OECD sees fragile New Zealand recovery; warns on energy, ageing and capital-market gaps

WELLINGTON - New Zealand's economy is in the early stages of a recovery after more than two years of weakness, but the OECD warns the rebound is fragile and exposed to renewed inflation pressure, high energy costs, ageing-related fiscal strain and chronically weak productivity, according to a report released by the OECD.

• The report said growth is expected to recover gradually to 1.4% in 2026 and 2.3% in 2027, supported by earlier monetary easing, resilient exports and recent reforms, including the investment depreciation allowance under the Investment Boost programme.

• The OECD said the Reserve Bank of New Zealand's 325 basis points of cumulative rate cuts had helped support domestic demand. It said the RBNZ should "look through the initial fuel price shock" while ensuring inflation expectations remained anchored.

• The report warned that frequent changes to the monetary policy mandate and remit since 2019 risked weakening predictability and said New Zealand should "reinforce the RBNZ's strong operational independence and credibility" by keeping the mandate and remit stable between five-year review cycles, while ensuring strong accountability and transparency of Monetary Policy Committee decisions.

• The OECD said New Zealand still had a structural fiscal deficit and should "continue fiscal consolidation in the short- to medium-term," while allowing any support linked to the U.S.-Israeli war on Iran to be temporary and targeted. General government gross debt was projected to rise from 59.4% of GDP in 2025 to 63.1% in 2027, while the fiscal deficit was forecast at 3.9% of GDP in 2026 and 3.6% in 2027.

• The OECD warned ageing would push health, long-term care and pension costs up by around 5% of GDP by 2060, putting debt on an unsustainable path "towards 200% of GDP" without reform. It urged a combined public and private pension package, including linking the pension eligibility age to life expectancy, considering occupational and ethnic differences, means testing, tax reforms to boost private pension accumulation and higher NZ Super Fund contributions.

(Reporting by Lucy Craymer; Editing by Thomas Derpinghaus)

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This story was originally published May 6, 2026 at 8:02 PM.