NZ franchises to benefit from gradual domestic recovery in a sea of global uncertainty

Nobody in business expected 2025 to be a cakewalk and so far the predictions of a slow start to the year have been borne out with miniscule improvements or even downturns in most key markers. However, in their quarterly Economic Overview released today, Westpac’s senior economists point to some encouraging signs in GDP growth and business confidence. Based on stronger than expected annual changes in capital investment they say that, “while current conditions remain subdued, businesses have been confident enough to start pushing ahead with renewed investment.”

Editor's note: Westpac New Zealand won the title of #1 Forecaster - New Zealand GDP at the 2025 Focus Economics Analyst Forecast Awards, placing them at the forefront of global financial forecasters.

Job numbers have levelled out in recent months and business surveys show a lift in hiring intentions. Franchises will be amongst those bringing on more personnel to relieve tight staffing pressures. Net migration numbers have lifted slightly, with more professionally skilled immigrants arriving to provide a higher quality pool of potential franchisees. 

Regional areas of New Zealand have generally been more resilient than the cities, and franchisees we’ve spoken to recently are confirming that higher prices for agricultural and horticultural exports have sustained stronger local economic and business health in those regional centres. 

Core inflation is now seemingly under control and falling interest rates (with further OCR and interest rate cuts now keenly anticipated) have been helping both households and businesses loosen their belts a little already. This means that the hardest hit urban-based franchises serving the domestic business sector and individuals (B2B, construction, retail and hospitality) can plan for greater consumer demand as the year progresses.

On the downside, for businesses in general and franchises included, Westpac’s economists predict that a weaker global outlook will contribute to cost pressures from imported goods and could slow the benefits recently seen from improved tourism spending. And of course, volatility in the US dollar looks set to continue, making precise foreign exchange forecasts very difficult. Overall, Westpac economists anticipate that uncertainty about global trade is likely to persist until August at the very least. 

The full report can be found here. 

Editors note: As was widely anticipated, the Reserve Bank of New Zealand cut the Official Cash Rate on 28 May by a further 25 basis points to 3.25%. Their revised projection indicates a baseline expectation of 1-2 further OCR cuts by the end of this cycle, with one of those cuts to occur in the September quarter. In Westpac's review of the RBNZ Monetary Policy Statement, Chief Economist Kelly Eckhold said that Westpac now sees the next 25bp cut to 3% at the August MPS (previously July), which concurs with their previous analysis that the uncertainty will persist until August at the very least. Most of the major banks in New Zealand also cut some of their interest rates yesterday as the OCR announcement was confirmed.