A Westpac survey is pointing to a modest improvement in the labour market, indicating unemployment may have peaked at 5.3%. 

The bank said its Westpac-McDermott Miller Employment Confidence Index (ECI) rose 3.9 points to 93.8 in the December quarter. 

While it was the highest reading since March 2024, it remained in subdued territory, Westpac said. 

A level below 100 indicates more households are pessimistic about the outlook than optimistic. 

“New Zealanders still see jobs as being in short supply,” Westpac senior economist Michael Gordon said. 

“However, there was a slight improvement in the December quarter, consistent with our view that the unemployment rate has peaked at its current level of 5.3%.” 

There was more confidence about job security and opportunities in the year ahead, he said. 

“There’s a growing sense that the economy has reached a turning point, although the labour market is typically one of the more lagging aspects of the economic cycle. 

“For that reason, we expect only a gradual improvement in the unemployment rate over the course of 2026.” 

Current and expected earnings growth remained subdued in the December quarter. 

“The existing slack in the labour market means that workers’ negotiating power has decreased, and with inflation back in the target range, cost-of-living increases have become correspondingly smaller,” Gordon said. 

The results were mixed across the country, with confidence rising in seven regions and falling in four. 

“In particular, the earnings measures of the survey were weaker in dairy-intensive regions such as Northland, Waikato, Canterbury and Southland,” Gordon said. 

He said recent falls in dairy prices may be weighing on earnings expectations across these regions. 

Confidence among employees working in both the private and public sectors rose over the quarter, Imogen Rendall, market research director of McDermott Miller said. 

Private sector employees’ confidence is up this quarter with an increase of 5.2 points to 96.8, and public sector employees’ confidence has increased 1.9 points to 96. 

“Private and public sector employees remain particularly concerned about the current job market, with close to six in 10 saying that jobs are currently hard to get,” Rendall said. 

The survey was conducted from December 1-11, 2025, with a sample size of 1550. 

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.