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RBNZ will hike rates to 2.0% next year

While the RBNZ only hiked rates by 25bps at today’s meeting, it is set to continue lifting rates next year. However, we think a slowdown in the economy will end the Bank’s hiking cycle with the OCR at 2.0%.
Ben Udy Australia and New Zealand Economist
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While wage growth is set to reach 3% by the end of the year, this week’s labour market data didn’t contain any upside surprises that would convince the Reserve Bank of Australia to accelerate its hiking cycle at the upcoming meeting in June. Meanwhile, the opposition Labor party looks on track to win the federal election on Saturday. While Labor has only pledged slightly looser fiscal policy that would easily be offset by likely upward revisions to tax revenue, the party’s historical track record suggests that the budget deficit would shrink less rapidly than under the Coalition government over the coming years.

20 May 2022

More from Ben Udy

Australia & New Zealand Economics Weekly

Wage growth and inflation to continue to strengthen

RBA Governor Phillip Lowe doubled down on the view wage growth will remain too low to justify a rate hike anytime soon. But wages for workers on individual agreements is soaring. And we think wage growth for other workers will begin to catch up next year. We therefore reiterate our view that wage growth will approach 3% by the end of next year and that the RBA will hike rates in 2023.

19 November 2021

RBNZ Watch

RBNZ to accelerate hiking cycle

The New Zealand economy is clearly overheating. Measures of underlying inflation are mostly above the ceiling of the RBNZ’s target band. And employment is now above the Bank’s estimate of the maximum sustainable level. We therefore expect the RBNZ to ramp up its hiking cycle with a 50bp hike at its meeting on 24th November. And we now expect the Bank to hike rates all the way to 2.0% by the middle of next year.

17 November 2021

Australia & New Zealand Data Response

Australia Wage Price Index (Q3)

The 0.6% q/q rise in the wage price index in Q3 will provide the RBA with some confidence that rates need to remain low in the near term. But we think that wage growth will rise over 2022, putting pressure on the Bank.

17 November 2021
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