The fuel crisis has wiped out early-2026 momentum and pushed the rate outlook higher
New Zealand's economy was finally finding its footing. Lower interest rates had been gaining traction since late 2025, business confidence was lifting, and households were beginning to loosen their grip on discretionary spending. Then the US-Israel-Iran war broke out at the end of February, triggering a global fuel crisis that has stopped the upturn in its tracks.
The NZIER June 2026 Consensus Forecasts — compiled from submissions by ANZ, ASB, BNZ, Kiwibank, Westpac, the Reserve Bank, and the Treasury — have revised GDP growth sharply lower. Annual growth for the year ending March 2026 is now forecast at just 0.6%, down from 0.8% in the March 2026 Consensus Forecasts. The outlook for 2027 has also deteriorated, with growth now expected to reach only 1.6% — less than half the 3% forecast in March 2026.
Households and businesses pulling back
The downgrade is broad-based. Household spending forecasts have been cut for the coming year, with rising petrol, electricity, and food costs eroding purchasing power faster than wages can keep pace. Consumer confidence has retreated on the back of these cost pressures, and the NZIER Quarterly Survey of Business Opinion — conducted between early March and early April — recorded a sharp deterioration in business sentiment and investment intentions following the onset of the fuel crisis.
Both overall and residential investment outlooks have been revised lower for 2026 and 2027. Architects' forward workloads — a lead indicator for construction activity — point to a reduced pipeline of building work over the next 12 to 24 months, a direct signal of softer housing supply ahead.
Inflation and interest rates heading higher
For advisers, the most consequential revision is to the inflation and interest rate outlook. Annual CPI inflation has been revised higher to 3.3% for the year ending March 2027, up from 3.1% in the March 2026 year. Annual petrol price inflation has surged to 30% and diesel to 91%, driving the upward revision. In response, the RBNZ brought forward the timing of its first OCR increase in the May Monetary Policy Statement, and the consensus forecasts have revised short-term interest rate forecasts higher in line with the central bank's updated guidance.
According to NZIER's June Quarterly Predictions, a 25-basis-point OCR hike is forecast at the July meeting, followed by another in September — a timeline that gives broker clients a narrow window to lock in current rates before the cycle begins.
The NZD is also expected to weaken, with the trade-weighted index forecast to track between 67.4 and 70 across the projection period — adding further pressure on import costs and reinforcing the inflation outlook.
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