New Zealand

Economic recovery delayed by Middle East tensions

Following economic contraction in 2024 and slow growth in 2025, the recovery, helped by lower interest rates and better terms of trade, has been delayed by the conflict in the Middle East that started in late February 2026. Higher input costs (fuel, freight, and materials) are putting pressure on business margins, and uncertainty surrounding geopolitical developments and the approaching November general election are preventing investment from really taking off. Relatively high inflation coupled with high unemployment (5.6% in Q2 2026) is also straining household disposable income and putting the pinch on consumption, particularly for discretionary expenses. While a weaker NZD benefits exporters, it also increases imported inflation. With price growth surging above the 1-3% target band, the RBNZ raised the cash rate by 25 bp to 2.5% in July. This was the first hike since the war began and more are expected before the end of 2026. However, the monetary stance should not become restrictive to avoid harming growth, especially given the remaining spare capacity.

In line with improving business and consumer confidence, growth should rebound in 2027, but the scale of the recovery depends on whether tensions in the Middle East persist. Throughout the year, private demand will gradually overtake public spending as inflationary pressures ease. Net exports will be the main growth driver as the fuel import bill decreases and favourable prices continue to benefit the agricultural sector.

In 2025, the agrifood sector achieved a record-high performance, a trend that has extended into 2026 despite cost pressures stemming from trade disruptions, especially for urea and fuel. In 2027, primary product prices are expected to slow, albeit from very high levels, so the sector will remain dynamic. Dairy products will continue to benefit from significant demand in Asia, growing opportunities from the 2024 FTA with the EU and robust production. Meat exports will continue to thrive as global supply of lamb remains tight versus strong demand, while beef will continue to benefit from robust demand in the US. Beef and kiwi fruit are exempt from the latest US import tariff of 12.5%. However, a strong El Niño could pose a downside risk by prompting drought and heatwaves that would damage pasture. Robust agriculture would bolster manufacturing and transport via food processing. These energy-intensive sectors should recover from cost pressures if supply chain tensions ease. Similarly, retail and hospitality should gradually recover as price pressures slow, household spending increases and tourism rebounds. Last, residential construction is also expected to grow as the number of dwelling consents has been rising since the second half of 2025, thanks to lower interest rates and the prospect of economic recovery. The government will continue to support housing growth to address the lingering but fading housing shortage, and develop public transport and infrastructure resilience.

Geopolitical instability to influence export growth and tax receipts

The general government deficit remained elevated in the 2025-2026 fiscal year, which ended in June of this year. Rising expenditure, by both local and central governments, was not matched by revenue growth due to subdued activity. However, the balance is expected to improve in 2026-2027 thanks to the economic recovery, higher levels of inflation and continued caution in spending. Fiscal discipline will still prevail, with the budget focusing on controlling spending and public debt, especially through cuts to public service jobs. Targeted and temporary support measures in response to rising petrol prices will be phased out. Economic recovery will expand the tax base, and thus revenue, allowing for additional spending on health, infrastructure, defence and schools. However, with the upcoming November parliamentary election in sight, uncertainty prevails over whether the budget will be rolled out. Public gross debt is expected to rise in line with the significant government deficit.

New Zealand’s current account deficit generally follows balance of goods and services trends, which are highly volatile. Over the past three years, the deficit has narrowed due to falling prices of imported commodities and weak economic performance that has curbed demand for imports. Furthermore, exports surged in 2025 thanks to soaring prices for exported goods (meat, dairy, gold and aluminum). The positive export trend is expected to continue in 2026, supported by a weaker New Zealand dollar. However, high oil import costs and softening gold prices have widened the 2026 deficit. In 2027, the current account deficit should narrow again as primary export prices stabilise at elevated levels and oil prices decline. However, the economic recovery will stimulate domestic demand for imported goods, thereby preventing a significant improvement in the deficit. While the recovery in tourism will reduce the deficit in services, the large and structural primary income deficit due to repatriated revenues by foreign investors will continue to weigh on the current account. The deficit is traditionally financed by financial and capital inflows, both in the form of direct and portfolio investments. Foreign currency reserves, which represented around five months of imports in June 2026, may also contribute to the financing. Risks relating to a possible depletion of international reserves are limited as the country’s external debt is mainly denominated in local currency.

November general election shaped by cost-of-living concerns

After surviving a vote of confidence in April, Prime Minister Christopher Luxon may step down following the parliamentary elections on 7 November 2026 in light of the plummeting popularity of the ruling coalition since 2023. The conservative government, led by the National Party, in coalition with the ACT Party and the populist New Zealand First Party, has controversially rolled back measures implemented by previous Labour administrations, including those related to M?ori rights and environmental regulations. Furthermore, the government’s term of office has been characterised by a struggling economy and rising unemployment. As the cost of living is the top concern for New Zealanders, this could work against the incumbent coalition and in favour of the Labour Party.

On the diplomatic scene, US-China rivalry poses challenges to New Zealand. Washington is a long-standing diplomatic, security and trading partner. Meanwhile, Beijing is by far the prime destination for New Zealand’s exports, especially for dairy. The number of tourists from China is also increasing. In a bid to maintain a good relationship with both countries, the government will likely maintain the status quo regarding the AUKUS partnership, particularly if the Labour Party wins the election, as the latter is opposed to joining the pact. As evidenced by the signing of the free trade agreement with India in 2026, Wellington will continue to strive to diversify its diplomatic and trade relations.

Payment

Primary payment methods in New Zealand consist of card (debit card and credit card) and electronic credit or debit (direct debits and credits, automated bill payments and electronic transfers). There has been a rapid increase in the use of contactless payments, mobile phone-based applications, and payments using the internet. Although cash remains important, its use is reducing significantly and cheque usage halved between 2013 and 2016. Wire transfers and SWIFT bank transfers are the most commonly used payment methods for domestic and international transactions. Most of New Zealand’s banks are connected to the SWIFT network.

Debt Collection

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The debt collection process usually begins with serving a letter of demand, where the creditor notifies the debtor of their payment obligations (including any contractual interest due) with a time limit for making the payment.

SUMMARY JUDGMENT PROCEEDINGS

If the creditor does not receive payment after issuing a letter of demand, a next possible step is to issue summary judgment proceedings. This procedure is intended for situations where the debtor has no defence against the claim. An application can be made to the District Court or High Court, depending on the value of the claim. The District Court has jurisdiction to hear matters for claims up to NZD 350,000, and the High Court typically hears matters for claims above NZD 350,000. A statement of claim must be filed, along with a notice of proceedings, an application for summary judgment and a supporting affidavit by the creditor (or in the case of a company, an individual with personal knowledge of the facts who is authorised to submit an affidavit on behalf of the company), which sets out the facts of the claim. A summary judgment typically involves a hearing, which lasts around one day (if the debtor raises a defence), with evidence given by way of affidavit rather than requiring witnesses. If the application is successful, the Court may enter a judgment in favour of the creditor. If the application is undefended, judgment may be entered by default in favour of the creditor, without the need for a full hearing although an appearance in Court to call the matter will be required. If the defendant is able to show an arguable defence, the Court may decline summary judgment and direct the matter to be heard as an ordinary proceeding.

ORDINARY PROCEEDINGS

Ordinary proceedings are used where summary judgment is unavailable because the debtor has raised a genuine defence, or if summary judgment is not granted. Ordinary proceedings are initiated by filing a notice of proceeding and a statement of claim. Depending on the value of the claim (as outlined above), these proceedings can take place in the District Court or the High Court. Unlike summary judgment, an ordinary defended proceeding may involve additional processes, such as discovery, hearing of evidence and interlocutory applications, or serving of briefs of evidence, depending on the nature of the proceeding.

APPEALS

The High Court determines appeals from the District Court. The Court of Appeal has jurisdiction to hear appeals from the High Court. Appeals are generally restricted to questions of law only. Appeals to the highest appellate court in New Zealand, the Supreme Court, can only be heard with leave of that Court. Leave will be granted if the Supreme Court is satisfied that it is necessary in the interests of justice to hear the appeal.

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Enforcement of a Legal Decision

If the Court enters judgment in favour of the creditor, there is no appeal, or all appeal avenues have been exhausted, the creditor can apply to the High Court, or District Court (depending on the value of the claim as outlined above), seeking enforcement action. This can include a deduction from the debtor’s wages or benefits (if the debtor is an individual), seizure of property, garnishee proceedings, or placing a charge on the debtor’s property. Foreign judgments must first be recognised by the Court under the Reciprocal Enforcement of Judgments Act 1934, or common law.

Insolvency Proceedings

BANKRUPTCY

If the creditor does not receive payment after obtaining judgment against a debtor and that debtor is an individual, the creditor can issue a bankruptcy notice served on the debtor. Failure by the debtor to comply with a bankruptcy notice is considered by the law to be an act of bankruptcy.

STATUTORY DEMAND

If the debtor does not make payment pursuant to the letter of demand and that debtor is a company, a further potential step is for the creditor to prepare and serve a statutory demand for the outstanding debt. This can be used as an alternative to summary judgment or ordinary proceedings. A statutory demand can only be issued if there is no substantial dispute over the debt. Once the statutory demand is served on the debtor, the debtor has 15 working days to pay the debt, or to enter into an arrangement for payment which is agreed by the creditor. If the debtor company does not make payment pursuant to the statutory demand, the creditor has a further 30 working days to commence liquidation proceedings against the debtor company, using non-compliance with the statutory demand as evidence of the debtor’s inability to pay its due debts. However, a debtor company can make an application to set aside a statutory demand within 10 working days of being served with it. The Court may set aside the statutory demand if there is a substantial dispute as to whether or not the debt is due, if the debtor company has a counterclaim, set-off or cross-demand, or if there are other adequate grounds to do so.

LIQUIDATION

Liquidation involves the realisation and distribution of a debtor company’s assets when the company is insolvent, or does not expect to remain in business. A liquidator is appointed to the company, who takes over the management of the company, realises its assets, pays its creditors and distributes the remainder to its shareholders.

CREDITORS’ COMPROMISE

There are two potential forms of creditors compromise, either an informal agreement between debtor and creditor, or a formal creditors’ compromise under the Companies Act 1993. A formal creditors’ compromise is a binding agreement between a debtor company and its creditor(s) regarding the payment of its debts, with terms and conditions that are less exacting than the strict legal rights of creditors. A compromise may involve payments over time, deferred payments, or accepting a lesser sum in full and final settlement of the debt. Once a creditors’ compromise is approved by the required majority of creditors, or the Court, the compromise binds all creditors. An equivalent procedure exists for individuals under the Insolvency Act 2006.

VOLUNTARY ADMINISTRATION

The debtor company may go into voluntary administration to try and maximise the chances of an insolvent company continuing to operate, or if that is not possible, to allow for a better return for creditors than immediate liquidation. It enhances the existing creditors’ compromise procedure as an alternative to liquidation, by imposing a moratorium on creditors taking steps to enforce their debts.

Last updated:August 2026