ASB chief economist Nick Tuffley says Kiwis can look forward to a year of renewed momentum after a turbulent year marked by recession.
The outlook is positive, driven by lower interest rates, resilient exports, and renewed consumer confidence.
The housing market is expected to regain momentum, with first-home buyers in a strong position because of lower interest rates and more choice.
“With interest rates at their lowest in years, more New Zealanders are set to benefit as mortgages refix at better rates.
"We anticipate modest price growth of about 3-4%, as confidence returns and employment growth lifts household earnings, although high stock levels will keep gains in check.”
Inflation, which rebounded to 3% in the third quarter of this year, is forecast to ease further as wage growth slows and spare capacity keeps price pressures in check, Tuffley says.
By the middle of next year, ASB expects inflation to be back to about 2%.
"The Reserve Bank’s recent cuts to the OCR are expected to hold, with the risk of further easing if recovery falters."
He says the central bank is likely done with OCR cuts as there aren’t many more drivers to push interest rates down.
ASB is forecasting annual growth of more than 2.5% next year as improving cashflows lift household spending.
"We’re seeing clear signs that the recovery is gathering pace," he says.
"Consumer spending is up, especially on big-ticket items like cars and electronics, and rural incomes are holding strong despite global uncertainty.
New Zealand's export sector had remained robust despite ongoing global trade challenges and tariffs.
About a quarter of the country’s US-bound exports are now exempt from the added 15% tariff, and there is strong growth in markets like China and Europe. Tourism is also rebounding, with visitor numbers back to 88% of pre-Covid levels.
"It’s time to enjoy a smoother ride after the potholes of the past year."
This outlook follows the September report that noted a "bumpy road" with temporary stalls in growth but highlighted green shoots like resilient exports and recovering consumer spending.
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