The New Zealand Business Confidence index, as reported by the Sigmanomics database, registered 18.00% in October 2025. This marks a 4-point decline from September’s 22.00% and sits below the 12-month average of 19.00%. The index remains positive but reflects a notable cooling in business sentiment amid ongoing macroeconomic challenges.

Drivers this month

• Monetary tightening by the Reserve Bank of New Zealand (RBNZ) has increased borrowing costs, dampening investment appetite.
• Inflation remains sticky at 6.20% YoY, pressuring input costs and consumer demand.
• Export demand slowed due to weaker global growth and geopolitical tensions in Asia-Pacific.
• Government fiscal policy remains neutral, with no major stimulus changes.

Policy pulse

The RBNZ’s official cash rate stands at 5.50%, up 75 basis points since June 2025. This rate is above the neutral estimate of 3.50%, signaling a restrictive stance aimed at curbing inflation. Business confidence reflects this tightening, with firms anticipating slower sales growth and tighter credit conditions.

Market lens

Immediate reaction: The NZD/USD pair dipped 0.30% within the first hour post-release, while 2-year government bond yields edged up 5 basis points, reflecting increased risk aversion and cautious investor positioning.

Core macroeconomic indicators provide context for the business confidence shift. GDP growth slowed to 1.20% QoQ in Q3 2025, down from 1.80% in Q2. Unemployment remains low at 3.80%, but wage growth has moderated to 3.50% YoY, insufficient to offset inflation pressures fully.

Monetary Policy & Financial Conditions

The RBNZ’s tightening cycle has increased mortgage rates by approximately 1.20 percentage points since mid-2025. Credit spreads have widened slightly, and lending standards have become more conservative. These factors contribute to subdued business investment intentions.

Fiscal Policy & Government Budget

Fiscal policy remains broadly neutral. The 2025 budget projects a deficit of 1.50% of GDP, down from 2.30% in 2024, reflecting moderate consolidation. Infrastructure spending continues but without new stimulus measures, limiting upside support for business confidence.

External Shocks & Geopolitical Risks

Heightened geopolitical tensions in the Asia-Pacific region, including trade frictions and supply chain disruptions, have dampened export prospects. Commodity price volatility, especially in dairy and forestry products, adds uncertainty to revenue forecasts.

Drivers this month

• Export sector confidence dropped by 3.50 percentage points due to global demand concerns.
• Domestic sales outlook fell 2.00 points amid higher borrowing costs.
• Input cost pressures remained elevated, subtracting 1.50 points from the index.

Policy pulse

The RBNZ’s hawkish stance continues to weigh on sentiment. Inflation remains above target, and the central bank’s forward guidance suggests further rate hikes are possible if price pressures persist.

Market lens

Immediate reaction: NZD/USD fell 0.30%, 2-year yields rose 5 basis points, and the S&P/NZX 50 index declined 0.40%, reflecting investor caution.

Looking ahead, business confidence in New Zealand faces a complex environment. Inflation control remains the central challenge, with monetary policy likely to stay restrictive through early 2026. External demand risks persist amid geopolitical uncertainties and global growth slowdown.

Bullish scenario (25% probability)

• Inflation moderates faster than expected, allowing the RBNZ to pause rate hikes by Q1 2026.
• Global trade stabilizes, boosting export demand and lifting business sentiment.
• Fiscal policy introduces targeted support for innovation and green sectors.

Base scenario (50% probability)

• Inflation declines gradually but remains above target through 2026.
• Monetary policy remains restrictive, with a cautious approach to further hikes.
• Export growth remains subdued, offset by steady domestic demand.

Bearish scenario (25% probability)

• Inflation proves persistent, forcing additional rate hikes and tightening credit further.
• Geopolitical shocks disrupt supply chains and reduce export volumes.
• Fiscal consolidation accelerates, reducing government support.

The October 2025 business confidence reading underscores a cautious mood among New Zealand firms. While sentiment remains positive, the downward trend signals growing concerns over inflation, monetary tightening, and external risks. Policymakers face a delicate balancing act between taming inflation and supporting growth. Investors and businesses should prepare for continued volatility and monitor inflation and geopolitical developments closely.

Key Markets Likely to React to Business Confidence

Business confidence in New Zealand closely influences several financial markets. Currency pairs, equity indices, and bond yields tend to respond swiftly to shifts in sentiment, reflecting changes in risk appetite and economic outlook.

• NZDUSD: The New Zealand dollar’s exchange rate versus the US dollar is highly sensitive to business confidence, reflecting trade and capital flow expectations.
• NZX50: New Zealand’s benchmark equity index often moves in tandem with business sentiment, as earnings outlooks adjust.
• AAPL: While a US tech giant, Apple’s supply chain exposure to Asia-Pacific links it indirectly to NZ business conditions and regional trade flows.
• BTCUSD: Bitcoin’s price can reflect global risk sentiment shifts, which are influenced by economic confidence worldwide.
• EURUSD: The euro-dollar pair reacts to global risk trends, which impact NZ exports and investor flows.

FAQs

What is the current level of New Zealand Business Confidence?

The latest reading is 18.00% as of October 2025, down from 22.00% in September.

How does business confidence affect monetary policy in New Zealand?

Lower confidence can signal slower growth, influencing the RBNZ’s decisions on interest rates and inflation targeting.

What are the main risks to New Zealand’s business confidence outlook?

Persistent inflation, tighter credit conditions, and geopolitical uncertainties pose significant downside risks.

Key takeaway: New Zealand’s business confidence decline signals caution amid tightening monetary policy and external risks, with a mixed outlook for 2026.