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Bullish forecaster pulls back rate predictions

One of the more bullish forecasters of interest rate cuts, Deutsche Bank, has changed its view and now expects the Reserve Bank will leave its official cash rate (OCR) unchanged at 5% at next months review.

Tuesday, August 26th 2003, 9:46PM

by Jenny Ruth

Deutsche Bank rates the chance of a September rate cut at only 40% now. Previously, it had been calling for the OCR to fall to 4.25% by the end of this year.

"In June we made a fairly aggressive call that rates would go a lot lower, which ultimately we’ve had to step back from," says chief economist Ulf Schoefisch.

The key reasons for the change are that the New Zealand dollar hasn’t appreciated as much as Deutsche Bank expected, global growth is picking up and the domestic economy has been stronger than expected, Schoefisch explains.

Take employment which grew a stronger-than-expected 0.8% in the second quarter, halting a declining trend, or retail sales which grew a faster-than-expected 1.5% in the June quarter and the extremely robust housing market in which the median house price keeps breaking new records. New housing starts are currently running about 40% above their normal level.

Schoefisch’s view is that migration, a key factor in driving the housing market and the economy and which added 1.1% to the population over the past year, may be calming down somewhat. From more than 42,000 over the past year, the annualised rate over the last couple of months has been only 30,000 to 35,000, he says. Still, that could just be a temporary blip.

Nevertheless, the same problem that had the central bank start cutting rates in late April from 5.75% still remains, that of "a two-speed economy," Schoefisch says.

"The problem is still there – the trade data is very poor." The trade deficit in the June quarter widened to about 2.3% of gross domestic product. And the New Zealand dollar is still rising, increasing the squeeze on exporters.

"It is highly likely that the Reserve Bank would cause a further rise of the New Zealand dollar if it confirmed that the easing cycle has come to an end. Considering the concern about the rising currency, we therefor expect the Reserve Bank to explicitly maintain its easing bias by arguing – similar to the July statement – that further rate cuts may be necessary," he says.

Indeed, if the currency continues to rise, Schoefisch thinks the central bank will cut the OCR to 4.75% in late October.

« Landlords get more powerHouse prices just keep rising »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.45 7.05 6.85
ANZ 8.64 7.99 7.49 7.35
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.39 6.89 6.75
ASB Bank 8.64 7.39 6.89 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - ▼7.29 ▼6.85 ▼6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.95 7.65 7.45
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.15 - -
Co-operative Bank - Owner Occ 8.40 7.35 6.89 6.75
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.85 7.39 7.25
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.85 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.59 7.29
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 7.89 7.65
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.35 6.89 6.75
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.90 7.39 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.95 7.45 7.29
SBS Bank Special - 7.45 6.95 6.79
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 7.05 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.19 7.55 7.55
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.39 6.75 6.75
Unity 8.64 6.99 6.85 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.45 7.37 6.77

Last updated: 23 February 2024 11:59am

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