BNZ Weekly Overview - NZD Above US82 Cents

This morning the Reserve Bank met expectations by leaving the official cash rate unchanged at 2.5%. However their view on the economy was more positive than the markets had been expecting so the Kiwi dollar is back above US82 cents and wholesale interest rates reversed some falls seen earlier in the week following the release of much weaker than expected employment data in the United States.

Our view on NZ growth remains firmly positive, but for now one still struggles to find data outside of booming merchandise export receipts to show strong growth. In particular short term construction prospects remain weak and businesses are cutting back investment except on commercial vehicles. Still, with our monthly survey showing confidence in the economy a year from now at a record high we feel on reasonably safe growth with our warnings regarding tightening labour availability, rising inflationary pressures, tightening monetary policy from late in the year, and eventually firmly improving housing market activity.

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