The outbreak of the Indian virus variant in Victoria this week highlights the risks from the slow vaccine roll-out. Despite strong investment figures for Q1, we are sticking to our forecast that the economy will expand 4.5% this year. Meanwhile, the Reserve Bank of New Zealand has come around to our view that interest rates should be lifted next year. And its forecasts now imply an even faster pace of tightening than we had anticipated. Even so, given the Bank’s poor experience with past tightening cycles, we still expect the Bank to err on the side of caution.
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