Weekly Economic Commentary News Today

With new figures this week likely to show our inflation rate falling meaningfully, economists are nevertheless concerned about the potential for for further inflationary disruptions

ASB chief economist Nick Tuffley says it now looks more likely the Official Cash Rate will be cut in the second half of next year - rather than in 2025

Westpac economists say we should expect the Reserve Bank to be unforgiving of any shocks that boost the growth and inflation outlook over the next year. Also, the RBNZ will likely be less willing to pre-emptively ease, as markets seem to currently expect

More economists are seeing a likelihood that the Reserve Bank will not start cutting the Official Cash Rate till 2025

Westpac economists say if the RBNZ's judgement is wrong, then New Zealand could be facing a protracted period of strong domestic inflation pressures

Westpac economists say there are signs the labour market 'has not cracked yet', which raises the likelihood the RBNZ will need to upgrade its economic growth forecasts - adding upside risk to the inflation outlook

ASB economists rue the whiplash derived from last week's big 'dovish' shift by the Reserve Bank, while Westpac economists still see a further Official Cash Rate hike in August and ANZ economists expect one in November

In their Weekly Economic Commentary the Westpac economists say up to now, the Treasury’s economic forecasts have been markedly downbeat, "despite the mounting evidence that the economy had rebounded readily from the lockdown". "We believe the Treasury is now on board with that view, and is set to revise up its forecasts significantly." The economist say this will mean a stronger expected tax take, and smaller (though still large) operating deficits over the next few years. Smaller deficits "...