“Inflation has lifted significantly and looks set to remain well above 3% over 2026, and core inflation is in the upper part of the RBNZ’s 1-3% target range,” he said.
The economist predicted headline inflation would stay above 3% until mid-2027 before briefly dipping below 2% as fuel effects drop out.
“The underlying pressure on prices has proven persistent, and the Reserve Bank will need to manage that carefully.”
Eckhold said Westpac expects two further 25-basis-point hikes to the Official Cash Rate (OCR) – currently 2.5% – this year before moving to a modestly restrictive 4% through 2027.
“Core inflation is unlikely to decline to 2% without additional monetary policy action.”
Meanwhile, he said unemployment had likely peaked, with a gradual improvement from the second half of this year.
The unemployment rate rose to an 11-year high of 5.6% in the June 2026 quarter.
He expected it to ease to 4.9% by the end of 2027.
Eckhold said there were several important risks to the outlook.
“Risks associated with the Iran war remain as no diplomatic resolution has been reached.
“Similarly, the general election looks likely to be close. A change in the make-up of the Government, and thus policy direction, could have implications for particular sectors of the economy.”
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