Significant recovery underway

Outlining his views to a Bayleys Old vs New Property webinar, Kerr says inflation will be at 4% by the end of the year, tracking down to 3% next year and back down to 2% over the next 18 months to two years.

He says the next move  from the RBNZ, whose job this time next year will be well and truly done, is a rate cut. “We’ll start seeing mortgage rates, business lending rates, all interest rates in the economy starting to come off and head in the right direction because we're clearly in restrictive territory at the moment.”

The interest rate rises that haven’t been seen in decades will be reversed next year, Kerr says. “I think cuts will come as early as May next year when the RBNZ starts cutting the OCR. “That gives the RBNZ a full 12 months after its last rate hike in May this year to assess the economic damage. And, it has caused quite a bit of economic damage which is actually ongoing.”

Kerr believes the RBNZ will take the cash rate from 5.5% back to 3% reasonably quickly. “That will provide a lot of mortgage relief for bank customers.”