“High frequency indicators point to improving domestic demand, and rising consumer and investor confidence,” S&P Global head of macroeconomic modelling Vincent R Conti said in his report.
“In particular, growth in business investment has been much better than we initially thought and is carrying growing momentum into the second half of this year.”
S&P Global is keeping its 2028 and 2029 New Zealand growth forecasts at 2.4%.
Higher growth momentum would also lead to slightly lower unemployment rate forecasts, Conti said.
S&P Global now sees the unemployment rate at 5.2% by the end of 2026. It was 5.6% in the second quarter.
It forecasts it to fall to 4.9% next year and to 4.5% in 2028.
Meanwhile, it forecasts inflation to fall back into the Reserve Bank’s comfort zone (1-3%) – down to 2.4% in 2027 and 2.3% in 2028.
“Our inflation forecast bumps up only slightly. But we would note that our new growth forecasts represent a reversion to potential from a period of under-capacity economic growth,” Conti said.
“As such, our overall view on inflation and policy rates are unchanged.”
S&P Global sees the Official Cash rate peaking at 3% in the current cycle (it is currently 2.5%) and staying steady there for the foreseeable future.
All of that bodes well for those hoping New Zealand’s fragile recovery will take hold and gather momentum.
But S&P Global highlights some key risks to its forecasts.
“Despite these revisions, we continue to see some growth risks,” Conti said.
“Energy market uncertainty will still pose risks to real disposable incomes. The property market remains relatively weak, and net immigration has slowed down.”
“We believe these issues will eventually moderate the strong bounce we are seeing in business investment.
S&P Global Ratings is one of the world’s leading providers of independent credit ratings.
In October last year, it affirmed New Zealand’s AA+ rating.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
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