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

 


RBNZ Observer Update: Expected to hike rates next week

RBNZ Observer Update: Expected to hike rates next week

New Zealand’s economy continues to pick up strongly, supported by post-earthquake reconstruction, elevated export prices and rising household spending
With demand booming and the economy already operating at capacity, the RBNZ should raise interest rates to keep inflation contained
We expect the RBNZ to be the first developed world central bank to lift rates in this cycle, raising the cash rate by 25 basis points to 2.75% next week

Interest rates should start to head towards neutral

New Zealand’s economy is at the beginning of a boom and interest rates should be increased from their current low levels to keep inflation contained. We expect the hiking phase to begin next week, with the RBNZ likely to raise rates by 25 basis points to 2.75%. This would make the RBNZ the first developed world central bank to lift rates in this cycle.

The three key drivers of growth remain in place, supporting strong growth in New Zealand.

First, post-earthquake construction continues to ramp up and is expected to support growth for a number of years. Second, New Zealand’s export prices remain at high levels, as strong demand from China provides a substantial boost. Third, household spending has picked up, supported by the run-up in housing prices over the past year or so and low interest rates. Despite a cooling in the housing market in recent months, the fundamental factors underpinning housing also remain in place, with strong migration inflows continuing against a backdrop of weak supply. Consumer confidence is at the highest level since 2007, suggesting spending will likely pick up further in coming months.

These factors are set to persist for some time and underpin further strong growth in an economy that is already operating at capacity. Business surveys imply annual GDP growth in excess of 4.0%, a rate that is well above the economy’s estimated potential growth rate of around 2.5%. Cost pressures are expected to build.

As a result, the RBNZ should start to normalise interest rate settings if it is to achieve its inflation goals. We expect the RBNZ to hike rates by 100 basis points through 2014 as it seeks to manage New Zealand’s boom.

Click here for the full report.

ENDS

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Prefu Roundup: Forecasts Revised, Surplus Intact

The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take. More>>

ALSO:

Convention Centre: Major New SkyCity Hotel And Laneway For Auckland

Today SKYCITY Entertainment Group Limited revealed plans to build a new hotel and pedestrian laneway of bars, restaurants and boutique shopping on land it owns in the Nelson and Hobson Streets block, expanding the SKYCITY Entertainment Precinct. More>>

ALSO:

Igniting The Spark: Bringing The Digital Enabler To Life

Changing a name is, relatively speaking, the easy part of a re-invention. Changing a culture, getting all the ducks in a row, turning yourself inside-out to become customer-inspired is a much bigger challenge. More>>

ALSO:

Ebola And NZ: Targeted Screening At Airport But Risk Low

The risk of any cases of Ebola in New Zealand remains very low, but health and border authorities are well prepared... anyone arriving in New Zealand who in the last three weeks has visited countries affected will be screened for symptoms of the disease. More>>

ALSO:

Scoop Business: Brewer Seeking Crowd-Funding Cancels Shareholders’ Dividends

Shareholders in Renaissance Brewing company, the first business to seek equity through crowd-funding in New Zealand, have cancelled their claim on $147,000 of accumulated earnings “to make Renaissance a more attractive investment opportunity.” More>>

ALSO:

It's Spark Now:
Why Telecom Wanted To Change

New Zealand led the world when Chorus demerged from Telecom. It gave us a telecommunications industry structure where the network is completely separated from the products and services it delivers. The changes brought about a new market dynamic and it dramatically changed Telecom’s role. More>>

ALSO:

Glass Half Empty: Dairy Prices Fall To Lowest Since 2012

Dairy product prices slumped to the lowest level since October 2012 in the latest GlobalDairyTrade auction, paced by whole milk powder and cheddar. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news