Moreover, the harder factors are stronger. The OCR and our bank interest rates, and export prices against a very low kiwi dollar (and fat Fonterra payouts), are now clearly very stimulatory. Yes, farmers will continue paying off debt but at some point sooner than later, there will be room for a little disposable spending.
Another factor is that the Government has done more in the second half of this year when it comes to business. I’ve argued from my first column in 2025 onwards that the Government needs to be a micro-economic reform factory, churning out initiatives and new policies on a weekly basis. While the Government has probably been more lifestyle farmer than factory, it has continued to up its pace, and decisions in areas such as tourism and events funding, screen and gaming incentives, visas and investor migrant settings, heck even Michelin Star ratings coming to New Zealand, have all helped to build a better economic scene and sentiment.
Finally, let’s factor in the big smoke, Auckland. I am hopeful we will end this year with a quality government/council city and regional deal, packed with substantive goodies in our Tāmaki Makaurau stocking. Then 2026 sees the coming to fruition of the biggest infrastructure initiatives of the last decade: the NZ International Convention Centre and the City Rail Link that together will mean a lot more people and economic activity.
All of this is very good and indicative of a slow and steady recovery beginning to occur and that will continue, rather than something more rapid and frothy that will come and possibly go. We are a tortoise, not a hare in the race, but with one foot in front of the other we are getting there. What, then, could possibly go wrong? Well in keeping with the glasses and drinks theme, the answer is CUPS.
Simon Bridges. Photo / Supplied
What is CUPS?
First, Comparison will continue to let us down. Specifically with Australia. Regrettably we do live next to one of the luckiest countries in the world and, with its greater scale and resources, it will continue to be a magnet, sucking away our talent.
Second, is Unemployment of 5.3% (or plus 6% in Auckland). It should come down but as slowly or slower than our growth rate rises. All that slack doesn’t disappear like a magic trick.
Next is Politics, and specifically Election 26.
I predict economic momentum in the first half of the year but we all tend to hold off on decisions and spending during an election period – especially one that’s a close call like this one is looking. Don’t have unrealistic hopes for the middle of the year onwards.
Finally, there is the Sharemarket and the real potential for a crash globally as more clever pundits begin to say so and factor this into their thinking.
The world has certainly been hooked on US shares recently due to understandable AI enthusiasm. Today, stocks are at a near all-time high. Some estimates put the effect of a correction on world GDP as negative 20%, not even including America. The shock in terms of consumption would be profound.
A sub-factor is more generalised global uncertainty whether politics, war, pandemic or other. Given the first five years of the 2020s, you’d be brave to predict against a mega event spilling our drinks or worse.
I’d repeat my call on the Government to be swift and bold in its pro-growth policy agenda. Work should continue because the job certainly isn’t done.
Simon Bridges
CUPS then, it is. I came up with this little acronym and expect a box of chocolates whenever anyone uses it.
CUPS means I’d repeat my call on the Government to be swift and bold in its pro-growth policy agenda. Work should continue because the job certainly isn’t done in big areas like tourism and international education (why for example don’t we liberalise tourism visas further?). Continued focus in high knowledge sectors such as tech and innovation, our universities and cultural sectors can also repay with higher growth.
Lastly, it would be remiss not to mention energy. The Government missed an opportunity in this area in 2025 choosing safety over initiative. The problem with inaction in politics is that it often ends up a far from safe choice. It’s near criminal that in a country with so much natural energy resource we haven’t built the competition and supply we’ve needed in recent times — especially when more energy would mean more economic growth. Without serious reform we will continue to play Russian Roulette with supply and prices in 2026, hopeful that we get much rain and no dry year bullet.
For 2026 I’m optimistic, but with a realistic view. There will certainly be growth but those bank economists who give us predictions of 3% annual growth or more will be proved plain wrong.
Champagne corks will ultimately pop, I reckon, but for heaven, think 2027.
● Simon Bridges is CEO of Auckland Business Chamber. Auckland Business Chamber is an advertising sponsor of the Herald’s Dynamic Business Report