High fuel prices are weighing on terms of trade, but it is not anticipated to derail New Zealand's economic recovery, ANZ said in a Thursday report.
However, the impact of high fuel prices is expected to slow growth within the year, the filing said.
ANZ expects growth over 2026 to come in at 1.7% on an annual basis, before accelerating to 2.6% and 2.8% in 2027 and 2028, respectively, as the oil shock and associated hit to confidence and balance sheet stress dissipate. It expects annual inflation to slow to 3.5% by the end of 2026, before stabilising around 2% by the end of 2027.
The bank continues to expect an official cash rate peak of 3%; however, the evolution of inflation pressures will ultimately determine where it settles. Risks to the equilibrium cash rate are skewed higher.
New Zealand's economic recovery is proving uneven, gradual, and increasingly vulnerable to upside inflation risks. Uncertainty remains elevated, particularly around the global outlook.
Several important growth drivers remain intact. Export incomes remain strong; the combination of favorable prices for many agricultural exports and a low New Zealand dollar continues to provide a significant income boost to large parts of regional New Zealand. Tourism is also continuing to recover. New Zealand's labor market is improving relative to Australia.
However, some of the traditional cyclical drivers of growth are close to neutral instead of stimulatory, the bank added. Several headwinds are containing growth, with the oil price shock the most obvious.