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

 


RBNZ Observer: Another 25bp hike expected next week

RBNZ Observer: Another 25bp hike expected next week

New Zealand’s economy remains on track to post one of the strongest growth rates in the OECD in 2014
With demand continuing to pick up strongly, we expect the RBNZ to raise rates further next week
The recent fall in dairy prices and the high NZD may see the RBNZ hike by less than current market pricing implies over the next year

New Zealand’s boom continues
The RBNZ became the first developed world central bank to hike rates this cycle, in March, raising its cash rate by 25bp to 2.75%. We expect the RBNZ to follow through with a further 25bp rate hike next week, as New Zealand’s economy remains on track to post one of the strongest growth rates in the OECD in 2014.

A number of factors are supporting growth. Post-earthquake reconstruction continues to ramp up. Export commodity prices have risen strongly. New Zealand’s housing market is also continuing to strengthen, with prices rising further in January and February, after moderating in previous months. With inward migration at 10-year highs, the housing market is likely to strengthen more. Strength in house prices is also supporting household spending, with construction activity rising outside of post-earthquake rebuild-driven construction in Canterbury. Further to this, a combination of rising asset prices and an improving labour market has helped support a rise in consumer spending and confidence.

As a result, business confidence remains close to 20-year highs and business surveys present some upside risk to the RBNZ’s growth forecasts. At the same time, domestic cost pressures are continuing to pick up. As a result, the RBNZ is likely to continue to raise interest rates to manage the boom in demand and keep inflation in check.

However, a couple of factors could limit the extent of further rate hikes this year. The first is the recent fall in dairy prices. Dairy prices have fallen 25% since their April 2013 peak – with this fall likely a little quicker than the RBNZ was expecting. In addition, the NZD has continued to strengthen, sitting 2.5% above the RBNZ’s expectations so far in Q2. This should help contain cost pressures created by the boom in demand.

Overall, we see a hike of 25bps to 3.00% next week as highly likely. But we expect the cash rate to end this year at 3.50%, compared to the RBNZ’s implied projection of 3.75% as a high NZD may do more of the work than the RBNZ is currently assuming.

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