Reserve Bank Governor Adrian Orr. Photo / Mark Mitchell
Reserve Bank Governor Adrian Orr. Photo / Mark Mitchell
The Reserve Bank of New Zealand has held firm, leaving the Official Cash Rate (OCR) unchanged at 5.5% for the eighth consecutive time.
“Restrictive monetary policy has significantly reduced consumer price inflation, with the committee expecting headline inflation to return to within the 1% to 3% target range in the second half of this year,” the Monetary Policy Committee statement said.
It noted risks that interest-rate pain may be feeding through to the domestic economy “more strongly than expected”.
NZ Herald business editor at large Liam Dann told The Front Page that economists interpret the release as more “dovish” and suggest that rate cuts might come sooner than the Reserve Bank (RBNZ) has previously signalled.
“We knew that the rate wasn’t going to be moved, but you get this statement and everyone’s poring over every word of that statement for clues.
“There are a few things in the tone of the language used by the Reserve Bank in this latest announcement that has convinced the economists that we’re going to get rate cuts sooner than the Reserve Bank has previously forecast.”
The RBNZ toughened its stance in May’s Monetary Policy Statement, pushing its projections for the first cut out as far as August or September next year.
“No one really believes it,” Dann said, “This is the first time we’ve seen the Reserve Bank offer some signs that they are maybe softening their stance and perhaps we’re heading to more like cuts in November or February, which is where most of the bank economists are picking things at the moment.”
The RBNZ won’t release new forecasts until its Monetary Policy Statement in August.
So, what should mortgage holders look out for from the RNBZ and how will it affect future financial decisions?
“When you refix you’re taking a bit of a punt on what you think might happen to interest rates in the future. I would caution that people should certainly fix their rate for their own personal circumstances and how much they can afford.
“You wouldn’t want to bet on it coming down because something could happen. Oil prices could spike or something like that that requires the Reserve Bank to change its mind again,” Dann said.
Liam Dann, Herald business editor at large.
Meanwhile, Dann said the RBNZ is seeing real signs of pain in the economy.
“You’ve only got to talk to anyone in business or get out and about in central Auckland to know that it’s really tough. It’s definitely a very recessionary feeling economy, even though technically the top line might not be, but it feels like a pretty grim economy right now.”
Nearly 4500 people have signed up to the Jobseeker Work Ready benefit since the start of May, but Dann said that’s to be expected as the country is bouncing back from a period of very high employment to traditional employment levels.
Latest Stats NZ data shows a net migration loss of 27,000 people from New Zealand to Australia last year, rising from 14,600 in 2022.
“However, it should be noted that this is below the record loss of 43,700 in the March 2012 year,” population indicators manager Tehseen Islam said.
Traditionally, there has been a net migration loss from New Zealand to Australia. This averaged about 30,000 a year during 2004-2013, and 3000 a year during 2014-2019.
“If I was going to be concerned about one statistic, it’d be this one,” Dann said.
“You have the borders opening up after Covid and probably still a large number of young Kiwis heading off on OEs that they weren’t able to.
“But, there is also a growing number of people going to Australia for higher wages, seeing more opportunity there and the idea that younger New Zealanders don’t see opportunity is worrying.”
Listen to the full episode to hear more about why we care so much about the OCR, why young Kiwis are heading abroad, and if a rise in people on the Jobseeker benefit is a concern.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
