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The government’s plans to fully deliver its promised tax cuts at next month’s budget must be in doubt, as the economy falters and the fiscal position continues to get squeezed. Compared to the government’s 2023 Budget, the deficit is tracking to be $1.8b larger than forecast. Read

The Reserve Bank’s August 2021 Monetary Policy Statement made it clear that interest rates will continue to be pushed higher. Demand conditions across the New Zealand economy are strong, but supply issues are creating heightened labour market and inflationary pressures. Read

Inflation has picked up rapidly and is set to spike higher in coming months, and the Reserve Bank has confirmed a strong tightening bias in its monetary policy settings. As a result, we have changed our outlook for monetary policy. We are now picking an increase in the official cash rate (OCR) next month, and we see potential for a rise of 50 basis points. Read

Sounding the alarm!

Since the Reserve Bank surprised markets with its shift towards an easing bias, the outlook for interest rates has been a constant source of speculation. But the timing of the shift in stance was curious – in our view, nothing fundamental had changed, and the Reserve Bank is sending out the entire fire brigade to rescue a kitten from a tree. Read

The New Zealand economy entered 2017 in fine fettle.  Despite dairy prices at GlobalDairyTrade auctions having fallen 3.8% since their early December level, the price index is up a massive 66% from its low point in the first quarter of 2016, with whole milk powder prices having risen 77% over the same period.  Both price measures hit 2.5-year highs earlier in December. Read

Equity-rich Auckland homeowners selling up in the big smoke is by now widely recognised.  Might commercial property markets in Waikato and Bay of Plenty see a similar effect? Read

The door remains open for the Reserve Bank to cut the official cash rate (OCR) again in June, with recent data showing that business cost pressures and inflation expectations remain subdued. Read

The media has been a buzz over recent weeks, with the apparent news that the New Zealand Stock Market is hovering at record levels.  However, although a bull run is indeed in full swing, it is a little premature to begin rewriting the record books.  Watermarking a market high based on the widely quoted NZX50 Gross Index does not make sense and prevents sensible historical comparisons. Read