OCR assumptions don’t add up

He says the central bank in this week’s Monetary Policy Statement seems to have deliberately downplayed the suppression of wages growth from the migration boom. “And it has assumed a level for the currency which is below where it is at.

Alexander says the RBNZ hasn’t allowed for any tightening of fiscal policy, and it has assumed El Nino has zero impact on agricultural production. “These are fairly unrealistic assumptions and positions.”

He expects the first cut in the cash rate to come in the second half of next year, but most people will not be expecting that cut for ages.

“The message from the RBNZ’s MPS could have been headlined: We are here to scare you.