New Zealand to Outpace Australia in 2025–2026 Economic Growth | Westpac Forecast
Westpac predicts New Zealand's economy will grow faster than Australia's in 2025–2026, thanks to lower interest rates, rising exports, and strong recovery signs. Read the key takeaways.
New Zealand Set to Grow Faster Than Australia
According to a new economic outlook from Westpac, New Zealand is expected to outperform Australia in GDP growth over the next two years. This marks a turnaround after Australia led in 2024.
Forecast Summary:
New Zealand GDP growth: 2.4% in 2025, 3.1% in 2026
Australia GDP growth: 2.0% in 2025, 2.2% in 2026
(Source: NZ Adviser via MPA Magazine)
Why New Zealand’s Economy Is Bouncing Back
Aggressive Interest Rate Cuts - The Reserve Bank of New Zealand (RBNZ) has dropped its official cash rate from 5.5% to 3.0% in the past year, with more cuts expected. This helps boost household spending, borrowing, and investment.
Stronger Export Markets - Demand for NZ dairy and a rebound in tourism are improving the country’s trade balance, reducing its deficit.
Housing Market Recovery - After a 17% drop from peak prices, NZ’s housing market is stabilising due to lower mortgage rates and increased construction activity.
Why Australia’s Growth Is Slowing
Slower Rate Cuts - The Reserve Bank of Australia (RBA) has only reduced its cash rate by 0.75% in 2025, holding it at 3.60% — above the neutral level.
Tighter Government Spending - Australia is cutting back on earlier cost-of-living support and stimulus programs, which could slow economic momentum.
Economic Risks to Watch
Both economies still face challenges that could impact the outlook:
- Weak household spending in NZ
- Unemployment rising to 5.2% in NZ, despite job growth in Australia
- New U.S. tariffs on NZ exports
- Inflation pressures: NZ’s inflation may rise above 3% again
Migration Trends: NZ to Australia
Net migration has favoured Australia, as New Zealanders seek job opportunities across the Tasman. But this may reverse if NZ’s labour market and wage growth pick up.
What This Means for You
Whether you're a homebuyer, investor, or business owner, this shift in economic momentum is worth watching:
- Lower interest rates = more affordable mortgages and loans
- Exporters may benefit from stronger demand and trade recovery
- Businesses can prepare for a growth phase by planning early
Source & Further Reading
This article is based on “New Zealand set to outpace Australia in growth – Westpac” by Mina Martin, published by NZ Adviser on 26 August 2025.
📖 Read the full article here