National unemployment rate

IBISWorld forecasts the national unemployment rate to climb by 0.32 percentage points in 2025-26, to 5.27%. This hike is closely tied to a combination of underlying factors. Previously, high interest rates, maintained by the Reserve Bank of New Zealand (Te Putea Matua) to combat inflation, have contributed to elevated borrowing costs for businesses and consumers alike, curbing investment and spending across multiple sectors. Despite interest rates easing in 2025-26, the delayed effects of this monetary tightening have continued to restrain economic momentum. Additionally, negative consumer sentiment is expected to weigh on consumer spending, placing upwards pressure on the unemployment rate. Combined with high net migration, a growing labour force participation rate and a sustained decline in online job advertisements since 2022, these factors have all contributed to the uptick in unemployment over the past year. Looking ahead, the Reserve Bank of New Zealand (Te Putea Matua) expects the unemployment rate to edge higher later in 2025 before beginning to stabilise in early 2026.

The unemployment rate grew strongly over 2020-21, because of the COVID-19 pandemic and associated lockdown measures. For example, the New Zealand Government (Te Kawanatanga o Aotearoa) implemented restrictions on travel and non-essential activities, forcing several businesses across the economy to cease trading. However, the overall rise in unemployment resulting from these restrictions was limited by the government's stimulus packages to support companies and individuals, like the Wage Subsidy Scheme. Even so, the job market improved over the two years through 2022-23, with unemployment rates falling as business conditions rebounded, demand for labour increased and the economy gradually reopened.

Over the two years through 2024-25, the unemployment rate trended upwards as high inflation curtailed household spending and slowed job creation by private sector businesses. This trend was compounded by the Reserve Bank of New Zealand holding interest rates at or above 3.75% to combat inflation, with higher borrowing costs dampening private sector expansion. Overall, IBISWorld forecasts the national unemployment rate to rise at an average annual rate of 0.11 percentage points over the five years through 2025-26.