Westpac Weekly Commentary says since the global financial crisis began, the cost of borrowing for banks and corporates rose substantially.
The Reserve Bank estimates that the marginal cost of bank funding is currently around 150 basis points above the OCR, compared to 20 to 30 points pre-crisis.
It says the crucial difference in last week's statement is that the Reserve Bank has assumed the wedge will remain constant at around 150 basis points over its forecast horizon, implying a lower OCR over time than previously assumed.
J P Morgan Weekly Prospects says regardless of the new interest environment it has not changed its view that the Reserve Bank will kick off the tightening cycle in July after the first quarter GDP report.
ANZ Market Focus had a similar view saying it differs to the Reserve Bank on the timing of the recovery becoming self-sustaining because it expects upcoming data to run mixed messages.
"Hence we still prefer Q3, as opposed to the Joe-consensus view of a June start to the tightening cycle."
ASB Business Weekly believes the housing market is the key reason for the Reserve Bank's ability to wait until the middle of 2010 to unwind monetary stimulus, with the market well and truly losing momentum thanks to impending changes in tax policy.
BNZ Markets Outlook says there is no use in economic growth being unduly reliant on low interest rates and accumulating debt and leverage as the cash rate will soon be nudged higher.
"The world tried that over the years 2003-07, underwritten by an overly lax Alan Greenspan, and came unstuck, spectacularly.
"Alan Bollard will not be lulled into the same trap as his namesake, even if only in mini version and so New Zealand companies and households need to realise they don't have much time to get their debt and debt servicing well set."
