Investment, hiring, and rates in the spotlight
Toplis highlights three swing factors for the 2026 outlook: weaker dairy prices, political uncertainty, and household incomes against “a backdrop of lower mortgage interest rates and ongoing weakness in employment growth.”
BNZ is “forecasting total fixed capital formation to increase 6.1% in calendar 2026, its strongest pace of expansion since 2021,” but warns that uncertainty around election outcomes and policy directions could delay investment decisions in both housing and business.
QSBO indicators point the other way for now, with sentiment feeding into stronger hiring and capex plans. Hiring and capex plans are now clearly turning up. NZIER says a net 5% of firms added staff in the December quarter and a net 22% plan to hire in the next three months, while a net 11% intend to lift building investment and 7% plan to increase spending on plant and machinery. Economists point to the rebound in investment intentions for both buildings and equipment, aided by lower rates and policy support such as the 2025 Investment Boost, as a key sign confidence in the upswing is strengthening.
Labour market lag and modest wage gains
BNZ’s projections imply employment will increase by 80,000 people across 2026, but Toplis flags this as “our biggest forecasts risk,” citing “extremely low flows of labour from the unemployed category into the employed category” and potential skill mismatches. With “the broader labour market still in a position of excess supply,” he expects wage growth to remain low with “modest real increases at best.”
QSBO labour indicators show early tightening at the skilled end, with a net 2% of firms now finding it difficult to hire skilled staff, while a net 15% still find it easy to hire unskilled workers. Economists say this mix suggests the unemployment rate is near its peak of around 5.3% and should gradually ease over 2026.