\n I\u2019ll make a few very specific forecasts
\n further down, but first, I want to say what I really think about next year.\n <\/p>\n
I think it might actually be okay. <\/p>\n
I don\u2019t think we\u2019re looking at an economic boom, but I think \u2013 if the AI bubble on Wall Street<\/a> doesn\u2019t explode all over us \u2013 that we might be in for a period of gentle economic growth.<\/p>\n \u201cOkay\u201d might just feel pretty good after the wringer we\u2019ve been through since Covid turned the world upside down nearly six years ago.<\/p>\n It\u2019s not that everybody is going to be suddenly wealthier. New Zealand\u2019s structural economic problems aren\u2019t going anywhere.<\/p>\n But the immediate economic cycle seems to be turning in our direction for the first time in years.<\/p>\n If we needed a last dash of cheer after the better-than-expected 1.1% third quarter GDP growth<\/a> figure that landed on Thursday, Friday\u2019s confidence surveys delivered it.<\/p>\n The ANZ Business Outlook survey showed confidence up again. General business sentiment and firms\u2019 own-activity expectations both rose and are now the highest since 1994.<\/p>\n It\u2019s one thing to be optimistic, but businesses are not reporting that actual performance has much improved.<\/p>\n \u201cThe improvement in reported past activity (the best indicator of GDP in the survey) is strikingly broad-based and suggests annual GDP growth is going to head north rapidly,\u201d said ANZ chief economist Sharon Zollner.<\/p>\n Even consumer confidence, which has been slow to rebound from the mid-year malaise, has turned positive.<\/p>\n Both the latest ANZ Roy Morgan<\/a> and Westpac McDermott Miller surveys show a solid spike \u2013 both are now at their highest levels since 2021.<\/p>\n So, we may find ourselves with the wind at our back in 2026.<\/p>\n If we do, then it is important that we recognise it … and make the most of it.<\/p>\n Whether it\u2019s government, business or our household finances, the time to make structural changes that set you up for future prosperity is when conditions are calm, when you aren\u2019t in crisis mode and busy fighting for survival.<\/p>\n The window of relative calm may be brief, and it would be a shame to miss it.<\/p>\n As humans, we have a habit of taking the good times for granted.<\/p>\n I pondered that as I rode my bike* into work last week.<\/p>\n I was enjoying the ride but wasn\u2019t sure why, until I realised I had a tailwind.<\/p>\n I only really noticed because I could see it blowing the trees and bushes around me.<\/p>\n I didn\u2019t intuitively feel the wind at my back. I can tell you I never fail to notice a headwind.<\/p>\n This is a curse and a blessing of human nature. We feel adverse conditions \u2013 like headwinds and recessions \u2013 acutely.<\/p>\n We grumble and curse our luck. We yearn for the conditions to improve.<\/p>\n But all too often, we take them for granted when they do.<\/p>\n Good times feel neutral or normal, a kind of default we think we are owed.<\/p>\n Perhaps we are hardwired that way to encourage resilience or tenacity of some such evolutionary advantage.<\/p>\n Anyway, my point is that after years of recessionary and inflationary conditions \u2013 not to mention the turmoil of Covid \u2013 we need to be smart and bold in 2026.<\/p>\n Things happen. \u201cEvents, dear boy, events\u201d as British Prime Minister Harold Macmillan allegedly once said when challenged as to why the economy was progressing to plan.<\/p>\n Events have a way of ruining the forecasts and predictions of the smartest and most meticulous economists.<\/p>\n Year-ahead predictions are a mug\u2019s game. Far better, when making forecasts, to do it quietly and frequently, with regular updates.<\/p>\n Highlight your successes, bury the failures.<\/p>\n The more specific a prediction is, the more improbable it is that it will be correct. That\u2019s just physics.<\/p>\n Heisenberg\u2019s uncertainty principle, a fundamental principle of quantum mechanics, tells us you cannot simultaneously know both the exact position and exact momentum of a particle with perfect precision.<\/p>\n The more precisely you measure one, the more uncertain the other becomes.<\/p>\n My unscientific extrapolation of this holds that the further out an economist forecasts, the less reliable the forecasts become.<\/p>\n