Economic Overview

New Zealand faces a period of stagflation-lite, with GDP growth slowing to 1.5% and inflation rising to 4.5% due to the Iran war shock. The RBNZ is expected to respond with OCR hikes starting late 2026, reaching 4.25% by 2027.

Key Takeaways

• 1.The Iran war has shifted the economic outlook toward a period of high inflation and subdued growth, with 2026 GDP forecast at 1.5%.
• 2.Inflation is expected to peak between 4-5% due to a 30% rise in petrol prices and related cost increases.
• 3.Monetary policy will tighten, with OCR hikes likely starting in September, aiming for a neutral 3.0-3.5% range and a peak of 4.25% by end 2027.

Table of Contents

• A note from Kelly
• Overview
• Global and Iran conflict assumptions
• Iran conflict transmission
• Households
• Labour market
• Housing and migration
• Construction
• Business investment
• Fiscal
• Agriculture
• Exports and balance of payments
• Inflation
• Monetary policy
• Monetary policy scenarios
• Foreign exchange
• The economy in eight charts
• Economic and financial forecasts

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