The latest Quarterly Survey of Business Opinion (QSBO) released by the New Zealand Institute of Economic Research (NZIER) shows that New Zealand's business confidence saw a significant jump in the fourth quarter of 2025, reaching its highest level since March 2014. This change is being interpreted by the market as indicating that New Zealand's economic recovery has entered a more substantial phase.

According to the survey results released on January 13th, after seasonal adjustment, 39% of the surveyed enterprises expect the overall economic situation to improve in the coming months, a significant increase from 17% in the September 2025 quarter. NZIER pointed out that this jump is rare in the history of QSBO, reflecting a "directional shift" in enterprises' judgment of the macro environment.

The effect of low interest rates is starting to emerge. Looking at the operating conditions of enterprises themselves, signs of improvement are equally clear. In the fourth quarter, only 3% of enterprises reported a decline in their own business activities, indicating that the recovery at the enterprise level is not just at the expectation level.

NZIER believes that this change is closely related to the transmission effect of the low-interest rate environment starting to spread to broader economic sectors. As the decline in financing costs gradually reflects in orders, investment, and employment decisions, the recovery path of the New Zealand economy is transitioning from a "technical rebound" to an "endogenous recovery".

The synchronous recovery of recruitment and investment willingness is particularly noteworthy in terms of changes in corporate behavior. Surveys show that:

In the December quarter, companies with a net increase of 5% increased their employee numbers;

22% of enterprises plan to continue hiring in the next quarter;

11% of enterprises plan to increase investment in buildings in the coming year, and 7% plan to increase investment in plant and equipment.

This result stands in stark contrast to the generally negative investment expectations held by enterprises in the September quarter, indicating that enterprises' confidence in the medium-term business environment is on the rise.

Labor market: Structural differences still exist. The QSBO also shows that idle capacity in some industries is shrinking, and this trend is reflected in labor market indicators. In the December quarter, only a few companies reported that it was "significantly more difficult to recruit" skilled workers, while non-skilled positions remained relatively abundant.

This means that the constraints in New Zealand's labor market are more structural than comprehensive, and the short-term pressure on wage inflation remains relatively manageable.

Industry differentiation: Manufacturing leads the way, while construction remains under pressure. In terms of industries, confidence has increased across all surveyed sectors, but there are significant differences in the pace of recovery.

Manufacturing emerged as the most optimistic sector in this round of survey:

56% of manufacturers anticipate an improvement in the future situation;

In the third quarter of last year, manufacturing remained the industry with the lowest confidence.

NZIER pointed out that the turnaround in manufacturing confidence was primarily attributed to the concurrent improvement in domestic and export demand during the fourth quarter. Despite the cost levels remaining elevated, feedback from businesses indicated that profitability had been restored.

Confidence in the construction industry has also rebounded, with over half of the enterprises optimistic about the overall economic outlook for the future. However, the actual operating conditions remain weak:

New orders and production continue to decline;

The architectural firm predicts a decrease in the number of residential, commercial, and government projects in the coming year.

From a longer-term perspective, the construction industry is slightly optimistic about demand in 12 to 24 months, but in the short term, insufficient demand is still undermining the pricing power of enterprises. NZIER judges that, against this backdrop, construction cost inflation may remain low in the short term.

Retail and Service Sector: Demand Improving but Profitability Under Pressure. Confidence in the retail and service sector has also been restored, but structural contradictions remain prominent.

In terms of retailers, despite the weak domestic sales performance in the fourth quarter, new orders have rebounded, making businesses cautiously optimistic about the recovery of future demand. The proportion of enterprises raising prices has increased, but profitability remains weak amidst persistent cost pressures.

The improvement in confidence among service sector enterprises primarily stems from the rebound in demand and expectations of further interest rate cuts. Against this backdrop, some service sector enterprises have begun to increase employment, but the overall profitability has not significantly improved.

The window for monetary policy is approaching. The QSBO, initiated in 1961, is one of the oldest business surveys in New Zealand and a subject of high attention from the central bank. Approximately 10,000 enterprises participate in the survey each quarter, and its results are regarded as an important "forward-looking indicator" for observing economic turning points.

The Reserve Bank of New Zealand will conduct its first monetary policy review since 2026 on February 18th. Currently, the Official Cash Rate (OCR) stands at 2.25%. Amidst a notable rebound in business confidence, yet with inflationary pressures remaining relatively moderate, the future direction of monetary policy will be a key variable for market attention.