Capital expenditure by the private sector

IBISWorld forecasts capital expenditure by the private sector to dip by 0.6% in 2025-26, to $50.1 billion. Private capital expenditure is expected to shrink in line with falling capital expenditure on construction, a result of years of elevated interest rates and swelling material and labor expenses. However, reliable gains in household consumption expenditure, brought about by interest rate relief following looser monetary policy by the reserve bank, have prevented capital expenditure from falling further.

Capital expenditure by the private sector has consistently increased since the global financial crisis and its flow-on effects over the two years through 2009-10. Part of this capital expenditure is attributable to earthquakes over the past decade. Earthquakes, like the 2016 Kaikoura earthquake, caused severe damage to infrastructure and equipment. New Zealand's private sector invested additional capital over the following years to repair damaged or destroyed infrastructure, driving up capital expenditure.

Before the pandemic, which caused a sharp dip in spending in 2020-21, private capital expenditure had long been trending upwards. Consistent population expansion and GDP growth have supported capital spending over the past few years. Rising residential housing prices over recent years have also encouraged firms to invest in construction activities. However, demand from the construction and mining sectors has fluctuated dramatically in recent years due to changing legislative conditions, impacting private capital spending over the period. Falling demand from sheep farming, caused by low global wool prices and volatile demand from beef cattle and grain farming resulting from climate related fluctuations constrained growth from agriculture over the period. Meanwhile, mining companies have frequently adjusted their investment in machinery and equipment, following significant volatility in the price of key export commodities like oil and gas, coal and gold over the past few years. Overall, IBISWorld forecasts capital expenditure by the private sector to strengthen at a compound annual rate of 0.2% over the five years through 2025-26.