There is reluctance to raise the OCR because of the stubbornly high dollar and unemployment.
But on the other side of the equation, there is pressure from the housing market and a lift in credit demand.
ASB chief economist Nick Tuffley said the bank still did not expect an OCR move until next year. “But there is a growing possibility the RBNZ will reach for its macro-prudential toolkit to cool the housing market and credit growth in order to delay using OCR that long.”
Tuffley said the dollar would likely stay strong, although the impact of that was spread unevenly across the economy. “Import-competing manufacturers have faced more widespread headwinds relative to the manufacturing export base, which gets some shelter from a large exposure to Australia.”
Tuffley expects that by the end of the year there will be better local economic performance and a bit more progress in getting on top of the developed world’s various debt woes.
“Rebuilding activity will be a key driver of higher overall New Zealand growth. The broader housing market is likely to continue strengthening, particularly in Auckland, further boosting house building. Greater building activity will filter through to the wider economy.”
