New Zealand's economy is gaining traction, supported by lower interest rates and resilient exports, but domestic demand for goods and services stays subdued. Boosting growth will require decisive reforms to improve energy security and affordability, and to deepen capital markets, according to a new OECD report.
The latest OECD Economic Survey of New Zealand projects that GDP growth will strengthen to 1.4% in 2026 and 2.3% in 2027. Inflation was within the 1-3% target range in 2025, at 2.8%, and is projected to rise to 3.4% in 2026, before easing to 2.4% in 2027.
To maintain macroeconomic stability, fiscal consolidation should continue, while monetary policy considerations should look beyond initial fuel price shocks and keep inflation expectations anchored. A significant uncertainty associated with this outlook is the length of the conflict in the Middle East. A prolonged crisis would increase the probability of sustained inflation pressures, fuel shortages and weaker growth.
Population ageing is the major fiscal pressure in New Zealand, with the cost of health and pensions expected to increase by around 5% of GDP by 2060. Continuing fiscal consolidation to address the structural deficit will be essential in the short to medium term. Accelerating the adoption of digital technologies, including AI across the health system, would improve spending efficiency while enhancing quality and access to health care.
A pension reform package is urgently needed. Reforming public pension settings by linking the eligibility age to life expectancy would put spending on a more sustainable path. Continuing to raise default contributions to KiwiSaver - New Zealand's voluntary and privately managed savings scheme - and reforming private pensions by gradually shifting taxation from contributions and returns to withdrawals can significantly increase private pension accumulation and raise retirement income adequacy from currently low levels.
New Zealand's electricity system has relatively low emissions, but challenges include supply shortages and increased prices. By introducing a transparent Firming and Flexibility Market that ensures a portfolio of independent and reliable non‑gas supply, New Zealand can break the gas-electricity price link that is driving up prices. This approach would take advantage of the country's natural resources, encourage competition, cut emissions, and strengthen energy security.
Developing a deeper and more diversified local capital market, including a larger pool of private pension savings, is key to raise productivity. The Survey provides a framework to fill important gaps in the capital market by relaunching a public growth equity market, supported by a new simplified equity savings account. Establishing a Business Growth Fund and a national loan securitisation platform for small and medium-sized enterprises would also give promising high-growth firms an important alternative to high-cost bank finance.
See the full OECD Economic Survey of New Zealand.
