Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


NZ Quarterly Economic Forecasts - July 2002

Data Flash (New Zealand)
NZ Quarterly Economic Forecasts - July 2002

Slower growth and strong NZ dollar will cap interest rates

In May the Reserve Bank of New Zealand argued that the Official Cash Rate (OCR) would have to rise to 6.75% to ensure a return of CPI inflation to below 2%.

Only two months later we attach a 35% probability to a scenario where the OCR will not even reach 6.0% during this cycle.

There are four key reasons for this change:

Partly as a result of the RBNZ's comparatively aggressive interest rate policy, the NZ dollar has appreciated significantly faster than expected, which will put additional downward pressure on inflation over the coming year.

The combination of lower price competitiveness of the export and import competing sectors, falling farm incomes, slowing population growth, and the withdrawal of interest rate stimulus suggests that New Zealand's growth rate will halve over the next 12-18 months.

Uncertainty about the global recovery has increased again, due to risks for the US economy arising from the continued correction of the US stock market. The Minister of Finance has signalled that, later this year, he will re-write the Policy Targets Agreement with the yet to be appointed new Reserve Bank Governor. That will force the RBNZ to adopt a less aggressive policy approach. Notwithstanding these considerations, our central scenario includes the expectation of one final �% rate hike by the RBNZ on 14 August, which would lift the OCR to the perceived `neutral' level of 6.0%.

A moderate RBNZ statement accompanying the move is expected to generate some downward adjustment in domestic yields, considering that markets are still pricing a cash rate of 6.50% for late 2003.

Ulf Schoefisch

© Scoop Media

Business Headlines | Sci-Tech Headlines


Mycoplasma Bovis: More Properties Positive

One of the latest infected properties is in the Hastings district, the other three are within a farming enterprise in Winton. The suspect property is near Ashburton. More>>


Manawatū Gorge Alternative: More Work Needed To Choose Route

“We are currently working closely and in partnership with local councils and other stakeholders to make the right long-term decision. It’s vital we have strong support on the new route as it will represent a very significant long-term investment and it will need to serve the region and the country for decades to come.” More>>


RBNZ: Super Fund Chief To Be New Reserve Bank Governor

Adrian Orr has been appointed as Reserve Bank Governor effective from 27 March 2018, Finance Minister Grant Robertson says. More>>


ScoopPro: Helping PR Professionals Get More Out Of Scoop has been a fixture of New Zealand’s news and Public Relations infrastructure for over 18 years. However, without the financial assistance of those using Scoop in a professional context in key sectors such as Public Relations and media, Scoop will not be able to continue this service... More>>

Insurance: 2017 Worst Year On Record For Weather-Related Losses

The Insurance Council of New Zealand (ICNZ) announced today that 2017 has been the most expensive year on record for weather-related losses, with a total insured-losses value of more than $242 million. More>>