NZIER's latest consensus of economic forecasts shows that while economic growth is expected to rise above 2% by this time next year, economists see GDP only growing 2.6% by the March 2028 year

While the economy's widely expected to have returned to growth in the last quarter of 2024, economists are still getting more pessimistic about the potential growth path in the years ahead.

The latest quarterly Consensus Forecasts from the New Zealand Institute of Economic Research (NZIER) show that in the year ending March 2025 GDP's expected to have contracted 0.8%.

That compares with a consensus forecast of 0.0% for the same period in the previous quarter. The sharp downward revision came as a result of the September quarter GDP figures released just before Christmas that showed, after extensive revisions, that GDP contracted 1.1% in the June quarter and 1.0% in the September quarter.

Economic growth is expected to rise to 2.1% for the year to March 2026. After this recovery, however, GDP growth's expected to rise 2.7% in the March 2027 year, but then fall to 2.6% in the March 2028 year.

All of the GDP forecasts have been trimmed back since the previous quarter. And they have been reduced in the past 12 months. A year ago the same consensus forecasts were pointing to 3% GDP growth in the year ending March 2027. To provide some form of comparison, actual economic growth did make 3% as recently as the March 2023 year - but 3% growth is not seen happening again in the next three years.

The consensus forecasts include forecasts from economists at the big five banks, RBNZ, Treasury and NZIER itself.

Expectations of household spending have also been trimmed back by the economists in the latest quarter.

NZIER senior economist Ting Huang said with about 55% of mortgages due for repricing within the coming six months, many households will face further reductions in their mortgage repayments at the next repricing of their mortgages.

"While this should support a recovery in discretionary spending over the coming years, this recovery is expected to be tempered by the soft labour market and slowing net migration," she said.

The residential investment outlook has been revised lower for the coming year but higher for the subsequent years.

"This reflects expectations for a recovery in residential construction demand over the longer term despite the weak demand over the coming year."

She said this expectation was in line with the architects’ work in their own office measure in the NZIER Quarterly Survey of Business Opinion (QSBO), which shows an increased pipeline of housing construction work in the next 12 to 24 months.

Huang said the export growth outlook has been revised higher for the year ending March 2025 but lower for years beyond that.

"While the combination of robust global demand and reduced global production of commodities has underpinned strong export growth in recent months, there are expectations for an easing in this growth over the coming years, given the increased trade tensions are weighing on global economic growth."

Forecast annual CPI inflation has been revised higher for the year ending March 2025 to 2.3%.

"This reflects expectations of the recent depreciation in the New Zealand dollar to push up prices of imported goods in the near term. Overall, the inflation outlook reflects the view that inflation will be anchored around the 2% inflation target mid-point over the coming years."