RBNZ still on track to cut rates in August

Although the RBNZ toned down its hawkish bias at its meeting this week, markets seem to be worried the Bank will take its cue from the Fed and keep rates higher for longer. However, with domestic demand remaining weak and unit labour cost growth set to plunge, we still expect the RBNZ to cut rates in August, rather than October as investors are now pricing in. Elsewhere, in Australia, leading indicators suggest that homebuilding activity will remain weak this year, sustaining the shortfall in housing supply relative to demand.