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

 

RBNZ MPS: Chapt One - Policy Assessment

Chapter 1
Policy Assessment

The Reserve Bank has decided to leave the Official Cash Rate unchanged at 5.75 per cent. In addition, the Bank's projections show no change in short-term interest rates over the period ahead - reflecting our sense that the risks for the future direction of the OCR are evenly balanced.

The new Policy Targets Agreement directs the Bank to target future CPI inflation outcomes of 1 to 3 per cent on average over the medium term. Looking ahead, current policy settings appear consistent with that objective. In essence, strong domestic demand is expected to be offset by offshore developments, keeping inflation pressures in check.

Unlike most trading partners, the New Zealand economy has performed well in 2002. Activity has continued to benefit from the surge in export earnings over the past two years and from the recent rapid population growth. To date, weak global conditions have not had as large an impact on the local economy as we might have expected.

Strong activity has left businesses with limited scope to meet increases in demand without incurring extra costs and firms have been reporting ongoing difficulties in finding skilled and unskilled labour. These pressures are contributing to higher prices in some domestic-based industries, such as services.

However, the soft international economy, falls in some commodity prices and the path of the exchange rate have produced a fall in the inflation rate for tradable items. These offsetting factors have seen annual CPI inflation remain steady at a relatively high level.

Economic growth is likely to slow over the coming year, to a little below its average, reflecting international market conditions and a moderating of the demand pressures associated with strong population growth. The rise in the exchange rate over recent months, if sustained, will also put downward pressure on inflation over the next few quarters and exert some braking effect on activity and inflation further out. From a starting point of some considerable pressure on resources, inflation pressures evident in some parts of the economy are likely to subside somewhat, although perhaps not immediately.

The new PTA provides monetary policy with a little more flexibility in the way it responds to changing economic conditions. Our intention is to operate policy in a flexible manner in order to meet our obligations under the PTA. We will continue to reassess economic developments and respond appropriately.

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 




Energy: New Zealand Could Be World’s First Large-scale Producer Of Green Hydrogen

Contact Energy and Meridian Energy are seeking registrations of interest to develop the world’s largest green hydrogen plant. The plant has the potential to earn hundreds of millions in export revenue and help decarbonise economies both here and overseas... More>>


MBIE: 36th America’s Cup Post-event Reports Released

Post-event reporting on the 36th America’s Cup (AC36) has been released today. The reports cover the delivery of the event by Crown, Council and America’s Cup Event Limited, economic impacts for Auckland and New Zealand, and delivery of critical infrastructure... More>>

Fonterra: Farmer Feedback Set To Shape Revised Capital Structure Proposal

With the first phase of Fonterra’s capital structure consultation now complete, the Co-op is drawing up a revised proposal that aims to reflect farmers’ views. A number of changes are being considered to the preferred option initially put forward in the Consultation Booklet in May... More>>




Statistics: Household Saving Falls In The March 2021 Quarter

Saving by New Zealanders in the March 2021 quarter fell to its lowest level in two years after rising sharply in 2020, Stats NZ said today. Increases in household spending outpaced income growth, leading to a decline in household saving from the elevated levels that prevailed throughout 2020... More>>

ALSO: