New Zealand’s economy gained momentum in the first quarter of 2026, supported by lower interest rates and stronger consumer spending, according to multiple media reports.
Data from Statistics New Zealand showed GDP rose 0.8% in the March quarter, matching market forecasts. The result followed a revised 0.5% expansion in the previous quarter.
Most of the growth occurred before the Iran conflict began affecting global markets and consumer sentiment.
Growth outlook weakens
Since then, higher fuel prices and weaker confidence have dampened expectations for the economy.
Economists now expect growth in the current quarter to be flat or even negative. Earlier forecasts had pointed to a broader recovery driven by lower borrowing costs, strong exports and a tourism rebound.
The weaker outlook creates pressure for the National Party ahead of November’s election.
Rate hike expectations
The Reserve Bank of New Zealand (RBNZ) kept its Official Cash Rate unchanged at 2.25% last month. However, policymakers signalled that further rate increases remain possible.
Markets currently see a strong chance of a 25-basis-point rate hike in July. Investors also expect rates to rise further by year-end.
The central bank must balance slowing economic activity against inflation risks linked to higher energy costs.
Oil prices provide relief
A recent US-Iran interim peace deal has eased concerns over energy supplies. Brent crude has fallen below US$80 a barrel after reaching around US$95 earlier this month.
Lower oil prices could support consumer spending and ease inflation pressures.
“High-frequency indicators suggest the economy stalled after the conflict broke out, but if oil prices stay down where they are now, there are good odds of the recovery resuming,” said Matthew Galt, economist at ANZ Bank in Wellington.
“Global developments are the main factor right now for the inflation outlook. On balance, we still think the RBNZ will hike in July, though easing oil prices mean it is no longer a slam dunk.”
Confidence slips
Consumer confidence has fallen towards a three-year low as higher fuel costs strain household budgets.
Business sentiment has also softened. Companies are reporting weaker hiring plans, lower profit expectations and slowing activity in manufacturing and services.
While the first-quarter figures show solid growth, economists say the recovery remains vulnerable to global events, energy prices and future interest rate decisions.