Kiwis expected that 2025 was supposed to be the year of recovery for our economy (the New Zealand economy) after a few COVID years; however those that had been hanging out through late 2024 with the “Survive to 25” mentality were no doubt disappointed with 2025.
The widely predicted rebound started off promisingly enough, but then rapidly petered out in April while unemployment continued to spike higher, inflation returned to the top of the Reserve Bank’s target band and the Government remained under pressure with a lack of money and no desire to increase the levels of borrowing more than what was already planned.
The anticipation of a bounce back for 2025 therefore failed to materialise and instead, it was another tough year.
Let’s look at some of the key things that happened in 2025.
Interest rates dropped – the Reserve Bank did cut the OCR this year but many people are saying that they should have done more and sooner particularly mid year when they had an opportunity to do a larger cut to stimulate the economy. Instead they took a conservative approach that helped, but only just. The Reserve Bank also was in the news with the sudden resignation of former governor Adrian Orr, followed a short time later by the departure of chairman Neil Quigley (in the wake of a shambolic handling of the details surrounding Orr’s departure) and then the new appointment of Dr Anna Breman as Governor of the Reserve Bank of New Zealand for a five-year term from 1 December 2025.
From what we have seen so far she seems like a breath of fresh air – she even issued a statement on Monday afternoon which effectively told the market its reaction to the bank’s November 26 Official Cash Rate (OCR) cut and accompanying commentary went too far.
Cost of living – even with the CPI now deemed within the acceptable range, many Kiwis are really struggling with the increases in the cost of living. Of course when we look at the household budget we typically focus on the food and supermarket costs which are easily identified and compared, but some of the other costs that have increased include the Council Rates, insurance costs (MASSIVE!) and professional fees.
With careful budgeting you can manage the living costs to some degree, but you cannot avoid all of these. The hope is always that incomes will increase in line with costs, but for many Kiwis there has been no increases for some time now.
Job security – in times where we have an unstable economy we also tend to see more business failures and that means less job stability too. This has been exacerbated during 2025 as organisations like the IRD had been ‘soft’ on tax arrears post COVID but this year got tough on it and that combined with the lack of an economic recover has contributed to the high level of company liquidations.
Company liquidations are on track to reach their highest level in 15 years (2,278 in year to end of October) as many businesses that had managed to hold on during Covid-19 were unable to continue with the high inflation and years of low or no economic growth, and of course then the concerted push by IRD to recover significant amounts of unpaid taxes (arrears have more than tripled over the last five years to over $10 billion). We’ve probably all seen some companies close their doors.
In regards to the job market, unemployment edged up to a near nine-year high to 5.3 percent in the three months ended September, from 5.2 percent in the previous quarter. The data was largely in line with expectations. The actual number of unemployed was 160,000, the highest since early 1994. The construction and manufacturing sectors were some of the hardest hit with 12,169 jobs and 5,850 jobs lost respectively.
Trump’s tariff’s – we cannot talk about 2025 and not mention Trump and the impact of the tariffs in New Zealand and around the world. The year was filled with a chaotic series of announcements that would have meant countries were subjected to a ludicrous range of tariffs, calculated using nonsensical formulas that were then often dialled back. The actual tariffs have probably not affected the New Zealand economy as much as it has with some others, but it has knocked business and investor confidence and especially as our economy is so small on the world stage and therefore can get knocked around a bit.
Property market – we know that Kiwis love properties and so we cannot do a review without mentioning the property market. In summary, not much happened in 2025. Up until recently New Zealand house prices had been falling. New Zealand house prices peaked in Nov 2021 and then gradually fell by 17.80% and it appeared that they hit the lowest point in May 2023, then started to recover but very slowly and erratically. According to the REINZ house price index data through to October the NZ house prices have increased 3.19% and most economists are predicting more steady, but still slow growth in 2026.
This will be good news for home owners and particularly those that purchased in the last 5-years and might have negative equity.
Sharemarkets – the major driver for the sharemarkets in 2025 was around AI and the companies that are linked to this. That meant that for 2025 the US sharemarket where many of these companies are listed has done very well, whereas the New Zealand sharemarket has been under performing.
It’s a common trend given that our sharemarket is so small and the limited number of companies listed.
Most of our KiwiSaver providers invest in global sharemarkets rather than just our own, and that gives better options and diversification but does add a currency risk to the investment.
Crypto – a lot of Kiwis have some exposure to Bitcoin and have seen the massive increases of 33% in early 2025 and then the dramatic fall in the price of Bitcoin of roughly 14%. Overall it is still up on what it was last year and like the sharemarkets we have seen some volatility. A lot of Kiwis have also asked if crypto is an investment or a high risk asset for speculation and there are a couple of things that make us think that the main crypto are becoming a more mainstream investment:
- Firstly, we are seeing more well known investment managers adding crypto to their portfolios. This is important for the stability of crypto pricing as these managers tend not to make rash investment decisions, instead they make more strategic decisions. They might hold crypto in a similar way to holding gold.
- Then there is the fact that we now have Donald Trump (the US President) who had become one of its biggest cheerleaders of crypto and himself with large personal crypto holdings. With his influence we could see crypto becoming more accepted as a currency for both trade and investment.
We have been seeing a lot of Kiwis getting involved in mining crypto through 2025 as this is seen as a safer long-term strategy.
2025 Economic View – Summary
As you can see and probably already knew, 2025 was not a great year for our economy.
Most of what has happened is a bit out of our control – plus we were not alone in 2025, with many countries around the world experiencing similar uncertainty.
Our neighbours in Australia have been struggling with inflation and so interest rates have not been cut like they have in New Zealand, but the economy has been doing okay and house prices have been increasing too. The Chinese economy is always an unknown, but their consumption of New Zealand products has been lower than what it was previously, and this has affected some exporters. They have also been affected by the tariffs and that has meant that some of the products that they produce have increased in price too. China’s export reliance could potentially turn into a major weakness for them.
Many other countries have been struggling in 2025 and while that might give a little bit of comfort it does not help our back pockets.
