OECD Economic Surveys: New Zealand 2026

Executive summary

Key messages

New Zealand’s economy is in the early stages of a cyclical recovery, driven by solid exports and monetary easing, although the outlook has become more uncertain. Broad coherent reforms are starting to address the roots of New Zealand’s chronic productivity problem. Global policy turbulence, costly and insecure electricity, ageing-driven fiscal pressures, investment gaps, shallow capital markets and limited risk capital require sustaining the reform momentum.

• Although post-Covid-19 overheating has unwound, macroeconomic stability challenges remain. Inflation control is complicated by structural factors, including weak competitive pressures. Given repercussions of the Middle East conflict, it will be important to ensure inflation expectations remain well anchored. High household debt calls for vigilant macroprudential management, while ageing-related fiscal pressures and low pension replacement rates sharpen the case for more efficient health spending and coordinated pension reforms.

• Despite high shares of renewable energy and a strong pipeline of new renewables generation, electricity prices are structurally too high due to falling gas supply and underinvestment in firming capacity. LNG should be treated as a short-term transition tool. Affordability will remain elusive without breaking the gas–electricity price link by scaling non‑gas long‑duration firming, expanding demand response and strengthening competition. This requires a mandatory Firming and Flexibility Market and could need minority Crown investment in independent-led, long-duration non-gas firming generation.

• Digitalising health is a rare, high-potential opportunity. Scaling up digital and AI-enabled health solutions can ease ageing and workforce pressures by improving access, reducing administrative burden and lifting productivity. Progress hinges on clearer regulatory settings, upgraded digital infrastructure and faster capacity-building across the health workforce.

• Deepening capital markets is critical for growth. Shallow capital markets and low private pension savings constrain funding for innovative firms. Lifting KiwiSaver contributions, shifting taxation of savings away from contributions and returns to withdrawals are central. Expanding venture growth capital, reviving public listings and deepening SME debt markets would mobilise savings, help firms scale and raise productivity.

Recovering amid strong global headwinds

New Zealand’s economic recovery is gaining traction, supported by accommodative monetary policy, resilient tourism and exports even as global trade policy uncertainty persists. Growth is expected to strengthen as easing financial conditions lift consumption and investment, although elevated unemployment and high energy costs continue to weigh on the outlook.

After overheating and then more than two years of rebalancing, the economy has entered a gradual recovery but is lagging peer OECD countries (Figure 1). Easing inflation, stabilising real incomes and the effects of earlier monetary loosening are supporting activity. Tourism has recovered strongly and goods exports have remained resilient despite additional US tariffs and heightened global policy uncertainty. Confidence has improved but remains somewhat cautious, while high electricity and transport costs, subdued net migration, and elevated unemployment over 5% continue to weigh on momentum. Inflation has fallen markedly from earlier peaks, but remains slightly above the 1–3% target band, with higher energy prices adding renewed pressure.

Growth is expected to recover gradually to 1.4% in 2026 and 2.3% in 2027 (Table 1), supported by earlier monetary easing, resilient exports and recent reforms, including the investment depreciation allowance under the Investment Boost programme. However, the recovery is projected to remain fragile and uneven in the near term, as heightened uncertainty and higher energy prices weigh on real incomes, confidence and domestic demand. Unemployment is projected to remain elevated before declining in 2027 as demand recovers. Inflation will rise in 2026 due to higher energy and transport costs before gradually easing toward the 2% midpoint, reflecting spare capacity and easing tradables inflation pressures, although considerable uncertainty surrounds the timing and magnitude of this adjustment, given the risk of further shocks.

Figure 1. GDP growth is gradually picking up while inflation faces renewed pressures

Source: OECD Economic Outlook database and Reserve Bank of New Zealand.

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Table 1.Real GDP is set to gradually recover in 2026 and 2027

Annual growth rates, %, unless specified

	2023	2024	2025	2026	2027
Real GDP	2.1	-0.3	0.5	1.4	2.3
Unemployment rate (% of labour force)	3.8	4.8	5.3	5.4	5.1
Inflation (consumer price index)	5.7	2.9	2.8	3.4	2.4
General government financial balance (% of GDP)	-3.5	-2.9	-3.2	-3.9	-3.6
General government gross debt (% of GDP)	54.7	57.5	59.4	61.5	63.1

Source: OECD Economic Outlook database; OECD Secretariat.

Keeping policy credibility while securing financial and fiscal resilience

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.

Breaking the gas link to secure affordable power for a renewable future

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.

Accelerating digitalisation to ease mounting pressures on the health system

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.

Figure 2. Productivity gains from the adoption of digital tools could be large

Predicted 10-year cumulative total factor productivity gains in health and social care sector, 2024–34

Source: Filippucci et al. (2026), “AI meets trade: Global linkages and the cross-country distribution of the gains from AI.”

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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.

Unlocking capital and building deeper markets to drive innovation and growth

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.

Figure 3. The public equity market is small

Market capitalisation of listed domestic companies, 2024 or latest

Source: World Bank and OECD (2025), The Swedish Equity Market: Institutional Framework and Trends.

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MAIN FINDINGS	KEY RECOMMENDATIONS
Recovering in an uncertain world
Inflation was above the 1–3% target range before the conflict in the Middle East started. The Reserve Bank of New Zealand (RBNZ) has reduced the Official Cash Rate by a cumulative 325 basis points since mid-2024, helping support domestic demand through lower interest rates.	The RBNZ should look through the initial fuel price shock, while ensuring inflation expectations remain anchored.
Since 2019 there have been frequent changes to the monetary policy mandate and remit. There is a new review of the operation of monetary policy including the Large-Scale Asset Purchase Programme is underway in 2026. The RBNZ regularly appears before the Parliamentary Finance and Expenditure Committee (FEC).	Ensure strong accountability including through transparency of Monetary Policy Committee decision making and regular evaluations. Reinforce the RBNZ’s strong operational independence and credibility including by keeping the RBNZ’s mandate and remit stable between five-year review cycles.
There is a structural fiscal deficit which the government is addressing through a medium-term consolidation programme focussing on expenditure restraint. The Middle East conflict’s impact on New Zealand may require a further fiscal response.	Continue fiscal consolidation in the short to medium term. Fiscal policy support may be needed to act temporarily to provide targeted support to counter the effects on New Zealand emanating from the conflict.
Ageing is putting increasing upward pressure on the fiscal deficit and without reforms public debt will rise unsustainably towards 200% of GDP.	Implement a combined public and private pension and NZ Super Fund reform - including linking the age of public pension eligibility to life expectancy while considering occupational and ethnic differences - means testing and tax reforms to increase private pension accumulation.
Towards a more affordable, secure and sustainable electricity system
Lumpy and unpredictable revenue, fuel shortages and uncertainty about consents is deterring investment in more non-gas seasonal firming needed to break the link between gas and electricity prices and durably improve affordability and security.	Consider making Crown minority co-investments in non-gas seasonal firming electricity generation to overcome barriers and crowd-in private sector investment in non-gas firming.
Vertical integration and control of all firming assets give the gentailers market power, hindering entry for independents, raising prices and stifling innovation. Demand response is under-utilised.	Establish a Firming and Flexibility Market (FFM) to procure both long‑duration and shorter‑duration flexibility transparently.
Harnessing digital tools to improve health system performance
Outdated legislation and unclear rules slow digital adoption. There is no clear regulatory pathway for high-risk clinical AI.	Update the Health Information Privacy Code and related legislation governing health data, and clarify regulatory expectations for high-risk clinical AI, drawing on emerging international approaches.
Short budget cycles and fragmented procurement have produced stop–start progress.	Use the 10-Year Digital Health Investment Plan to anchor multi-year, outcome-based funding, including temporary and tapered upfront public investment, and ensure annual budgeting is aligned with long-term priorities.
Hospitals and small providers face high costs and vendor lock-in, while small and primary-care providers have limited incentives to upgrade systems.	Mandate national interoperability and security standards and phase certification requirements for vendors backed by financial incentives to ensure system-wide compatibility. Introduce targeted incentives and shared evaluation pilots to accelerate digital adoption in primary and community care.
Unlocking capital markets to drive growth
The allocation of household financial assets towards private pensions is low. KiwiSaver, the private pension scheme, has lower contribution rates and a shorter accumulation period than in Australia.	Continue to gradually raise the default employee and minimum employer contribution rates for KiwiSaver to help underpin pension adequacy and boost funding to capital markets.
New Zealand’s unusual Tax-Tax-Exempt system reduces pension asset accumulation compared to the Exempt-Exempt-Tax system, which is the most common system in the OECD.	Increase pension savings for retirement and funding to capital markets while containing short-term fiscal costs by gradually reducing taxation on pension contributions and returns and increasing it on withdrawals.
There is a structural shortage of domestic growth‑equity supply in the NZD 5–50 million range, and many New Zealand firms are forced offshore earlier than optimal to access capital.	Consider making minority Crown investments in a Business Growth Fund or convening a growth‑equity (GE) and venture‑growth (VG) fund of funds. Encourage KiwiSaver providers and other institutional investors to allocate small shares of their portfolios to these GE and VG funds.
There have been no major initial public offerings (IPOs) since 2021. IPO and ongoing listing costs are high and equities research on small companies is insufficient. Helped by lighter listing requirements Sweden’s Growth Market is a major listing platform for high-growth companies.	Launch a public growth equity market with lighter proportionate listing governance and disclosure rules, tax relief for small firm IPO and ongoing listing costs, support for research on small-cap stocks, and dual class shares to reduce loss of control concerns.
Directors of listed firms face higher legal obligations and reputational risks, deterring experienced candidates.	Set clearer, lighter thresholds proportional to firm size for disclosure, director duties and board composition.
High household direct holdings of equities contribute to vibrant domestic growth equity markets in other countries.	Introduce a non‑retirement New Zealand Equity Savings Account to expand domestic retail investment in listed New Zealand companies.
The SME debt market is constrained not by a lack of capital but by structural barriers, small firm scale including high fixed issuance costs, fragmented documentation, and limited loan‑level transparency.	Establish a national pooled SME‑loan securitisation platform (SPV) with standardised documentation, loan‑level data reporting, and a credit register.