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ASB warns of high inflation, falling house prices

ASB is warning of continuing challenges from Covid 19, high inflation and worker shortages this year.

Friday, January 21st 2022, 8:27AM 2 Comments

by Eric Frykberg

On interest rates, it comes close to but does not match the ANZ's forecast of a 3% peak OCR, saying only that it could reach 2.25% by the end of the year and rise further next year by an unspecified amount.

The ASB says Covid will hang heavily on the country during the year, with an outbreak of Omicron looking to be a matter of ‘when’ and not ‘if’.

This could increase employee absenteeism and aggravate existing labour shortages.

A further problem will be soaring inflation in New Zealand and abroad, which has been worsened by global supply chain disruptions.

Labour shortages will push up wages and collectively, inflationary pressure will impel the CPI above 6%, the highest real level since 1988.

ASB also says a year of huge price rises for housing will be followed by a fall this year, possibly 8% to 10% in inflation adjusted terms.

The bank is also looking closely at the outlook for interest rates. It says current market pricing has an additIonal 125 basis points added to the OCR over the coming year, with the growth rate looking set to end at 2.25% at the end of the year. However, there will be further rises in 2023, though it does not give a number.

ASB adds a rider, there is a lot of uncertainty right now and market pricing could be wrong. There are several upside and downside risks, such as unexpectedly persistent inflation or curtailed domestic spending which could upset current  predictions.

Tags: ASB

« Non-bank lenders add their voice to over CCCFA woesBig jump in inflation forecast this week »

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Comments from our readers

On 21 January 2022 at 2:15 pm Murray Weatherston said:
@Eric
In the context of inflation, what does "the highest real level since 1988" mean?
Is that what ASB said or is that your interpretation of what they said.
The answer is important as it will show where the economic illiteracy resides.
On 21 January 2022 at 3:37 pm DannyT said:
@Murray, I think it means stripping out the impact of one-off items, like the impact of the GST increases.

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Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora ▲5.43 ▲4.57 ▲5.58 ▲5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 ▼5.14 6.05 6.15
TSB Special 4.79 ▼4.34 5.25 5.35
Unity 5.65 ▲4.80 ▲5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 16 May 2022 9:03am

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