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Pressure on interest rates to ease - possibly

A fall in GDP numbers could slightly ease pressure on interest rates, Westpac says

Friday, June 17th 2022, 1:59PM

by Eric Frykberg

Yesterday's 0.2% fall in GDP might make the Reserve Bank's job slightly easier, according to advice done for Westpac.

Acting chief economist Michael Gordon thinks it might lessen any need to push the OCR close to 4%, as had been warned.

Gordon said even though the economy was still running ahead of its non- inflationary equilibrium, there was now a greater option for a soft landing, which could make interest payments for borrowers slightly easier in future years.

But the margin won't be great - Gordon is still forecasting an OCR peak of 3.5% and a return to growth next quarter.

Kiwibank economists, who earlier had forecast growth this quarter, say the impact of Covid was far greater than expected, while worker absenteeism played a role in the decline.

They expect to see a bounce back in activity over the second quarter, but are worried about the outlook into 2023.

They say growth will halve next year, driven down by the cost of making interest payments at the same time as a falling housing market could induce hesitation about spending.

“Both consumer and business confidence are in the doldrums already,” they said.

ASB economist Nathanial Keall had earlier forecast growth for the March quarter and admitted he was wrongfooted.

Looking ahead, he said substantial headwinds were mounting.

“We don't want to sound too pessimistic,” Keall said,

“Just as recent house price falls were not a bloodbath, so the economy is not on the brink of caving in.

“We can take some comfort from New Zealand's favourable terms of trade and the constructive outlook for our export sector. Nevertheless, we see growth slowing to circa 1% to 2% over 2022 and 2023, in contrast with the whopper 5.4% we expected last year.”

The Government blamed the lower result on global economic worries that had reduced the appetite for New Zealand exports.

Tags: GDP

« Lower growth likely in GDP numbers this weekGovt softens conduct requirements for advisers »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.94 - - -
AIA - Go Home Loans 8.49 ▼6.19 ▼5.69 ▼5.69
ANZ ▼7.89 6.79 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 6.19 5.69 5.69
ASB Bank 8.39 ▼6.19 ▼5.69 ▼5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.90 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - ▼6.19 5.79 5.79
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One ▼7.94 - - -
BNZ - Rapid Repay ▼7.94 - - -
BNZ - Std ▼7.94 6.45 5.89 5.79
BNZ - TotalMoney ▼7.94 - - -
CFML 321 Loans 6.70 - - -
CFML Home Loans 6.95 - - -
CFML Prime Loans 8.75 - - -
CFML Standard Loans 9.70 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼5.99 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 8.15 ▼6.19 ▼5.75 5.69
Co-operative Bank - Standard 8.15 ▼6.69 ▼6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.60 6.10 -
First Credit Union Standard 8.50 7.20 6.70 -
Heartland Bank - Online 7.99 6.69 6.35 6.15
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC ▼7.49 ▼6.15 ▼5.69 ▼5.69
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 8.25 7.19 6.69 6.59
Kiwibank - Offset 8.25 - - -
Kiwibank Special - 6.29 5.79 5.79
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.75 6.69 6.19 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.49 ▼6.95 ▼6.29 ▼6.29
SBS Bank Special - ▼6.35 ▼5.69 ▼5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.94 5.45 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
TSB Bank 9.19 7.09 6.59 6.59
TSB Special 8.39 6.29 5.79 5.79
Unity 8.64 6.29 5.79 -
Unity First Home Buyer special - 6.20 - -
Wairarapa Building Society 8.50 ▼6.50 ▼5.89 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 8.39 6.47 6.10 5.79

Last updated: 9 October 2024 9:07am

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