NZIER's latest quarterly consensus forecasts see higher household spending on the back of interest rate falls, but GDP growth forecasts are virtually unchanged from the previous quarter

Economists are now forecasting higher household spending on the back of interest rate falls, but they have left their GDP forecasts virtually unchanged.

According to the NZ Institute of Economic Research's latest quarterly 'consensus' forecasts, there will be zero GDP growth in the year to March 2025 - and that's an unchanged forecast from the previous consensus release in September.

The economists' consensus forecasts come from the big five banks, the Reserve Bank (RBNZ), The Treasury and NZIER.

With much of the year already finished, it's perhaps not surprising the GDP forecast for the current year is unchanged. But also largely unchanged are the GDP picks for subsequent March years. 

The pick for GDP growth in the March 2026 year is 2.2%, unchanged from the forecast made in September, the pick for March 2027 is unchanged at 2.8%, while the March 2028 consensus pick is actually slightly reduced at 2.7%, from 2.8% picked in September.

While the rapid-fire interest rate reductions that have been seen in the latter months of this year haven't convinced economists that GDP will fare any better - they do see household spending levels rising now.

Private consumption growth for the March 2025 year has been bumped up from an anaemic September forecast of just 0.2% to 0.9%.

For the March 2026 year private consumption growth is now forecast to be 2.2% versus 1.9% previously, while for March 2027 the forecast is 2.9% (2.5% previously) and for March 2028 it's 3.1% (2.2%).

NZIER senior economist Ting Huang said more households in recent months have been fixing their mortgages at shorter fixed terms in anticipation that interest rates will decrease.

"With over half of the New Zealand mortgage book due for repricing within the coming six months, many households will roll onto lower mortgage rates and face reduced mortgage repayments.

"This, along with the income tax cuts, is expected to support a recovery in discretionary household spending over the coming years."

Huang said that, similarly, the residential investment growth outlook has been revised higher, reflecting the expectations that lower interest rates should support a recovery in residential investment over the coming years.

The consensus pick for residential investment in the current year to March 2025 is -6.1%, an improvement on the September forecast of -7.3%. 

Positive growth is expected to resume in the year to March 2026, with a 2.8% lift (2.7% previous pick) and then in March 2027 the consensus pick is 6.0% (5.1% previously) and 3.9% in March 2028 (3.1% previously).

Huang notes that the consensus GDP forecasts "reflect the expectations that activity in the New Zealand economy will remain soft in the near term".

"BusinessNZ’s PMI and PSI measures of manufacturing and services sector performance and NZIER’s Quarterly Survey of Business Opinion measure of firms’ domestic trading activity also point to continued weak activity in the economy. Beyond 2025, lower interest rates are expected to drive a pick-up in growth."

Huang says the export growth outlook for the years beyond 2025 has been revised higher.

"This reflects the expectations that the continued strengthening in commodity prices, especially dairy, and the constrained global supply of food commodities should underpin New Zealand’s export growth over the coming years.

"Although the new US Government’s trade policy setting may present a downside risk to New Zealand’s export demand, this may be offset by the potential recovery in China’s demand with its new economic stimulus package in place," she says.