2025 was a year when interest rates kept on falling as policy makers strove to normalise their balance sheets. Inflation was claimed to under control - except it was a mirage. Inflation got new impetus from some crazy US actions and that reverberated around the world. Equity markets drank the Trump Cool-aid, and bond markets sipped it for a while, But as the year has ended the bond market decided the addiction wasn't going to healthy. Yields have started to rise, all preceded by an unseemly dash for precious metals in the hope they might provide some value protection. Certainly, crypto couldn't supply any.
Juicing all this financial market fear is a 79 year old grifter in full retribution mode, essentially an autocrat with an alcoholic personality.
The problem for 2026 is it might all get worse. Just because 2025 didn't end in tears is no protection that 2026 wont. And financial markets are getting the sense that US inflation and the US budget deficit will get very much worse at the same time, ushering in a serious bout of global stagflation.
New Zealand might look like it is coming out of its 2025 recession, but social pressures have bult up. An unstable global situation is unlikely to be helpful in getting the benefits of 'growth' more broadly shared.
And there will be climate stress. That too will cause local impacts. Would you invest in petrol stations?, buy on a flood plain? or near coastal lowlands? If you do, will you expect society to bail you out if things go pear-shaped? Should insurers be required to cover those risks and spread the costs over everyone else? Should banks lend when those risks seem obvious?
Will we tolerate un-priced risk any more? Can we resist the socialising of losses? We may have to when public budgets are in growing deficit. The HYFEU pushed out the deficit track as fast as time is elapsing.
On top of all this, it's election year in 2026. One of the most interesting developments of 2025 was that one major party indicated it would bring in a capital gains tax - and almost no-one objected. It probably helps that there are no capital gains in the current residential housing market, so that blunts the NIMBY impulses
Anyway, there is a lot to talk about.
How do you think our economy (housing, agriculture, tourism, education, to name the key sectors in decreasing size) will fare in 2026?
And don't forget those climate predictions. Pretend you are an insurer (or a lender).
Who will be the winners in 2026? The losers?
It is time to test your prediction skills and bravely record them here in the Comment stream below. (Sign up here.)
And of course there is the small matter of bragging rights on your 2025 predictions. How good were they? Here is a quick link to last year's set. More than 200 of you weighed in again last year. More than 15,000 readers watched that particular debate.
This article is to encourage you to record your 2026 predictions.
Your predictions can be on any topic that has an impact on the New Zealand economy: anything, including property, interest rates, exchange rates, the RBNZ (is the new governor a Willis-patsy, or has genuine inflation-fighting skills?), insurance, rural issues, the dairy payout, our migration issues, our relationship with China, the big international economic influences, even the shifting international power balance, and the like. But please try to ground them in the economy. (For example fashion, sporting or celebrity comments are not relevant, but climate change issues certainly are.)
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Grab a wine or a beer. Settle in. Over to you.
8 Comments
Can we make election predictions?
Seems to be yes.
I think most people are sick of the main parties. If new parties like TOP can get a good election strategy then they could do very well. Think Peter Dunne (Mr. Sensible) and United ? Party.
I think economy will limp along until at least after the election. There won't be a kick start in early 2026 and the election will be enough reason for capital to stay on the sideline. "In '27 we're going to heaven" is the next catch phrase.
Peace won't break out and the existing hotspots will smoulder along. Plus maybe a Venezuela added in for good measure.
China will talk a lot about Taiwan but won't do anything kinetic. Taiwan will continue to develop and stockpile marine and air drones making invasion even less likely.
England will progress to the knock out round of the World Cup and then implode. Have a feeling it's Brazil's year. Olé!
"In '27 we're going to heaven" is the next catch phrase.
Does that mean the economy will completely kark it this year before we ascend to the pearly gates?
"One of the most interesting developments of 2025 was that one major party indicated it would bring in a capital gains tax - and almost no-one objected. "
Ignoring the objections of NZs Coalition govt currently enjoying a representative voting majority in recent polls. The rest of us were ROFL at the promise of 3 doctors visits for everyone, irrespective of income & health & availability of doctors.
Some 2026 thoughts (directions rather than predictions)
Gold USD $10000 / oz
Trump loses the House in the mid terms
Ukraine loses the war (concedes already lost territories).
RBNZ governor achieves inflation target.
NZ property prices flat in NI, up 5% in SI
Coalition re elected, thanks to NZF & Labours unlikeable bedfellows in Greens and MP.
Winston announces political retirement & is knighted during next parliamentary term.
Ukraine will cough up territory and Putin will take a breather but aerial skirmishing will continue, virtually unabated. Meanwhile China, in view of some not denied speculation of gaining control of Taiwan by 2027 will ramp up the pressure by way of escalating blockades. Some degree of justification will be offered by way of Trump’s precedent vis a vis Venezuela and all of that will have some emboldenment from the fact that Russia has had in its adventure, very little to worry about with concern to Trump.
My holiday reading includes Erik Larsons "The splendid & the vile" a comprehensive yet readable review of Churchill in 1939-41.
The lessons of history are easily forgotten.
The accuracy of my financial forecasting is on par with most economists.
So a grain of salt required.
Swing in international economic relationships away from USA centric.
Blue collar NZ continues to pay economic price of delayed monetary loosening. Employers use opportunity to 'right size' workforce.
Agriculture earnings return to long term averages, especially dairy. Fonterra suppliers live off capital repayment as payout and costs close gap.
House prices remain stationary as more first home buyers can afford to buy is matched by disillusioned 'ma and pa' investors with 1-3 rentals unloading.
Purchasers only now realizing low point in interest rate cycle already been and gone.
Two main supermarket groups continue to dominate as no serious new competition in a market too small for many.
Election - the first one in forever that doesn't feature Winston centre stage. National and Labour are at par. The decider will be between the level of support for the Greens on the left and support for ACT on the right.
Predictions of a year ago:
by Yvil | 30th Dec 24, 3:45pm
Two points from me;
1) I think most of us, myself included, underestimate the very long lag between the rising interest rates and their effect on the economy. Therefore, sadly, I still see more hurt in the NZ economy (businesses, unemployment, housing etc…) for 2025.
2) I just can't see how Trump's tariffs will be anything but disastrous for both the USA and other countries. Trump's isolationist policies will be bad for the entire world but this will not play out by the end of 2025, it will be very apparent by the end of Trump's term, if he makes it to a full term.
For 2026 I see more of the same, but worse volatility worldwide.
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