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

 

Strong migration data likely to seal OCR increase

Strong migration data likely to seal OCR increase on Thursday.


By Garry Dean (Sales Trader, CMC Markets New Zealand)

The Kiwi continues to consolidate around 0.8700 in the leadup to Thursday’s Reserve Bank OCR review. While last week’s Q2 CPI number printed just below market expectation, it was largely in line with the Reserve Bank’s June projections at +0.3% for the quarter. A breakdown of the figure does however show non-tradeable inflation running at an annualised rate of 2.7%, which was slightly below the rate expected by the market and the central bank. This won’t be sufficient to cause the RBNZ to pause on Thursday, with a fourth 25pt increase to the OCR meaning they will have delivered around half of the tightening expected by the end of next year. Focus will be on the tone of the Governor’s statement, with some market economists forecasting that an increase on Thursday may be the last for this year.

The June MPS highlighted the central banks concerns around the demand pressures fuelled by rising immigration. We saw yesterday the release of net migration figures for June which showed a surge to 11-year highs, and the annualised number of migrant arrivals topping 100,000 for the first time ever. This is far stronger than expected, and at odds with the central banks forecast of a decline from recent highs. The additional demand pressures resulting from this level of immigration will keep the pressure on Governor Wheeler to keep rates high, a move that will likely keep the Kiwi elevated at the expense of an export community suffering from a slump in commodity prices.

Last week’s 8.9% slide in the fortnightly GlobalDairyTrade auction has taken the total fall since February to a staggering 38%, and suggests Fonterra’s $7.00 opening forecast for the 2015 season is a mile off the mark. A figure closer to $6.00 looks more realistic, and this would result in a decline of $3 bio in dairy sector revenue, wiping up to 1.5% off GDP in the process. At some point this will weigh on the Kiwi, but for the moment the Reserve Bank are forced to be on the front foot to manage the inflation pressures created by the government’s immigration policy. A pause at present would send the wrong signal, and lead to a decline in mortgage rates that would further fuel the Auckland property market.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

NZ's Space Programme: Rocket Lab Makes It To Space (But Not Orbit)

Electron lifted-off at 16:20 NZST from Rocket Lab Launch Complex 1 on the Mahia Peninsula in New Zealand. It was the first orbital-class rocket launched from from a private launch site in the world. More>>

ALSO:

Earlier:

Budget: Irrigate (Good Times, Come On!)

Additional grant funding of $26.7 million over the next three years plus a capital boost of $63 million towards irrigation investments in Budget 2017 will deliver economic and environmental benefits through better use of water... More>>

ALSO:

Silver Fern Farms: Proposal To Close Fairton Sheepmeat Plant

Silver Fern Farms has advised its people of the proposal to permanently close the site, and has discussed potential transfer options to its other sites in the region as part of the consultation process...
More>>

ALSO:

MPI: Myrtle Rust Appears In Taranaki

The nursery in Waitara (just north of New Plymouth) reported suspected myrtle rust symptoms on young plants to the Ministry’s 0800 number yesterday (Tuesday). More>>

ALSO: