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

 


The RBNZ Observer: Expect another 25bp hike next week

The RBNZ Observer: Expect another 25bp hike next week

- Timely indicators continue to suggest that New Zealand's economy is growing at an above trend pace

- Despite recent falls in dairy prices and signs of some cooling in the housing market the overall momentum in growth remains strong

- We expect another 25bp hike to 3.25% next week, but for the RBNZ's forward guidance to suggest fewer future hikes may be needed than they previously indicated

Managing a boom
New Zealand’s economy is booming. Growth has been supported by three key factors, exports of dairy products to a rapidly growing Chinese middle class, the post-earthquake rebuild of the Canterbury region and impact of low interest rates on the local housing market. As a result of New Zealand’s relative outperformance growth is now also being supported by very strong net inward migration. Foreigners are moving to New Zealand in droves and Kiwis are both heading home and staying at home more than any time in over a decade. Strong population growth is set to continue to support New Zealand’s boom.

To manage this, the RBNZ has already begun the process of lifting interest rates back towards more normal levels. The cash rate has already been increased by 50bp this year.

There are some very early signs that higher interest rates, combined with the central bank’s adjustments to its new macroprudential settings, are taking some of the heat out of the housing market. At the same time, dairy prices have fallen back a bit in the past couple of months, from near record high levels. But these are minor setbacks in the grand scheme. Business and consumer sentiment surveys suggest that growth is still running at a well above trend pace. More tightening is likely to be needed.

We expect the RBNZ to lift the cash rate by a further 25bp next week to 3.25%. At the same time though, we also expect that the modest pullback in the economic indicators will see the central lower path for the 90 day bank bill a touch. This does not involve a shift in our forecast, we are sticking by our long held view that the cash rate will be 3.50% at end 2014 and 4.50% at end 2015.

The NZD has fallen recently, broadly in line with the decline in dairy prices. From the central bank’s perspective the decline in the currency will be welcome news, though they are still likely to repeat that they expect it to fall further from here.

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news