Economists at the country's largest bank now see the Official Cash Rate (OCR) going to 2.5% before the end of the year - and they've cut their house price forecast.
ANZ chief economist Sharon Zollner said the ANZ economists had added "two more" OCR cuts to their forecasts - in August and October. Previously the ANZ economists had forecast an OCR-low of 3.0%.
The OCR is currently at 3.5% having been dropped from 5.5% since August of last year.
On the house price forecast, the ANZ economists have for some time been forecasting 6% growth for the full 2025 calendar year - but they've now trimmed this back to 4.5%.
Recent housing market data has shown a continued overhang of houses for sale on the market.
The economists have also revised down their GDP growth pick from 1.3% to 1.0% for 2025 and from 2.9% to 2.6% for 2026.
Zollner said recent economic data had on balance suggested that while the economic recovery is well under way, it is "looking a bit more stop-start than our current forecasts imply".
"In addition, persistent uncertainty on the global trade front and a darker and murkier outlook for global growth is likely to dampen investment and broader risk-taking to some extent," Zollner said.
On the housing market, Zollner said recovery is under way "though at a slower pace than previously expected".
The ANZ economists now think the economy "will require a bit more support from monetary policy to ensure that the recovery remains on track" and that medium-term inflation doesn’t undershoot the target.
"It’s early days, but we expect the RBNZ forecast revisions will have the same broad flavour in next month’s Monetary Policy Statement," Zollner said.
She said the risks are tilted towards the 100bp of OCR cuts the economists are forecasting arriving more quickly than a steady 25bp at each meeting.
"With inflation pressures looking contained the RBNZ is indeed, as they stated last week, in a good position to respond vigorously to downside risks should they manifest. The risk that the [NZ dollar] may hold up better than it has in previous global ructions (should the USD come under pressure) also implies a risk that the OCR will need to do more work."
16 Comments
"The ANZ economists now think the economy "will require a bit more support from monetary policy to ensure that the recovery remains on track" and that medium-term inflation doesn’t undershoot the target."
I'm so shocked. Never saw this coming. Thanks for your insightful analysis ANZ. Yourselves and the all the other industry economists should be on morning mainstream news shows sharing your sage insights that no one else could possibly decipher themselves.
They will do whatever they can to try and maintain house prices, preferably price rises.
Will they succeed is another matter, but they will throw everything at it.
hell yeah it work in China....
its too big to save
....and following house price (HPI) reported drops, the banks forecast's slither downwards too. Core-logics declaration that house price growth had entered the 2nd stage was the leading clanger by a country mile.
Wasn’t core logics comment based on the successive month-on-month rises they’d seen not on year-on-year?
I am not saying they are right with their call that the market had turned a corner, winter is still to come etc, but month-on-month was up wasn’t it?
Three words: Donkey, tail, blindfold
Great analogy.
Everyone keeps taking about ‘the recovery’ assuming we are about to head back to what we’ve experienced in recent history (falling interest rates and booming houses prices).
But what if this is a fallacy? What if everyone is suffering from recency and confirms bias in their analysis? What if ‘the recovery’ never comes? When do we stop forecasting that ‘the recovery’ back to what we knew is just around the corner? And we acknowledge that the future might look different to the past? Eg we drop rates but house prices don’t rise and the economy continues to stagnate.
The guy who has this knowledge, and whose job is to publish, is just waiting to sell his house before he publishes it.
Well, we know that we have a COVID induced change in economics, which is temporary (but longer lasting that most people can comprehend). So there's an assumption that over time an equilibrium will be reached.
But, we are also now moving so many pieces globally, it'll likely be another 5+ years before we can determine what "normal" looks like.
And then we also face the proposition of continual change.
So anyone's guess whether one proceeds as normal, stands still and waits, or works out another direction. What's fairly unlikely, is that the average person's fortunes are going to improve on their own.
So the economic environment sounds more like sports betting then investment here?
It's always been risk based. There's just more chaos element involved currently, and likely a larger contrast between winners and losers in the coming years.
Let's hope not too many people have been listening to these economist when making home loan refix decisions...
TA has been pushing 4.99% 3 year fix if it appears.... if 2.5% ocr will be lower
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