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

 


The RBNZ Observer: A rate hike expected

The RBNZ Observer: A rate hike expected


New Zealand’s economy is beginning to boom, boosted by the post-earthquake rebuild in Canterbury and strong housing and dairy prices
- Growth and inflation are running ahead of the RBNZ’s previous expectations, which we think will trump concerns over the high level of the NZD

- While finely balanced, we expect the RBNZ is likely to raise the cash rate by 25bps at next week’s meeting, in order to keep ahead of the game on inflation


A close call, but RBNZ expected to raise rates

New Zealand’s economy is beginning to boom. Post-earthquake reconstruction, solid house price growth, a rapid run up in export prices and very accommodative policy are providing a significant boost to growth. After registering quarterly GDP growth of +1.4% q-o-q in Q3 (an annualised rate of +5.7%), recent business surveys have suggested that the economy is likely to have expanded at a similar pace in Q4.

With these drivers in place, the RBNZ had already signalled, in its last official statement (12 December) that rate hikes would be needed by April this year. Since that statement, both inflation and growth have surprised the RBNZ on the upside and forward indicators also suggest that there is more momentum than the central bank was forecasting.

The challenge for the central bank is that the NZD still remains high and has also risen since then. But, in our view, the stronger economy and higher inflation are likely to trump concerns over the elevated exchange rate. The economy is already operating at capacity, demand is booming and inflation is ahead of expectations. Interest rates need to rise soon if the central bank is to meet its inflation goals.

We see the RBNZ as likely to hike by 25bp next week.

The decision is, however, still a close call, with the main risk being that they wait until March to move. This would allow the rate hike to be accompanied by their official statement and give them the opportunity to present a full set of projections, rather than the one-page summary that will accompany next week’s announcement. But, on balance, we think this is unlikely to hold them back, given that the RBNZ’s medium-term outlook is still intact and the Governor is already scheduled to give a public address the day after the decision. We expect them to ring in the New Year with a rate hike.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Errors Found: Electricity Authority Dumps Transmission Pricing Modelling

The Electricity Authority is ditching the cost-benefit analysis at the heart of its controversial attempt to find a new way to divide up costs for the national grid after finding an expanding range of serious computational errors in the work by Australian consultancy Oakley Greenwood. More>>

ALSO:

New Record: Migrant Arrivals At 129,500 A Year

Annual net migration has been steadily increasing since 2012. "This was mainly due to the rising number of migrant arrivals to New Zealand," population statistics senior manager Peter Dolan said. "Fewer migrant departures also contributed to the increase in net migration." More>>

ALSO:

Launched: NASA's Super Pressure Balloon Takes Flight From NZ

NASA successfully launched its football-stadium-sized, heavy-lift super pressure balloon (SPB) from Wanaka, New Zealand, at10:50 a.m. Tuesday, April 25 (6:50 p.m. April 24 in U.S. Eastern Time), on a mission designed to run 100 or more days floating at 110,000 feet (33.5 km) about the globe in the southern hemisphere's mid-latitude band. More>>

ALSO:

Trade Agreements: TPP Minus US Starting To Gain Ground

The Japanese government is picking up the pace on reviving the Trans-Pacific Partnership trade and investment deal, with talks scheduled next month among the 11 countries left in the pact after the withdrawal by the US after the election of president Donald Trump. More>>

ALSO:

PACER:

Prices Up 2.2%: Annual Inflation Highest In Over Five Years

"Rising petrol prices along with the annual rise in cigarette and tobacco tax lifted inflation," prices senior manager Jason Attewell said. "Petrol prices in New Zealand are closely linked to global oil prices, and cigarettes and tobacco taxes rise in the March quarter each year". More>>

ALSO:

Undertaxed? NZ Income Tax Rate Second Lowest Among Developed Nations

New Zealand workers pay the second smallest portion of their income to the government among developed nations and less than half the average ratio of their Organisation for Economic Cooperation and Development peers. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news