Westpac’s pre-election forecasts, dated November 6, project a recovery in AUD/NZD to 1.27 in December 2026, followed by a decline to 1.20 in June 2027 and 1.15 in December 2027.

The incumbent centre-right bloc secured 67 of 131 seats in the preliminary election count. However, the balance could change once special votes are counted, with official results scheduled for November 27.

Goldman Sachs saw little reason for the election itself to change the immediate interest-rate outlook. Ahead of the vote, its economists argued that the main parties’ policy programmes implied broadly similar fiscal stimulus, leaving the near-term political backdrop neutral for the Reserve Bank of New Zealand.

Weak New Zealand Hiring Clouds December Rate Hike

New Zealand’s unemployment rate increased from 5.6% to 5.7% in the September quarter, while employment declined by 0.1%.

Westpac Senior Economist Michael Gordon highlighted weakness in recruitment. In his assessment, the rise in unemployment has largely reflected growing difficulty finding another job after leaving work, rather than an acceleration in job losses.

That gives policymakers more room to wait for evidence that higher living costs are feeding into wages.

Gordon still considers a December increase in the Official Cash Rate (OCR) more likely than a hold. However, he expects a close debate between hawkish and dovish Monetary Policy Committee members, potentially requiring another split vote. Westpac retains its forecast for a 4.0% peak in the OCR, while acknowledging greater flexibility over when that level will be reached.

Goldman Sachs, by contrast, has shifted its next expected increase to February 2027. It anticipates a final 25-basis-point rise in June 2027, taking the OCR to a lower terminal rate of 3.25%.

What This Means for AUD/NZD

Australia’s cash rate stands at 4.85%, compared with New Zealand’s 2.75%, giving Australia an advantage of 2.10 percentage points.

Westpac expects the Australian rate to remain unchanged through June 2027 before declining to 4.35% by December. Over the same period, it forecasts New Zealand’s OCR reaching 4.00%.

That would narrow Australia’s advantage to just 0.35 percentage points, reducing interest-rate support for the Australian dollar. The importance of RBNZ policy expectations for the Kiwi was also discussed in our previous NZD/USD forecast.

The RBNZ’s December 9 decision will provide the first major test. A delay until February would preserve more of Australia’s rate advantage through December and January.

A lower eventual OCR peak, as Goldman Sachs expects, would present a more lasting challenge to Westpac’s forecast for the New Zealand dollar to strengthen against its Australian counterpart.