Data released overnight showed that New Zealand’s economy expanded again in Q1, albeit at a slower pace than at the end of 2009. The recovery should not come under serious threat in coming quarters but is likely overall to be sluggish. Deleveraging in the household sector has a long way to go and the property market will probably cool. The cash rate will almost certainly move up again in July but the monetary tightening over the next 12 months looks set to be a gradual process.