Having survived 2025, It’s time to thrive in 2026: What Kiwi businesses need to know

After several years of economic turbulence, uncertainty, and stubborn inflation, many Kiwi businesses are arriving at the end of 2025 with one shared feeling: exhaustion. As Kiwibank Chief Economist Jared Kerr puts it, the theme for many was “survive until ’25.” But as the dust begins to settle, the outlook for 2026 is finally shifting in a more encouraging direction. Read more or watch the full recording to learn some of the key takeaways from this talk.

The Global Picture: Volatility, Tariffs, and a Changing World Order

2025 has been a year of global unpredictability. The aggressive US tariff agenda has rattled financial markets, but Kerr notes that the economic impact may be far less dramatic than many assume.

The tariff's function more like a tax swap for US residents, raising tariffs so income taxes can be cut. While some sectors will feel the pinch, New Zealand’s major exports to the US, such as beef, are largely shielded, and others are simply absorbing the cost and moving on.

The bigger concern isn’t tariffs themselves, but the larger trend: a global shift away from the decades-long era of free trade. Trade restrictions have been rising every year since 2009, and the slowdown in globalisation introduces new uncertainty for small, trade-dependent nations like New Zealand. Kerr’s message is clear: we must double-down on new trade agreements and diversify export markets; particularly with rising giants like India and fast-growing Southeast Asian economies.

Meanwhile, global volatility has seen investors flood into safe-haven assets like gold and the Swiss franc. Yet despite the noise, there’s no evidence the world is abandoning the US dollar or US government bonds, which remain the backbone of global finance.

New Zealand’s Reality: A Tough Recession, But Recovery is Taking Hold

Kerr is refreshingly blunt: the recession New Zealand just endured was worse than the GFC. Many businesses, especially those in retail, hospitality, and construction, faced severe pressure as rising costs collided with falling consumer demand. Unemployment rose from 3.2% to 5.3%, but the more meaningful statistic is hidden below the surface: total hours worked fell by 4%, a huge indicator of under-utilisation.

Households felt the bite too. Inflation surged faster than wage growth, meaning many families could buy less despite spending more. Essentials ate into budgets, discretionary spending dropped, and sentiment sank to the lowest levels observed since the early 1990s recession.

But despite the pain, the economic recovery is now materially underway.

Interest Rates: The Turning Point Businesses Have Been Waiting For

After a period of overly aggressive tightening, the Reserve Bank has finally delivered the relief businesses needed. Interest rates have fallen sharply; to around 2.25%, and for the first time in years, mortgage rates are returning to levels that restore confidence.

This matters because interest rates influence almost everything:

• Businesses can finally justify new investment.

• Households start loosening their wallets.

• The property market, a critical driver of Kiwi confidence, rebounds.

Kerr expects house prices to grow 2% to 3% in 2026 and 5% to 6% in 2027, moderate, sustainable levels that boost confidence without overheating the market.

Equally importantly, after years of restrictive lending, banks are opening their doors again. Competition is returning, pricing is sharper, and credit availability is improving, a meaningful green shoot for the broader economy.

Regional Reality Check: Why the South Island Feels So Different

One of the most interesting insights from Kerr is how regional sentiment differs dramatically across the country.

• South Island economies, particularly dairy regions and tourism-heavy areas like Queenstown are upbeat. Farmers have strong payouts, lower debt, and renewed confidence.

• North Island farmers, especially in the Waikato, are using payouts to pay down debt rather than reinvest, limiting economic spill-over.

• Canterbury businesses report strong hiring and investment confidence.

• Auckland and Wellington remain more subdued, with tight household budgets and more cautious business sentiment.

These regional differences will continue to shape where growth pockets emerge first in 2026.

Labour and Migration

The recession triggered a wave of Kiwis heading across the Tasman. For some industries like construction, trades, and specialised professions, this loss of talent has become a major constraint.

Kerr notes that this wasn’t a “pull” from Australia, but a “push” from New Zealand. Fewer hours, job insecurity, and higher costs drove many to try their luck overseas.

As the recovery strengthens in 2026, job opportunities, increased business investment, and returning economic confidence should help stabilise this flow, but the talent shortage won’t disappear overnight.

AI, Automation, and the Next Productivity Wave

Kerr’s take on AI? It’s both exciting and disruptive. He sees massive long-term productivity upside, particularly in industries bogged down by administrative tasks. But he’s equally clear that certain jobs, drivers, pilots, repetitive knowledge-work may face major displacement.

The key message for businesses: AI won’t replace industries wholesale, but it will reshape them, and those that embrace it early will benefit most.

So, is 2026 the Year to Thrive?

After years of turbulence, there is finally light at the end of the tunnel. Lower interest rates, stabilising inflation, improved credit availability, and growing consumer confidence all point toward a more optimistic 2026.

For businesses, this means:

• Revisit investment plans that were shelved during the downturn

• Prepare for rising consumer demand in the second half of 2026

• Consider talent strategies as hiring conditions tighten again

• Leverage technology and AI to gain early productivity advantages

• Watch for new export opportunities as global markets evolve

In short: having survived 2025, it’s genuinely time to thrive in 2026.

A huge thank you to Jared Kerr for sharing his insights with our community. Also, to Sarah White, Head of Accounting, Finance, Data & Risk at Tribe, who hosted the event and is a great point of contact for any recruitment needs in this sector.