NZ Business Confidence Rebounds: Recovery Insights 2026

Business Confidence Rebounds

The December 2025 NZIER Quarterly Survey of Business Opinion (QSBO) shows a decisive shift in sentiment. A net 39% of firms expect general economic conditions to improve in the coming months, a sharp rise from 17% in September and the strongest reading since 2014. This optimism spans most sectors, signalling that recovery is taking shape as lower interest rates begin to bite.

The Interest Rate Connection

Lower interest rates are finally gaining traction. Since August 2024, the Official Cash Rate has fallen from 5.25% to 2.25% in November 2025, a reduction of 300 basis points, reducing borrowing costs for businesses and households. QSBO findings suggest these cuts are translating into renewed confidence and investment intentions.

Activity and Investment on the Rise

While the gap between sentiment and actual activity remains, signs of stabilisation are clear:

Only net 3% of firms reported a drop in trading activity last quarter.
A net 23% expect stronger activity in the next quarter.
Hiring and capital spending intentions have turned positive, with 22% planning to increase staff and 11% planning investments in building.

Capacity and Inflation Dynamics

Capacity utilisation is the extent businesses are using their existing plant, equipment, machinery and other productive fixed assets, has edged up to 89.8%, and firms report slightly more difficulty finding skilled labour. Yet inflation pressures remain muted, with fewer businesses expecting cost or price increases, keeping inflation near the Reserve Bank’s target.

Sector Snapshot

Manufacturing: most optimistic, with 56% expecting improved conditions.
Services and Retail: confidence rising, though margins remain tight.
Construction: still subdued, with lower profitability and pricing constraints due to weak demand.

What This Means for Your Business

For Moore Markhams’ clients, these trends offer practical insights:

Improving confidence signals opportunity
Business confidence is at its highest level in more than a decade, suggesting conditions are turning more favourable for growth, investment, and expansion decisions.
Demand is starting to recover, but unevenly
While overall sentiment is strong, actual trading conditions remain mixed across sectors. Some businesses will see early gains, while others (notably construction) may experience a slower recovery.
Hiring conditions may tighten gradually
Early signs of reduced spare capacity, particularly for skilled labour mean wage pressure and recruitment challenges could re-emerge later in 2026.
Cost pressures are easing, margins still tight
Inflation remains contained, but profitability is still under pressure in many sectors due to lingering cost increases and limited pricing power.
Interest rates likely at or near the bottom
With the OCR expected to trough at 2.25%, businesses should plan on stable borrowing costs in the near term, followed by gradual increases from late 2026.

Align Your Strategy with Recovery

Confidence is improving, but volatility remains. Now is the time to:

Review pricing and margin strategy: with demand improving but competition still strong, now is the time to reassess pricing, cost recovery, and margin expectations.
Plan workforce needs early: businesses expecting growth should plan recruitment and retention strategies now, before labour markets tighten further.
Revisit capital investment decisions: stable interest rates and improving confidence may justify revisiting deferred investment in plant, machinery, or technology. When assessing the timing and scale of investment, consider the Government’s Investment Boost scheme, which may improve after tax returns and early cashflow on qualifying assets.
Strengthen cashflow resilience: recovery phases often expose working capital weaknesses. Ensuring strong debtor management and cashflow forecasting is critical.
Scenario-plan for interest rate changes: while rates are stable for now, modelling the impact of future OCR increases will help avoid surprises in 12–24 months’ time.