NZ v Aus: know when to hold ’em

For central banks, it’s all about knowing when to hold ‘em .

In response to persistently low CPI inflation New Zealand’s Reserve Bank is widely expected to cut the official cash rate from its current level of 2.0 per cent in November, with ANZ predicting a further cut in February.

" New Zealand house price inflation has left its Australian counterpart in the dust this year."
Sharon Zollner, Associate Director & Senior Economist, ANZ NZ

This is in contrast to across the ditch, where the RBA left its cash rate on hold at 1.5 per cent last week.

Although evidence is accumulating that the Sydney and Melbourne markets are heating up again, New Zealand house price inflation has left its Australian counterpart in the dust recently.

And it’s hardly off low levels: New Zealand has experienced the worst deterioration in house price affordability in the world over the past six years.

Evidence is accumulating that the latest round of RBNZ LVR restrictions are cooling housing turnover.

Whether this will be enough to make a dent in house price inflation expectations will be the key to whether the impact will be sustained, given the stimulus from net migration and low mortgage rates doesn’t look set to significantly wane any time soon.

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Sharon Zollner is Associate Director & Senior Economist at ANZ NZ

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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