IMF Executive Board Concludes 2026 Article IV Consultation with New Zealand
- Press Release
Global Business Magazine Admin
- 29 minutes read
Washington, DC – August 27, 2026: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for New Zealand on August 24, 2026, and endorsed the staff appraisal without a meeting on a lapse-of-time basis [1] The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]
Following a period of stagnation and low growth, the New Zealand economy was finding its footing in early 2026, before the onset of the Middle East war. Real GDP is estimated to have expanded by 0.2 percent in 2025, supported by household consumption amid easing debt service costs and favorable export prices. Inflation gradually increased in 2025, breaching the upper bound of the RBNZ’s target range in Q4, and price pressures have been rising following the oil price shock. After the closure of the Strait of Hormuz in late February, domestic fuel prices rose by 37 percent and diesel prices doubled by mid-April, but these increases had eased significantly by early July.
The Middle East war’s temporary disruption of global energy markets and supply chains increased uncertainty, raised prices, and delayed New Zealand’s economic recovery. Growth is estimated to have contracted in 2026Q2, as elevated oil prices weigh on household purchasing power and business profitability, but is projected to recover in subsequent quarters to average 2 percent in 2026. Growth is expected to accelerate to 2.7 percent in 2027 as pent-up demand and business confidence recover, supported by continued strong exports of agricultural products and tourism. Inflation is projected to temporarily rise to around 4 percent y/y in mid-2026 and remain above the RBNZ’s 1–3 percent target band until end-2026. Inflation is expected to return to the midpoint in the second half of 2027, as the oil price shock dissipates and the negative output gap helps contain domestic price pressures.
Executive Board Assessment[3]
New Zealand’s strong institutions and policy frameworks continue to support resilience, but the nascent recovery is being delayed by the oil price shock and elevated uncertainty. Growth is projected to strengthen as energy prices normalize and confidence recovers. Inflation is expected to remain temporarily above the RBNZ’s target band before returning to target as the shock dissipates, with spare capacity containing broader domestic price pressures. Risks to the outlook are tilted to the downside, particularly in the short term, while risks to inflation are tilted to the upside. The external position in 2025 is assessed as having been weaker than medium-term fundamentals and desirable policy settings.
Fiscal policy should continue to balance near-term support for the recovery with credible medium-term consolidation. The authorities’ targeted and temporary response to the oil price shock has been appropriate, protecting vulnerable households while preserving price signals and fiscal space. The government’s medium-term fiscal strategy is appropriately ambitious, aiming to achieve operating surplus by FY2028/29 and place debt on a declining path, and should remain the anchor for fiscal policy. Rebuilding fiscal buffers will strengthen resilience to future shocks. Expenditure restraint and public-sector efficiency gains should remain central to the adjustment effort, while safeguarding priority and growth-enhancing public investment, and should be complemented by well-designed revenue reforms. Looking further ahead, addressing aging-related spending pressures will require gradual reform to public pension settings and further strengthening the KiwiSaver scheme.
Monetary policy faces a difficult trade-off between returning inflation to target and supporting the recovery. The uncertain environment calls for nimble and data-dependent monetary policy supported by clear communication to deliver medium-term price stability. In the baseline, monetary accommodation should continue to be gradually withdrawn, with the policy rate converging towards a broadly neutral stance by end-2026. If inflation pressures prove more persistent, core inflation accelerates, or expectations begin to de-anchor, monetary policy should tighten more decisively. Consistent implementation of the new MPC Charter and stability in the Remit between scheduled reviews would support predictability and credibility.
Financial stability risks remain contained. Banks are well capitalized, liquid, profitable, and supported by stable funding. Current macroprudential settings are appropriate, with debt-to-income and loan-to-value restrictions continuing to provide safeguards against systemic risks. Implementation of the Deposit Takers Act and crisis-management reforms should proceed in a proportionate way across deposit takers. The recalibration of capital settings appropriately preserves resilience while supporting efficiency and competition. Housing reforms should continue to focus on easing land-use, planning, and infrastructure constraints to make supply more responsive and durably improve affordability.
Continued structural reform efforts are needed to revive productivity growth and translate New Zealand’s strong AI preparedness into economic gains while managing its impact on worker displacement. Deepening domestic capital markets will be critical to support sustained capital accumulation, reduce reliance on bank-based financing, and improve firms’ access to long-term and risk capital. The increase in KiwiSaver contribution rates in Budget 2025 is a welcome step toward expanding the pool of long-term private savings, and further reforms should be considered to strengthen capital market depth and business investment. AI adoption has the potential to boost productivity and growth, but its employment and distributional effects remain uncertain, underscoring the need to support workers at risk of displacement, particularly women and younger cohorts. Realizing these gains will also require addressing structural impediments that may slow adoption across firms.
Selected Economic Indicators, 2023-2031
(Annual percent change, unless otherwise indicated)
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | |
| Est. | Projections | ||||||||
| NATIONAL ACCOUNTS Real GDP (production) | 2.2 | -0.3 | 0.2 | 2.0 | 2.7 | 2.7 | 2.5 | 2.4 | 2.4 |
| Domestic demand | -0.7 | -1.1 | 0.9 | 2.2 | 2.5 | 2.4 | 2.3 | 2.3 | 2.4 |
| Private consumption | 1.1 | -0.2 | 1.4 | 1.0 | 2.5 | 2.7 | 2.5 | 2.3 | 2.4 |
| Public consumption | 0.1 | -0.9 | 2.5 | 1.5 | 2.2 | 2.1 | 1.7 | 1.7 | 1.9 |
| Investment | -4.8 | -3.4 | -1.7 | 3.3 | 2.1 | 2.2 | 2.5 | 2.8 | 2.9 |
| Public | 11.8 | -3.8 | -3.0 | 0.9 | 1.9 | 1.9 | 1.9 | 2.0 | 2.0 |
| Private | -4.5 | -5.3 | -0.5 | 0.9 | 3.0 | 2.8 | 3.1 | 3.2 | 3.3 |
| Private business | -4.4 | -2.7 | 1.5 | 1.1 | 3.0 | 3.3 | 3.4 | 3.6 | 3.6 |
| Dwelling | -4.7 | -11.3 | -5.5 | 0.5 | 3.0 | 1.6 | 2.3 | 2.0 | 2.3 |
| Inventories (contribution to growth, percent) | -1.2 | 0.4 | -0.1 | 0.5 | -0.1 | -0.1 | -0.1 | 0.0 | 0.0 |
| Net exports (contribution to growth, percent) | 2.7 | 0.6 | -0.3 | 0.0 | 0.1 | 0.1 | -0.1 | -0.1 | -0.2 |
| Real gross domestic income | 1.3 | 0.5 | 2.3 | 2.1 | 3.1 | 2.8 | 2.5 | 2.3 | 2.3 |
| Investment (percent of GDP) | 24.5 | 23.6 | 22.5 | 22.7 | 22.5 | 22.3 | 22.3 | 22.4 | 22.5 |
| Public | 7.4 | 7.0 | 6.7 | 6.4 | 6.3 | 6.2 | 6.2 | 6.2 | 6.2 |
| Private | 17.1 | 16.5 | 15.8 | 16.2 | 16.2 | 16.1 | 16.1 | 16.2 | 16.4 |
| Savings (gross, percent of GDP) | 18.7 | 14.5 | 16.2 | 18.0 | 18.9 | 18.7 | 18.9 | 19.4 | 19.5 |
| Public | -3.2 | -3.2 | -4.0 | -4.1 | -3.3 | -2.1 | -1.3 | -0.8 | -0.5 |
| Private | 21.9 | 17.8 | 20.2 | 22.1 | 22.1 | 20.9 | 20.2 | 20.2 | 20.0 |
| Potential output | 2.6 | 1.4 | 1.5 | 1.8 | 1.8 | 2.4 | 2.4 | 2.4 | 2.4 |
| Output gap (percent of potential) | 1.6 | -0.1 | -1.4 | -1.2 | -0.3 | 0.0 | 0.0 | 0.0 | 0.0 |
| LABOR MARKET Employment | 3.2 | -0.2 | -0.7 | 1.0 | 1.8 | 2.1 | 1.6 | 1.3 | 1.5 |
| Unemployment (percent of labor force, ann. average) | 3.8 | 4.8 | 5.3 | 5.4 | 5.1 | 4.5 | 4.3 | 4.5 | 4.4 |
| Wages (nominal percent change) | 7.0 | 4.6 | 4.0 | 4.0 | 3.6 | 3.1 | 3.0 | 3.0 | 3.0 |
| PRICES Terms of trade index (goods and services, % change) | -3.2 | 3.1 | 5.2 | -0.9 | 0.6 | 0.1 | 0.0 | -0.1 | -0.3 |
| Consumer prices (avg, % change) | 5.7 | 2.9 | 2.8 | 3.9 | 2.4 | 2.0 | 2.0 | 2.0 | 2.0 |
| GDP deflator (avg, % change) | 4.9 | 3.9 | 3.5 | 3.1 | 2.6 | 2.2 | 2.1 | 2.0 | 2.0 |
| MACRO-FINANCIAL Official cash rate (policy rate, percent, EOP) | 5.5 | 4.3 | 2.3 | 3.0 | 3.3 | 3.3 | 3.3 | 3.3 | 3.3 |
| Credit to the private sector (percent change) | 0.1 | 3.2 | 5.2 | 3.9 | 3.6 | 3.8 | 4.3 | 4.4 | 4.4 |
| Interest payments (percent of disposable income) | 8.5 | 9.9 | 8.9 | 10.7 | 10.9 | 10.6 | 10.4 | 10.3 | 10.1 |
| Household savings (percent of disposable income) | 2.7 | 2.5 | 2.4 | 2.3 | 2.8 | 3.5 | 4.2 | 5.0 | 5.7 |
| Household debt (percent of disposable income) | 167 | 164 | 165 | 162 | 159 | 156 | 153 | 151 | 148 |
| GENERAL GOVERNMENT (percent of GDP) 1/ Revenue | 37.0 | 38.8 | 38.1 | 37.1 | 37.0 | 36.9 | 37.1 | 37.2 | 37.3 |
| Expenditure | 40.7 | 41.6 | 41.7 | 41.4 | 41.0 | 39.5 | 38.8 | 38.2 | 37.9 |
| Net lending/borrowing | -3.7 | -2.8 | -3.6 | -4.3 | -4.0 | -2.6 | -1.7 | -0.9 | -0.6 |
| Operating balance | -1.5 | -0.5 | -1.2 | -1.7 | -1.3 | 0.0 | 0.8 | 1.4 | 1.8 |
| Cyclically adjusted primary balance 2/ | -3.0 | -2.9 | -2.2 | -2.7 | -2.6 | -1.5 | -0.7 | 0.1 | 0.4 |
| Gross debt | 45.7 | 49.1 | 53.6 | 55.9 | 57.9 | 58.1 | 57.6 | 56.7 | 55.8 |
| Net debt | 19.0 | 20.2 | 24.6 | 27.0 | 29.1 | 29.4 | 29.1 | 28.0 | 27.5 |
| Net worth | 95.8 | 95.4 | 90.4 | 86.9 | 84.1 | 82.7 | 82.4 | 82.6 | 82.9 |
| BALANCE OF PAYMENTS Current account (percent of GDP) | -6.3 | -4.7 | -3.6 | -3.6 | -3.4 | -3.0 | -3.0 | -2.9 | -3.0 |
| Export volume | 11.1 | 4.7 | 2.9 | 4.0 | 4.2 | 3.8 | 3.9 | 3.7 | 3.4 |
| Import volume | -0.6 | 1.6 | 3.2 | 3.2 | 2.9 | 2.9 | 3.4 | 3.4 | 3.5 |
| Net international investment position (percent of GDP) | -51.0 | -49.5 | -43.8 | -44.5 | -45.7 | -46.6 | -47.6 | -48.5 | -49.4 |
| Gross official reserves (bn US$) | 14.8 | 23.2 | 27.9 | … | … | … | … | … | … |
| MEMORANDUM ITEMS Nominal GDP (bn NZ$) | 413 | 427 | 445 | 469 | 493 | 518 | 541 | 565 | 590 |
| Percent change | 7.1 | 3.6 | 4.2 | 5.3 | 5.2 | 5.0 | 4.6 | 4.4 | 4.4 |
| Nominal GDP per capita (US$) | 56,154 | 51,380 | 51,400 | 52,978 | 53,183 | 56,051 | 57,813 | 59,501 | 61,495 |
| Real gross national disposable income per capita (NZ$) | 55,887 | 54,721 | 55,767 | 56,657 | 58,027 | 59,074 | 60,073 | 61,075 | 62,079 |
| Percent change | -1.4 | -2.1 | 1.9 | 1.6 | 2.4 | 1.8 | 1.7 | 1.7 | 1.6 |
| Population (million) | 5.2 | 5.3 | 5.3 | 5.4 | 5.4 | 5.4 | 5.5 | 5.5 | 5.5 |
| US$/NZ$ (average level) | 0.614 | 0.605 | 0.582 | … | … | … | … | … | … |
| Nominal effective exchange rate | 105.0 | 105.0 | 99.8 | … | … | … | … | … | … |
| Real effective exchange rate | 104.6 | 105.4 | 100.5 | … | … | … | … | … | … |
| Sources: Authorities’ data and IMF staff estimates and projections. 1/ Fiscal year. 2/ In percent of potential GDP. [1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. [2] Under the IMF’s Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/newzealand page. [3] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm. | |||||||||
