The findings of the latest Household Labour Force Survey have helped to fuel the expectation that the official cash rate (OCR) will be kept low well into 2010.
ANZ's Economic Review this week noted the rise in unemployment to 6% and the 1.9% drop in hours worked and says this suggests "material changes" are ahead before an economic recovery can take hold.
The unemployment figures reaffirmed weakness for the economy in the second quarter, it said. ANZ is expecting a protracted and "bathtub (with waves)" shaped cycle going forward.
"We continue to expect the Reserve Bank of New Zealand to keep the OCR low for an extended period and well into 2010," it says.
Meanwhile, BNZ chief economist Tony Alexander reaffirmed his view that a three year fix at 6.99% is still his preferred borrowing option.
In his Weekly Overview he states that those preferring the cash flow advantages of floating or short term fixes should brace themselves for their costs to rise 2-3% in a couple of years time.
"Personally speaking one thinks the risk for interest rates lies on the upside from late-2010, given that even now we can see emerging commentary about some labour shortages which will eventually elicit a price response," he says.
