Economy approaching fuel squeeze against backdrop of lower-than-expected growth

Thursday, 19 March 2026

The economy grew only 0.2% in the final quarter of last year and 1.3% overall in 2025, Stats NZ has reported in a double disappointment.

The December quarter GDP figure was at the bottom end of bank economists’ expectations of 0.2% to 0.4% growth, and 0.3 percentage points below the Reserve Bank’s February forecast of 0.5% growth.

In addition, Stats NZ trimmed its estimate of growth during the previous nine months of 2025 to 1.1%, from 1.2% previously.

The overall GDP increase of 1.3% for the year put economic growth on a par with growth in Europe, but significantly behind Australia, which experienced 2.6% growth last year.

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Stats NZ macroeconomic spokesperson Jason Attewell said the GDP figures were “unusually dated” because they did not reflect recent developments in the Middle East.

But the government department was talking to customers to work out what it could do to provide more contemporary information on the state of the economy in light of the conflict, he said.

“Because the situation is evolving so quickly, we know there is the demand for higher frequency indicators, so we’re looking into that at the moment. Things like more frequent price indicators, information about fuel, and also household spending.”

On the plus side, most industries recorded an increase in economic activity in the December quarter and now was the first time since the year ended September 2024 that the economy had experienced annual growth, he said.

ANZ senior economist Matthew Gait, who had accurately predicted 0.2% GDP growth in the December quarter, had forecast a “downside surprise” to the Reserve Bank’s forecast on that scale would not greatly influence the outlook for the Official Cash Rate.

GDP figures had been volatile recently and prone to revisions, he noted.

At the margin, a downside surprise to GDP would give the Reserve Bank “a little more latitude” to look through the near-term inflationary impact of the oil shock and focus on the potential medium-term implications, he said ahead of the release.

“Clearly, higher oil prices are not good for either inflation or [economic] activity.”

Which industries were up

Rental, hiring, and real estate services were the largest contributor to the overall increase in GDP, up 0.8% in the quarter.

Retail trade and accommodation were up 1.3%, financial and insurance services up 1.5%, information media and telecommunications up 1.9%, arts, recreation, and other services up 2%.

Spending by overseas visitors increased in the December 2025 quarter, contributing to a 7.8% rise in travel services exports which flowed through to service tourism, like rental car hire, retail trade, and accommodation.

Construction was the largest downward contributor, down 1.4%. That followed a 0.8% increase in the September 2025 quarter.