Rhyme and reason

A quick look at who survived and thrived in 25 and who’s well fixed for 26

Written 30 November 2025

As we saw out 2024 in a bit of an economic funk, it was already becoming apparent to a nation of poet-commentators that 2025 would be a year to survive rather than thrive. Whether ’26 will see a full economic fix is still a matter of conjecture, but at least we are entering the new year with more favourable tailwinds than we’ve felt for some time and therefore far greater cause for optimism.

Looking back on this last year, one person who didn’t thrive or survive in 2025 was Reserve Bank Governor Adrian Orr – the star of the year’s most unlikely soap opera. Although mild by comparison to the regular verbal stoushes between President Trump and Federal Reserve Chair Jerome Powell, the underlying friction in his relationship with Government was slow burning. He did oversee cuts to the OCR however only since his departure have we seen drops into what could be considered stimulatory territory, with the prevailing sentiment seemingly one of ‘not before time’.

Interest rates are the single most effective tool to deliver an economic recovery – and with this tool now as sharp as it has been for three and a half years, with the OCR at 2.25%, conditions are now in place for a meaningful rebound throughout our domestic economy.

For many market players, this rebound has already started and there have been some notable late-year rallies. Ahead of a predicted upturn in the housing market, and supported by long-term demographic trends, the retirement sector is up 24% in the last three months, while Sky City, which will be among the beneficiaries of greater discretionary consumer spend, not to mention the International Convention Centre and City Rail Link, has risen 18% over the last two.

For some of our listed companies, it’s not actually been a bad year at all. The real estate sector has harnessed the tailwinds of dropping interest rates to be up 15% this year, while Sky TV is up a whopping 50%. Set against a 4.1% gain for the wider equity market, which has been dragged down by concentrated losses among the larger constituents on the Index, if nothing else 2025 has made a compelling case for active management.

And so flirting again with a bit of poetry, what’s our pick for 26?

Lower borrowing costs should support an increase in consumption, business investment, housing activity and therefore confidence. From an investment perspective, this should encourage Fixed Income investors to consider gradually reducing duration as upward pressure on yields re-emerges. Meanwhile, the equity market will likely see a rotation towards cyclicals leveraged to stronger domestic demand, such as building materials, tourism and retail.

Alongside the names mentioned earlier that have already begun their rebound, Spark should continue its recovery after its prolonged period of under-performance, and commercial real estate should continue to attract investors reallocating capital away from term deposits as values firm and yields remain appealing.

Although our dollar may have already hit rock bottom, its resurgence may be more of a slow burn - and with tariff pain somewhat muted, conditions should remain favourable to our key exporters for much of the year ahead. This, in turn, will provide valuable liquidity to the wider economy.

The Government will also be looking for levers to pull to speed up economic recovery as we move towards an election at the end of the year. Among these we can expect them to continue bringing forward expenditure on health and education infrastructure, adding greater flexibility to immigration and international student settings and placing a greater focus on tourism and major event hosting.

Collectively we should therefore have sufficient drivers to build the momentum required to support a more dynamic economic environment and robust investment market over the next year and into 2027.

But just as the more distant spectre of an election will help build momentum, its arrival into plain sight may see it stall. Our three-year electoral cycle has never been conducive to economic growth, but particularly in the current era of substantial policy divergence not just between the two major parties but within existing coalition agreements. We can expect to see major investment decisions deferred until the exact next Government make-up and its priorities and policies are known.

The positive to draw from this though, is that when this handbrake is inevitably pulled, it will be to slow an economy that has already picked up speed, rather than one still stuck in neutral.