Breathe a sigh of relief because 2024 is done and there’s good things coming for everyone in 2025.
Even the economy’s looking brighter and better after a dismal year, which should provide breathing room and put more money in back pockets. Here’s what the experts and economists are forecasting for the year ahead.
Lower interest rates
If you have a mortgage which is up for renewal this year, feel free to fist pump right now, because the forecasters are saying interest rates will be lower in 2025. TradeMe did the hard work and gathered all the forecasts from leading economists in their November article:
- They said that the Official Cash Rate (OCR) would cut to between 3.75% and 3.0% by December 2025.
- That should translate into one-year fixed interest rates in the high fours or low fives.
- Longer term rates (2-5 years) aren’t expected to fall much further than their current levels.
- Most of their forecasters suggested that one year and six-month rates might be the best deal as of November 2024, but that could change quickly in the new year.
These lower rates should put upward pressure on house prices too, although they’re unlikely to boom like they did in 2021.
Lower, more stable inflation
When Stats NZ last checked in September 2024 inflation was at 2.2%, which is pretty good. The Reserve Bank is aiming for 2.0% but they’re usually happy if it's between 1% and 3%.
Kiwibank’s economists said in a December 14 article that they reckon inflation will be somewhere below 2% in late 2025. If they’re right that means inflation will hold steady for most of the year, making life easier for households and businesses.
More money in back pockets
If inflation is below 2% and wages continue to increase, Kiwis can expect to have a little more money in their back pockets. It may not feel like much, but that extra bit of disposable income might just make life a bit easier in 2025.
A stronger economy
Times have been tough for businesses over the last few years, with lower consumer demand. Thanks to lower inflation and lower interest rates in 2025 this should turn around, possibly leading to higher spending on retail and construction in particular.
What’s more, ASB Senior Economist Mark Smith told MPA Mag that export growth should continue which will help boost the Kiwi economy.
Geopolitical uncertainty (the Trump effect)
Smith also explained that the re-election of US President Donald Trump throws up a few question marks. A return to America-first policies including tariffs could throw a spanner in the works of the markets:
“The trade policies are of most concern for a small open economy like NZ. NZ exporters will need to be nimble, particularly for those selling into US markets.”
Getting advice is as important as ever
If the last four years has taught us anything, it’s to expect the unexpected. That’s why getting good financial advice is as important as ever - read more about finding a good financial adviser.
Disclaimer:
This ‘What can we expect from the NZ economy in 2025’ blog is general information only. The views and opinions expressed do not necessarily reflect those of the FSC. It is not intended to constitute legal or financial advice and does not take your individual circumstances and financial situation into account. We encourage you to seek assistance from a trusted financial adviser, legal or other professional advice.
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February 2025.
