A couple of data points from New Zealand today.

NZIER Survey of Business Opinion (Q1)

Westpac notes the Q1 NZIER Survey of Business Opinion points to a fragile recovery backdrop, with headline confidence improving modestly but underlying activity still soft. Firms reported a slight lift in expected own activity, suggesting conditions may be stabilising after a weak 2025, though current demand indicators remain subdued.

Cost pressures continue to feature prominently, with businesses highlighting ongoing increases in wages and other inputs. Pricing intentions also remain elevated, signalling that firms still see scope, or necessity, to pass on higher costs. Westpac interprets this as a sign that inflationary pressures are easing only gradually, rather than decisively rolling over.

Q1 CPI (primary focus)

Turning to inflation, Westpac argues the Q1 New Zealand Consumer Price Index reinforces the view that disinflation is proving sticky. While headline inflation may not have surprised materially, the composition is more concerning from a policy perspective, with core and non-tradables measures remaining firm.

The bank highlights that domestically driven inflation, particularly in services, continues to show persistence, underpinned by wage growth and capacity constraints. This aligns with signals from business surveys, where firms continue to report elevated cost pressures and strong pricing intentions.

Westpac also emphasises that tradables inflation is offering less relief than previously, with global cost dynamics and exchange rate effects limiting downside. As a result, the overall inflation profile remains inconsistent with a swift return to target.

In Westpac’s view, the data strengthens the case for the Reserve Bank of New Zealand to remain cautious. While growth remains soft, the persistence of core inflation suggests policy will need to stay restrictive for longer, with the hurdle for rate cuts still high in the near term.