ING’s Francesco Pesole notes that New Zealand’s labor market and growth context is broadly in line with the Reserve Bank of New Zealand’s forecasts. Stronger-than-expected employment growth, high labor force participation rates and improving PMI data suggest that momentum remains unchanged, with GDP trending close to the RBNZ estimate of 0.7% quarter on quarter and 2026 growth forecasts of around 2.9% unlikely to be significantly revised.
The tightening of the labor market supports this political stance
“The labor market is also sending relatively hawkish signals. The unemployment rate was 5.4%, slightly above the RBNZ estimate of 5.3% in Q4 2025, but all the surprise came from the rise in the labor force participation rate. The underlying momentum appeared stronger: employment growth in Q4 was 0.5% quarter on quarter compared to the RBNZ forecast of 0.2%, and sharper-than-expected declines in net migration may result in some tightening the labor market in 2026.”
“SEEK (New Zealand’s largest job market) indicators show that the number of job applications per job advert remains significantly elevated following the Covid-19 pandemic, while the number of up-to-date job adverts is significantly lower. However, there has been some improvement in the second half of 2025 and these trends have gradually started to reverse.”
“On growth, we do not expect Q4 GDP to be materially different from the RBNZ estimate of 0.7% quarter on quarter. The 2.9% growth forecast for 2026 may not be materially changed at this meeting.”
(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)
