Sabrina Delgado: Kiwibank economist predicts economic growth for 2026

New Zealand's economy is set to expand next year, as several key indicators point to economic recovery.

Kiwibank's latest bi-annual report forecasts a 2.4 percent growth for 2026, with boosted household confidence, an improved property sector, and a stabilising labour market.

The review cites low interest rates as the leading drivers of growth.

Economist Sabrina Delgado says there's a broad base for recovery, which comes as relief after 2025.

"We did expect a recovery to sort of start taking place in 2025 this time last year - it took some hits and had some delays and it's just now that we're starting to see the signs of recovery taking foot."

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Sunday Session podcast with Francesca Rudgin
from News Talks EDB.

Speaker 2 (00:12):
Well, we've all been surviving twenty five, but brighter days
of forecast. The twenty twenty six kee we Bank has
released its economic outlook and is tipping a robust recovery,
with suggestions the economy has turned a corner. Keep Wei
Bank economist Sabrina Delgado joins me. Now is Sabrina, good morning.

Speaker 3 (00:31):
Good morning.

Speaker 2 (00:32):
This is a pretty upbeat report from you. You say
we are seeing signs of recovery across the board.

Speaker 1 (00:37):
Oh.

Speaker 3 (00:38):
Absolutely, We're pretty excited going into next year. We're looking
forward to quite a broad based recovery, especially after this year.
You know, it was a frustrating year for many. We
did expect a recovery to sort of start taking place
in twenty twenty five this time last year. It took
some hits and had some delays, and it's just now
that we're starting to see that the signs of recovery

(00:58):
has sort of taken foot, And I mean, it's great
that we're finally here, and it's really all to do
with the fact that we've got the right settings now
traits you know, they're at levels that are finally encouraging
activity that matters, and it's having an impact the signs
we're saying. You know, we've got consumption lifting business confidence
as the firmer, the jobs market is stabilizing, We're seeing
some activity in the housing market, so the recovery is

(01:21):
underway now and you know, we think will gather pace
into twenty twenty six for a much better year.

Speaker 2 (01:26):
Okay, so that's why things are looking brighter. Where are
we seeing shifts at the moment.

Speaker 3 (01:31):
In particular, definitely across consumption. You know, we've been looking
at some of our own Kiwibank card data. We've seen
that consumers they're signed to spend more on some of
those funner discretionary items. That's a good sign and consumer confidence.
They're also starting to spend more on your big ticket items,
particularly around housing related spending. So that usually tends to

(01:54):
tick point to maybe a bit of a pickup in
the housing market too. You know, if people are out
buying new furniture or even buying some paint, they're either
you know, maybe looking to moving homes or putting their
hand back on the market. So it's all pretty positive there.

Speaker 2 (02:10):
Love hearing about the uptick. Love hearing that things feel like,
you know, the bell curve is kind of on a
it's heading in a different direction and things. It's really interesting,
isn't it. Because then I go and talk to someone,
you know, who is a very big retailer, who says
to me, oh, it's still really tight. People aren't shopping.
You know, it's hard to kind of get a gauge
on it, but it does. It feels like it's moving

(02:30):
in the right direction, but it's quite slow. Would that
be fair to say.

Speaker 3 (02:33):
Yeah, we're still at the beginning of the recovery now.
You know, it wasn't until a couple of months ago
that we actually thought interest rate settings move into levels
that actually do encourage activity. We were more at neutral
settings before. So it will take some time for that
path through to continue. We still have around thirty percent
of you know, the mortgaged households to roll onto lower

(02:54):
rates as well in the coming six months, so there
is still a path through effect that will take time,
but we are starting to see those signs that Okay,
there's signs of life here. The recovery is going to
takes place now.

Speaker 2 (03:08):
Signs of life. I love it. We've seen long term
interest rate rises this week, what you expect in twenty
twenty six on that front.

Speaker 3 (03:17):
Yeah, ultimately, it's a little bit annoying and I guess
it premature to be seeing these financial conditions tightening. And
it's a little bit frustrating because it comes from a
bit of a missp from the Reserve Bank. You know,
following their last meetings, they sort of signaled that they
were done cutting completely and it encouraged traders to price

(03:40):
the rate hikes into next year. For us, you know,
rate hikes are still a twenty twenty seven story, but
that poor signal has seen you know, bank's funding costs
through wholesale rates increase quite dramatically. But ultimately, you know,
it doesn't change our outlook or derailed the recovery that
we're expecting. You know, if we look at intrat rates today,

(04:02):
they're so materially lower than they were compared to this
time last year, and they're still upsettings that you know,
should encourage this lift and consumption. It should encourage investors
to be investing and businesses to invest in higher So
we still, you know, still expect the forcurry to take place.
Even with that what.

Speaker 2 (04:20):
Are you expecting from the housing.

Speaker 3 (04:21):
Market the housing market or we are starting to see
quite a list in activity. You know, how sales are
up six percent compared to this time last year, and
we always say, you know, where where house sales go,
prices tend to follow interest rates. Again, they're always the
largest driver for the housing markets too, So we do
expect a lift. We're saying about two to three percent

(04:43):
next year, and that's against the backdrop where you know,
we do see that we have quite ample supply in
the market right now, and you pair that with weak
population growth because of this sort of migrate low migration
levels that we're getting into the country right now, so
that that does temper any bigger gains in house prices,

(05:03):
but it's definitely an improvement from you know, what we've
been seeing over the last two and a half years,
which is that house prices have just largely trapped sideways.

Speaker 2 (05:12):
And Sabrina, how about households. Do you expect households will
feel a bit of a shift in twenty twenty six
and for a little bit of.

Speaker 3 (05:18):
Relief, Yeah, absolutely, I think we're hearing that a lot already.
I think, you know, as households roll onto these lower
interest rates. That makes it different. And as the housing
market picks up, you know, we know that the wealth
effect in New Zealand is quite real. So if we
see those games as two to three percent house based
gains next year in the housing market, you know that'll
add a bit more boost of confidence household. You know,

(05:40):
sixty seven percent of QI we own their own house.
So when the housing market does it better, you tend
to feel a little bit better too.

Speaker 2 (05:47):
So we are we are hopeful there, Sabrina. If you've
got a good saying for twenty twenty six, like we've
survived twenty five or we were going to thrive, but
we survived twenty five. Unfortunately robust recovery twenty six kind
of has a ring to it, but we do.

Speaker 3 (06:01):
It's not as good as our previous rhymes, but it's
fixed in twenty twenty six.

Speaker 2 (06:05):
Okay, fixed and twenty six. You're nice, not bad. Better
know what we came up with this morning, Sabrina.

Speaker 3 (06:11):
Thank you for trying.

Speaker 2 (06:12):
We tried, no, no, really honestly, we tried to and
it didn't go very well. Thank you so much, Sabrina,
really appreciate it. That was Kiwibank economist Sabrina Delgado there.

Speaker 1 (06:22):
For more from the Sunday session with Francesca Rudkin. Listen
live to news Talks it'd be from nine am Sunday,
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