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Sunny MPS surprises some

Optimism was the order of the day today, with RBNZ releasing a Monetary Policy Statement (MPS) that was most notable for its positivity.

Thursday, November 9th 2017, 3:36PM

While the OCR remained unchanged at 1.75%, with longer term inflation projected to reach the middle of range (2%), RBNZ’s GDP predictions are causing some economists to scratch their heads.

Dominick Stephens, chief economist at Westpac, says the forecasted GDP of 1.2% by March 18 is quixotic.

“It’s quite extraordinarily optimistic, to the point of being unrealistic”.

He says that given the weakening housing market, lowering of business confidence, construction stalling and electronic card transactions flat, it’s highly improbable that RBNZ’s predicted GDP will be realised.

“With the uncertainty associated with a change of Government lying ahead of us, population growth slowing sharply, and the reality of a slow housing market sinking in, we find it highly unlikely that the economy will reach these heights,” says Stephens.

“The RBNZ will have to change their tune next year.”

BNZ Senior Economist Doug Steel was more tempered in his assessment of the MPS.

“There weren’t a lot of surprises, and there was a lot ground covered,” he says.

He continues by saying that the economic outlook was rather more positive than might have been expected, and noted the likelihood of interest rates being lifted at some stage in the not-to-distant future.

Peter Cavanagh from Bancorp agrees that the inflation and fiscal assessments were more upbeat than many expected, with a higher predicted net inflation track to the lower New Zealand dollar.

Meanwhile, Zoe Wallis, Chief Economist at Kiwibank, says the MPS was largely in line with their expectations

“Although RBNZ is pulling forward the expected timing of rate hikes in its forecasts slightly,” she continues.

She says that they see some risk to the RBNZ's non-tradables inflation forecasts, but still expect the RBNZ will have to start lifting the OCR from the end of 2018.

Christine Leung, Principal Economist from NZIER, also says the announcement was pretty much business as usual.

“Given so much uncertainty over the effects the Government policies a wait-and-see approach was prudent. Overall, the net effect of the new Government policies are likely to be inflationary - the reduced labour supply from the immigration cuts will likely put upward pressure on wages, while increased Government spending will boost demand.”

Tags: Bancorp Treasury Services BNZ Kiwibank OCR RBNZ Westpac

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 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 - 7.24 6.79 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 7.84 7.39 7.25
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 - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
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 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 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 7.29 7.32 6.65

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