Nick Tuffley: ASB Chief Economist on a brighter outlook for the economy in 2026

Signs of a brighter economy in the year to come. 
 
ASB's forecasting annual growth of more than two-and a half percent in 2026.
 
It points to an accelerated housing market, more resilient exports, and a renewed willingness to spend.
 
Chief Economist Nick Tuffley told Heather du Plessis-Allan we can expect inflation to soften further,  with the Reserve Bank seeing more stimulus in the pipeline. 
 
He says it's in wait and see mode - but seems fairly confident it won't have to cut interest rates any further. 

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Episode Transcript

Speaker 1 (00:00):
So now there is increasing confidence the next year really
will be better economically. I know we've been saying this
for ages, but it's going to be next year. Asb's
latest quarterly economic forecast is out there, calling clear signs
of recovery in twenty six consumers spending up big ticket purchases,
returning interest rates easing off. Nick Tuffley is asb's chief
economist and.

Speaker 2 (00:18):
With us Morning, Nick, Good morning.

Speaker 1 (00:20):
OK, give it to me. Out of one hundred hour
confident are you in this, let's.

Speaker 2 (00:25):
Say about about about an eighty. Look, you never say never,
but the seeds of their recovery look like they are
starting to really come through, and we know there are
a few things that will give a bit more momentum
next year as well.

Speaker 1 (00:37):
So what are you picking two and a half next year?

Speaker 2 (00:40):
You know we've got gross picking up and heading over
two and a half percent for a period. And let's
face it that after the last three years of the
economy literally going nowhere, we've got a lot of spare capacity.
We do need the economy to actually grow faster than
what we call it it's sort of usual speed limit
of somewhere around about two percent.

Speaker 1 (01:00):
Do you I mean, saying it's going to be two
percent two and a half percent is one thing, But
are we actually going to feel it or is it
going to be you know, because at the moment we're
not feeling it in the cities while they're feeling it
in the regions. Are we all going to feel it?

Speaker 2 (01:11):
I think we'll feel it a lot more evenly. Look
at it still has been quite patchy even in retail
spending where we've seen some really strong growth. It's been
in some of the big ticket, big ticket items. But
we are starting to see a turnaround in the construction sector,
particularly the residential It is turned the corner after falling
quite a bit. And look, there is a lot more
cash that we will see more visibly coming through. So

(01:34):
we still have you know, a bit under half of
people on a mortgage and effect waiting to benefit from
the really low rates. And there is a lot of
cash that people have been earning in the dairy, red meat,
kiwi fruit sectors. There's some examples and we'll see more
of that flow through to the regions around the country. Ok.

Speaker 1 (01:51):
At that half who are yet to refix on the
lower rates, when do they like when is this happening
for them.

Speaker 2 (01:57):
Yeah, it has started to really sort of build up now,
and we'd expect that by the middle parts of next
year a lot of a lot of the benefit will
have started to flow through. It's just because so many
people are picking a floating rate or a six month
rate or even a one year rate over the last
year or so, that's kind of slowed down, ironically, the
benefit for the economy, but obviously it's given people a

(02:19):
window to fix it a much lower rate.

Speaker 1 (02:20):
Yeah, HSBC, I had a chat to them on Friday.
They're picking us round actually the same as you two
and a half beating Australia at two point one. Would
you say that's about right. We're going to out before Australia.

Speaker 2 (02:32):
We've got a good chance. And hey, look we've got
some figures where we're hitting like about two point seven
percent on an annual average, just to sort of like
emphasise or a little bit ahead of Australia. But look,
we're in a bit of an upswing after a pretty
tough time Australia has they sort of chugged along. But
the biggest problem at the moment, and I've got interest
rates at probably a restrictive level. Is the biggest problem
is that inflation has been creeping up again, and their

(02:54):
economy did sail on through things a lot better than ours.
We have to we have to sort of really acknowledge
that to.

Speaker 1 (03:00):
All Right, Hey, listen, Nick, it's good to talk to you.
Thank you so much. Enjoy the rest of your morning,
Nick Tagley, ASP's chief economist.

Speaker 2 (03:05):
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