Firmer footing for economy

Westpac's latest quarterly Overview confirms what we reported earlier in the year, that business confidence is now being matched by a pickup in activity. The Overview reports, "An upturn in business investment is now well advanced... [reflecting] a necessary part of the replacement cycle, with falling funding costs also providing support." The Overview also echoes MYOB's predictions based on a recent survey, that more businesses anticipate taking advantage of the Government's Investment Boost scheme before the end of the current tax year.

A cautionary note in the Overview addresses the price pressures that have been affecting inflation, predicting that we have not seen the last of the increases in such costs as council rates, electricity charges and insurances. "We’ve also seen a lift in some measures of inflation expectations, as well as gauges of businesses’ cost and pricing intentions. Firms with pricing power may seek to restore margins." That kind of prediction certainly seems likely to fuel business purchases that qualify for the Investment Boost incentive earlier in the year, rather than later!

A virtuous cycle

Westpac's Chief Economist Kelly Eckhold says in the Overview that, despite earlier concerns about the economy not responding sufficiently to stimulatory activity, business and consumer confidence are now seen to have taken decisive steps higher. Some of the economic data from the last two quarters of 2025 has now proved contrary to "negative perceptions of the time" and quarterly employment growth is at its strongest levels since early 2023. Kelly says that the key to further strengthening activity is, "the extent to which firms invest and hire, driving a virtuous cycle."

The Overview predicts that, even if the Reserve Bank of New Zealand increases the Official Cash Rate late in 2026, as anticipated, borrowing costs will remain low throughout the coming year and house prices will (hopefully) only increase gradually as demand rises to meet the current oversupply of stock.

Net migration is expected to increase back to pre-Covid levels, as better economic conditions slow the rate of departure of those hunting overseas jobs, and the new Parent Boost Visa makes New Zealand more attractive to immigrating workers and investors.

And in good news for anyone reliant on foreign exchange rates, the NZD is expected to find a firmer footing against major trading partner currencies over the next year and a half, as the current levels of confidence in the domestic economic recovery are backed up by future data.

Westpac's February 2026 Economic Overview can be read in full here.