A tale of several cities (in NZ)

The Reserve Bank of Australia cut the cash rate to a record low last week but banks passed on only half of it at a retail level. A similar outcome is likely in New Zealand this week should the RBNZ follow suit, with bank funding costs having risen sharply this year.

However, the RBNZ will be hoping the $NZ doesn’t follow the $A example and lift following the cut.

" The RBA cut the cash rate to a record low… [and] a similar outcome is likely in New Zealand."
Sharon Zollner, Senior Economist, ANZ

One point where the two Australasian central banks are likely to diverge is in their comments on the housing market. Outgoing RBA Governor Glenn Stevens believes the likelihood of lower interest rates exacerbating risks in the housing market has “diminished”.

In NZ, with Hamilton house prices are up nearly 30 per cent year on year, a similar call on this side of the Tasman would certainly be a big one, indicating a lot of faith in the latest round of LVR restrictions.

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Sharon Zollner is an Associate Director & Senior Economist at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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