OECD Economic Surveys: New Zealand 2026

Maintaining the Reserve Bank’s high credibility and independence is indispensable for returning inflation within the 1-3% target band in a difficult and uncertain environment. Financial stability remains resilient, though continued macroprudential vigilance and banking competition reforms remain essential. Fiscal sustainability faces mounting ageing-related pressures, requiring continued reforms.

Inflation has eased but faces renewed pressures from higher energy prices, while weak competition, rapid rises in administrative prices such as local government rates and climate-change-induced rises in insurance premiums make inflation control more difficult. These conditions underline the importance of anchoring inflation expectations and maintaining the Reserve Bank’s strong operational independence, credibility and accountability. The recent return to a single inflation mandate strengthens clarity, but frequent changes and reviews of the monetary policy framework and operations since 2019 risk undermining the credibility of the framework. Maintaining stability of the mandate and remit outside scheduled five-year review cycles, would support the Bank’s credibility and enhance its ability to deliver on its inflation objectives. It is also important for credibility to have strong accountability mechanisms including regular evaluations. Investments to modernise macroeconomic data will improve policy calibration and reduce costly missteps.

The financial system appears resilient, underpinned by high capital and liquidity buffers and the new depositor guarantee scheme. Stress tests suggest banks can withstand severe shocks, but vulnerabilities persist among highly indebted households and SMEs. Macroprudential tools like debt-to-income limits should continue to be used to avoid procyclical risks. Reforms to boost competition in the banking sector, including open banking to make switching banks easier and provide cheaper and more direct online payments channels, and a review of capital requirements, are welcome steps to improve credit flows.

Ageing will push health and pension costs up by around 5% of GDP by 2060, putting public debt on an unsustainable path without reform. There is a need to continue fiscal consolidation to address the structural deficit in the short to medium term. The conflict in the Middle East may call for further targeted support. However, this should be temporary. Raising efficiency in health spending and reforming private and public pension settings could all help longer term sustainability. Complementary revenue measures, including weight-based road user fees, and a tax on land rezoning, could help increase the fiscal balance while supporting environmental goals. A proactive approach to managing the Crown balance sheet is crucial to optimise returns and reduce fiscal risks.

The electricity system is highly renewable and low-emissions. Renewables generation is expanding quickly but the system faces mounting challenges that threaten affordability, security, and competitiveness. Supply shortages and high prices have emerged, driven by dwindling gas reserves and stagnant long-duration investment in firming capacity, threatening accelerated deindustrialisation.

Gas shortages have pushed up wholesale electricity prices and risk premiums. Dry years now trigger prolonged price spikes, forcing industrial shutdowns. Policy and weak revenue uncertainty have stalled investment in new firming despite rising demand, leaving the system close to security limits even as renewables investment grows.

Immediate action is needed to restore resilience and affordability. LNG will help restore security of supply but risks locking in fossil fuel dependence and should be treated as a transition fuel only. The government should consider making significant minority co-investments in independent-led, non-gas seasonal firming generation and expand demand-side flexibility to break the gas–electricity price link. A dedicated mandatory firming and flexibility market (FFM) would improve access to firming services, lower barriers for independent generators, and reduce reliance on opaque bilateral deals. Linking conduct compliance to FFM participation and granting the Electricity Authority stronger enforcement powers would amplify competition and transparency.

Vertically integrated generator-retailers (gentailers) governance and financial strategies and planning law must align with long-term investment needs. Dividend payout ratios far exceed international norms, constraining reinvestment. A formal ownership policy and more appropriate payout ratios, combined with board appointments based on technical expertise, would ensure gentailers support system-wide goals for secure, sustainable, and affordable electricity. Planning law must be simplified and excessive appeal rights reduced to accelerate electricity generation investments of all types including renewables.

Population ageing and persistent workforce shortages make the wider adoption of digital technologies increasingly important. To overcome barriers such as limited interoperability and fragmentation across regions and hospitals, New Zealand could strengthen governance and regulatory settings, increase investment in digital infrastructure, and ensure more inclusive digital design, helping to improve efficiency and resilience.

Digital and AI technologies provide a rare opportunity to improve access, quality and productivity across New Zealand’s health system (Figure 2). Health technology advances have historically tended to increase process costs, e.g., by expanding the volume of services delivered per patient. Digitisation, by contrast, shows potential to improve process efficiency. Early pilots of AI-assisted clinical documentation suggest reductions in administrative time, enabling more efficient care. However, despite national assets such as the National Health Index and robust medicines data, fragmented systems, outdated regulatory settings, limited infrastructure, skills gaps among the workforce, and policy uncertainty constrain progress.

The Government’s new 10-Year Health Digital Investment Plan provides clearer long-term direction. Delivering on this potential will require continued implementation through mechanisms such as the Centre for Digital Modernisation of Health, alongside clearer governance arrangements, and modernised regulation, with explicit pathways for high-risk clinical AI and improved oversight.

Gaps in digital infrastructure across regions, hospitals and providers, combined with short funding cycles and fragmented procurement, continue to slow adoption and the scaling up of digital and AI-enabled solutions. Strengthening interoperable infrastructure through enforceable technical standards and vendor certification pathways would improve continuity of care and system resilience.

Insufficient workforce skills and uneven adoption remain significant challenges. Digital, data and AI skills vary widely across clinical groups. Embedding digital, data and AI competencies across clinical education and continuing professional development, alongside stronger clinician-led co-design, would support safer and more consistent adoption. Ensuring equity-by-design, including targeted affordability measures and culturally grounded services for Māori, Pacific and rural communities, will be important to ensuring that digital health benefits are shared widely.

New Zealand’s capital markets remain shallow by international standards, limiting investment in innovative firms and the wider economy. Modest private pension assets, a compliance-intensive public equity market, and limited corporate bond activity all restrict capital availability. Deepening capital markets requires reforms building on market foundations including KiwiSaver and re-launching a low compliance growth equity market.

Developing a deeper more diversified local capital market is central to raising New Zealand’s productivity. International evidence shows well-functioning equity markets are the key to funding high-productivity innovative firms with only intangible assets. A vibrant local public equity market gives small and medium-sized enterprises the chance to expand through access to public funding, broadens investment opportunities for households, supports price discovery and governance and reduces over-reliance on foreign capital markets and regulatory regimes.

Structural barriers are holding back progress. The public equity market is small (Figure 3). Listings have declined and there have been no major domestic initial public offerings (IPOs) since 2021. Private pension assets remain modest, and corporate bond issuance is low, leaving SMEs reliant on expensive bank credit. Public equity listing and ongoing costs are high relative to firm size and analyst coverage and liquidity are thin. Founders worried by loss of control, onerous director legal liabilities and uncertain valuations prefer private equity or trade sales.

The foundations are in place to deepen the market. The venture capital market has expanded rapidly, supported by public co-investment (Elevate NZ). KiwiSaver private pension assets have risen, and the NZ Super Fund provides significant capital to the domestic market, while delivering robust long-term returns with global diversification. Recent overseas-investment reforms have shortened consent times through risk-based screening. These strengths can anchor a step-change if regulation is simplified, savings channels are broadened, and public equity and debt markets are revitalised.

Household savings and institutional investors can be further mobilised. Too many Kiwis arrive at retirement with almost no private savings. Raising KiwiSaver contributions while gradually shifting taxation from pension contributions and returns to withdrawals, would boost private pension accumulation and provide greater funding to New Zealand equity markets. Institutional investors including the NZ Super Fund, ACC and KiwiSaver providers, should play a greater role in long‑term domestic investment.

Revitalising the equity ladder is critical. There is an acute shortage of domestic equity capital in the NZD 5–50 million range. Many firms are forced offshore earlier than optimal due to limited local capital market depth and high transaction costs. A coordinated growth equity and venture growth fund of funds model, drawing in small, diversified tranches from KiwiSaver providers, iwi funds and other institutional investors, would help fill this gap. Improving the effectiveness of Catalist as a stepping stone market, including lowering transaction costs, adjusting auction mechanisms and clarifying progression to the NZX, would further support firms seeking to raise mid stage equity. The public market should be rebooted by introducing a Swedish-style growth board with reduced IPO and ongoing listing costs, dual class shares to allay loss of control concerns, lighter thresholds proportional to firm size for disclosure, director duties and board composition, and support for small capital equity research combined with a New Zealand Equity Savings Account to mobilise retail participation.

Debt markets should be deepened. Structural barriers, including small firm scale, high fixed issuance costs, uneven documentation and limited transparency, prevent SMEs from accessing debt markets. Developing a scalable SME credit market through a pooled SME loan securitisation platform, standardised documentation, loan level data, a credit register, and a streamlined wholesale private placement regime would reduce financing costs and provide SMEs with alternatives to expensive property secured bank loans.