New Zealand IMF Report Flags Delayed Recovery and Rising Inflation

The International Monetary Fund warned that New Zealand’s economic recovery is lagging because of higher oil prices and global uncertainty. It expects GDP growth of about 2 % in 2026 and 2.7 % in 2027, while inflation, at 3.1 % in Q1, will stay above the Reserve Bank’s 1‑3 % target until late 2026 and only return to the midpoint in the second half of 2027. The IMF advises the central bank to gradually withdraw accommodation and aim for a broadly neutral stance by the end of 2026, but notes considerable uncertainty in defining neutrality.

Fiscal analysis highlighted rising pressures from New Zealand Superannuation and defence spending. To meet its 2028/29 surplus target and rebuild debt buffers, the IMF suggested a broader set of revenue measures, including a comprehensive capital gains tax or reforms to land‑value taxation. It also urged structural reforms to boost productivity, deepen capital markets and increase housing supply.

New Zealand Treasury data show the government’s operating balance improved, with revenue $1.7 billion higher than forecast and expenses $0.9 billion lower, narrowing the deficit by about $3 billion. Finance Minister Nicola Willis said the figures reflect a strengthening economy despite recent oil‑price shocks. Nonetheless, IMF officials warned that without new taxes the fiscal target may be missed, and that excessive reliance on spending cuts could harm public services.