ASB tips stronger-than-expected growth but warns of uneven sectors and household strain
ASB is forecasting New Zealand's production GDP grew 0.3% in the June quarter, translating to annual growth of 2.4% — well ahead of the Reserve Bank's flat quarterly forecast in its MPS, and modestly above its separate Kiwi GDP nowcast tool, which sat at 0.2%.
If confirmed when official figures land, it would mark the strongest annual growth rate since June 2023, though ASB economist Wesley Tanuvasa (pictured) notes this partly reflects "the sharp June 2025 contraction dropping out of the annual calculation."
The forecast is also a meaningful upgrade from ASB's own previous call of a 0.1% contraction, with the bank pointing to a run of stronger-than-expected data releases in recent weeks as the basis for the revision.
Westpac has separately upgraded its own forecast to 0.2% growth for the quarter, also citing resilient construction and agriculture data.
Exports carry the load, households lag
The recovery is not evenly spread. ASB expects the primary and goods-producing sectors to lead growth, supported by robust dairy prices, expanding forestry exports and a construction sector that appears to have found firmer footing after several years of post-2021 rebalancing.
Manufacturing is also tipped to extend its expansion, aided by strong trade data and improving business conditions.
Services — by far the largest share of the economy — are forecast to grow just 0.5%, dragged down by weaker discretionary spending.
ASB expects household spending to have declined over the quarter, consistent with typical consumer behaviour during a fuel price shock. The bank flags the closure of the Strait of Hormuz as "the largest physical oil supply disruption in modern history," warning that "it will take time for the effects of the shock to fully wash through the economy."
What it means for the RBNZ and rates
ASB believes the stronger Q2 momentum should ease Reserve Bank concerns about the fragility of the recovery flagged in its September MPS. That statement, delivered on 2 September, saw the RBNZ lift the official cash rate 25 basis points to 2.75%, citing fuel-driven inflation from the Middle East conflict, with the RBNZ signalling it may tighten further before year's end.
At the same time, ASB cautions that a faster-than-expected absorption of spare capacity could complicate the inflation outlook, even as "there remains a lot of spare capacity in the economy."
For mortgage advisers, the takeaway is nuanced: with the RBNZ already signalling further tightening, an upside GDP surprise doesn't automatically point to earlier rate relief. Bank forecasts for where this tightening cycle ultimately peaks currently range from 3% to 3.75%, and the RBNZ is expected to weigh upcoming inflation signals — including the NZIER business survey on 6 October and the CPI release on 22 October — more heavily than the GDP data itself when it reviews the OCR again on 28 October.
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