The Reserve Bank of New Zealand has lifted the country’s official cash rate by 0.25 per cent to 2.5 per cent after several months of holding at 2.25 per cent.
Retail NZ CEO Carolyn Young said many of its members will be nervous about the rate rise.
“It has been a challenging time for retailers in recent months, with the tough economic environment and lower consumer spending taking its toll on the sector,” Young said.
“Hikes to the OCR can impact confidence and reduce consumer spending as interest rates rise, directly affecting homeowners through higher mortgage rates and other debt.”
During 2024 and 2025, RBNZ had slashed the cash rate nine times before holding at 2.25 per cent since November 2025. This was reportedly in an effort to stimulate growth as the country’s economy slowed, with unemployment rising and fuel prices growing.
Young said that changes to the cash rate is the only mechanism the Reserve Bank has to manage inflation and stimulate the economy, but added that the rate cuts over the last several months struggled to make any meaningful impact on spending, and didn’t positively affect business and consumer confidence.
“Retailers have been feeling the effects of rising overheads in terms of fuel and freight costs, as well as higher power prices during these cold winter months,” Young said.
“They know as well as anyone that next week’s inflation number is likely to show a noticeable increase, and that it is in their interests to get inflation back down to the Reserve Bank’s target range.
“However, they’ll now be bracing for another tough few months ahead as those business costs remain high, but spending in-store is likely to reduce.”
The bump in New Zealand’s cash rate comes a month ahead of the Reserve Bank of Australia’s monetary policy decision, with some economists expecting this to rise.