When the RBNZ cut rates by 25bp at its meeting this week, it acknowledged that it would need to lower the policy rate all the way to 2.5% this cycle – consistent with our longstanding forecast. And while PMI data point to a pickup in activity this quarter, they are unlikely to change the Bank's assessment that the economy remains in a position of significant excess capacity. Elsewhere, Australian policymakers discussed tax reform as a means of boosting productivity growth. Although lowering the company tax rate could prove beneficial, it remains unclear whether the measure will make it onto the legislative agenda.
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