The Pacific nation's economy is exposed to renewed inflation pressure, high energy costs, ageing-related fiscal strain and chronically weak productivity, according to a report released by the OECD.
The report said New Zealand's economic growth is expected to recover gradually to 1.4 per cent in 2026 and 2.3 per cent in 2027, supported by earlier monetary easing, resilient exports and recent reforms, including the investment depreciation allowance under the Investment Boost program.
The OECD said the Reserve Bank of New Zealand's 325 basis points of cumulative rate cuts had helped support domestic demand.
It said the RBNZ should "look through the initial fuel price shock" while ensuring inflation expectations remained anchored.
The report warned frequent changes to the monetary policy mandate and remit since 2019 risked weakening predictability.
It said New Zealand should "reinforce the RBNZ's strong operational independence and credibility" by keeping the mandate and remit stable between five-year review cycles, while ensuring strong accountability and transparency of Monetary Policy Committee decisions.
The OECD said New Zealand still had a structural fiscal deficit and should "continue fiscal consolidation in the short- to medium-term," while allowing any support linked to the US-Israeli war on Iran to be temporary and targeted.
General government gross debt was projected to rise from 59.4 per cent of GDP in 2025 to 63.1 per cent in 2027, while the fiscal deficit was forecast at 3.9 per cent of GDP in 2026 and 3.6 per cent in 2027.
The OECD warned ageing would push health, long-term care and pension costs up by around five per cent of GDP by 2060, putting debt on an unsustainable path "towards 200 per cent of GDP" without reform.
It urged a combined public and private pension package, including linking the pension eligibility age to life expectancy, considering occupational and ethnic differences, means testing, tax reforms to boost private pension accumulation and higher NZ Super Fund contributions.
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