Tourism-heavy and agricultural regions in the South Island were leading the way, while many households and businesses in the North were still feeling the pressure of weak demand, higher costs and economic uncertainty, he said.
Queenstown remained a standout performer, supported by strong visitor numbers, low unemployment and ongoing demand in the housing market.
At the same time, many North Island regions continue to face softer business conditions. Auckland’s economy remains subdued, while Wellington businesses report holding back investment decisions amid economic and political uncertainty.
The divergence was particularly evident in labour market data.
North Island unemployment averaged around 6%, compared with 3.7% across the South Island.
Underutilisation, which includes both unemployed and underemployed workers, remained elevated nationally at 13.8%, with Northland recording one of the weakest outcomes.
Economist Jarrod Kerr says the economy is improving, but it’s doing so at different speeds across the country. Photo / Fiona Goodall
“The labour market tells the story clearly. Many households are finding it difficult not just to secure work, but to secure enough hours and income. That’s especially true in parts of the North Island,” Kerr said.
Property markets also reflected the regional split.
While national house prices had largely moved sideways over the past three years, Otago and Southland have outperformed, Kerr said.
House prices in Auckland and Wellington remain well below their post-pandemic peaks.
Despite the subdued conditions, Kiwibank expected the recovery to strengthen through 2027.
Lower interest rates, improving agricultural incomes and another strong tourism season are expected to support economic activity, particularly across regional New Zealand.
“The good news is that the foundations for stronger growth are in place and the direction of travel is positive. Tourism is rebounding, commodity prices remain supportive and lower borrowing costs should help lift activity over the coming year,” Kerr said.
It was disappointing that we had been through “another year without a meaningful recovery”, he said.
“It’s disappointing for firms facing higher costs and a despondent consumer. And it’s disappointing for households stuck in a cost-of-living crisis.”
But despite having delivered a similar message about potential recovery this time last year, Kerr said he was sticking with an optimistic take.
“We’re just going to have to say it again: a recovery is underway and should strengthen into 2027.
“So yeah, we keep our glass half full. The recovery is coming. We’d hate to wake up in a year’s time only to deliver the same message again [hopefully the AI investment boom doesn’t bust … surely not].”
Kiwibank’s Regional Score summarises seven economic indicators in 13 regions.
Included in the scores are: population growth, retail sales, employment & unemployment rates, house price index, house sales and residential consents.
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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