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

 

Cosmetics & Pollution: Proposal To Ban Microbeads

Cosmetic products containing microbeads will be banned under a proposal announced by the Minister for the Environment today. Marine scientists have been advocating for a ban on the microplastics, which have been found to quickly enter waterways and harm marine life. More>>

ALSO:

NIWA: 2016 New Zealand’s Warmest Year On Record

Annual temperatures were above average (0.51°C to 1.20°C above the annual average) throughout the country, with very few locations observing near average temperatures (within 0.5°C of the annual average) or lower. The year 2016 was the warmest on record for New Zealand, based on NIWA’s seven-station series which begins in 1909. More>>

ALSO:

Farewell 2016: NZ Economy Flies Through 2016's Political Curveballs

Dec. 23 (BusinessDesk) - New Zealand's economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry. More>>

ALSO:


NZ Economy: More Growth Than Expected In 3rd Qtr

Dec. 22 (BusinessDesk) - New Zealand's economy grew at a faster pace than expected in the September quarter as a booming construction sector continued to underpin activity, spilling over into related building services, and was bolstered by tourism and transport ... More>>

  • NZ Govt - Solid growth for NZ despite fragile world economy
  • NZ Council of Trade Unions - Government needs to ensure economy raises living standards
  • KiwiRail Goes Deisel: Cans electric trains on partially electrified North Island trunkline

    Dec. 21 (BusinessDesk) – KiwiRail, the state-owned rail and freight operator, said a small fleet of electric trains on New Zealand’s North Island would be phased out over the next two years and replaced with diesel locomotives. More>>

  • KiwiRail - KiwiRail announces fleet decision on North Island line
  • Greens - Ditching electric trains massive step backwards
  • Labour - Bill English turns ‘Think Big’ into ‘Think Backwards’
  • First Union - Train drivers condemn KiwiRail’s return to “dirty diesel”
  • NZ First - KiwiRail Going Backwards for Xmas
  • NIWA: The Year's Top Science Findings

    Since 1972 NIWA has operated a Clean Air Monitoring Station at Baring Head, near Wellington... In June, Baring Head’s carbon dioxide readings officially passed 400 parts per million (ppm), a level last reached more than three million years ago. More>>

    ALSO:

    Get More From Scoop

     
     
     
     
     
     
     
     
    Business
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news