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

 


RBNZ Observer: On hold, with a longer pause now expected

The RBNZ Observer: On hold, with a longer pause now expected

- Having delivered 100bp of hikes and with dairy prices falling, the RBNZ is expected to hold steady next week

- Timely indicators of business and consumer sentiment have stepped back from high levels, although inward migration remains strong and the Canterbury rebuild is on-going


- Given some easing in conditions and the dairy price fall, we now expect the RBNZ to be on hold for the rest of this year, with the next hike expected in Q1 2015 (previously Q4 2014)

The RBNZ has time on its side
The rate hikes are over for now. With 100bps of interest rate hikes delivered between March and July, the RBNZ made it clear at the last meeting that it is on hold for the time being. And recent activity indicators suggest that some of the shine has been taken off the economy’s boom – meaning an extended pause from the RBNZ looks prudent.

With a no-change decision widely anticipated, more interest will be focused on the tone of the Monetary Policy Statement and the accompanying forecasts. Over the past few months, prices for key export commodities have continued to decline, impacting incomes. At the same time, business and consumer sentiment have softened, as has the housing market – all suggesting that higher interest rates are already restraining activity.

While the RBNZ’s forecasts may be a little softer that those published in June, they will almost certainly be more hawkish than current market pricing. In June, the RBNZ’s forecasts implied an OCR of around 4.5% at end-2015, whereas market pricing has now fallen to imply an OCR of only around 3.75% by that point.

We remain optimistic about New Zealand’s growth prospects. Even though indicators have moderated a little recently, they remain at healthy levels overall and we still expect the economy to grow by +3.5% over 2014 and +3.0% over 2015. With growth continuing to exceed potential, the economy’s spare capacity will likely diminish further and more inflationary pressure is expected to be generated.

The key judgment for the RBNZ is just how much inflation will be generated and when. So far, despite strong economic growth, inflation has been well-contained. The same is true of wages and forward-looking indicators of firms’ pricing intentions. With the inflation outlook still benign, the RBNZ has time on its side. We now expect it to remain on hold for the rest of 2014, before resuming a hiking stance in early 2015.

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Sky City : Auckland Convention Centre Cost Jumps By A Fifth

SkyCity Entertainment Group, the casino and hotel operator, is in talks with the government on how to fund the increased cost of as much as $130 million to build an international convention centre in downtown Auckland, with further gambling concessions ruled out. The Auckland-based company has increased its estimate to build the centre to between $470 million and $530 million as the construction boom across the country drives up building costs and design changes add to the bill.
More>>

ALSO:

RMTU: Mediation Between Lyttelton Port And Union Fails

The Rail and Maritime Union (RMTU) has opted to continue its overtime ban indefinitely after mediation with the Lyttelton Port of Christchurch (LPC) failed to progress collective bargaining. More>>

Earlier:

Science Policy: Callaghan, NSC Funding Knocked In Submissions

Callaghan Innovation, which was last year allocated a budget of $566 million over four years to dish out research and development grants, and the National Science Challenges attracted criticism in submissions on the government’s draft national statement of science investment, with science funding largely seen as too fragmented. More>>

ALSO:

Scoop Business: Spark, Voda And Telstra To Lay New Trans-Tasman Cable

Spark New Zealand and Vodafone, New Zealand’s two dominant telecommunications providers, in partnership with Australian provider Telstra, will spend US$70 million building a trans-Tasman submarine cable to bolster broadband traffic between the neighbouring countries and the rest of the world. More>>

ALSO:

More:

Statistics: Current Account Deficit Widens

New Zealand's annual current account deficit was $6.1 billion (2.6 percent of GDP) for the year ended September 2014. This compares with a deficit of $5.8 billion (2.5 percent of GDP) for the year ended June 2014. More>>

ALSO:

Still In The Red: NZ Govt Shunts Out Surplus To 2016

The New Zealand government has pushed out its targeted return to surplus for a year as falling dairy prices and a low inflation environment has kept a lid on its rising tax take, but is still dangling a possible tax cut in 2017, the next election year and promising to try and achieve the surplus pledge on which it campaigned for election in September. More>>

ALSO:

Job Insecurity: Time For Jobs That Count In The Meat Industry

“Meat Workers face it all”, says Graham Cooke, Meat Workers Union National Secretary. “Seasonal work, dangerous jobs, casual and zero hours contracts, and increasing pressure on workers to join non-union individual agreements. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

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