NZIER's Shadow Board and Westpac's client survey point to a rate rise, with views split on how far and how fast
New Zealand's rate outlook has firmed heading into this week's Reserve Bank Monetary Policy Statement, with two independent surveys pointing the same way.
NZIER's Monetary Policy Shadow Board found just over half of its members recommending a 25-basis-point hike to 2.75%, while separate Westpac client polling found 79% of respondents expecting exactly that outcome, broadly in line with market pricing implying a 90% chance of a 25bp move.
Not every voice agrees on timing. Some Shadow Board members backed holding the OCR at 2.50%, pointing to subdued domestic activity and recent easing in inflation expectations. Westpac's survey found a similar minority view, with 17% of its 92 respondents expecting no change this week.
Westpac chief economist Kelly Eckhold (pictured left), a Shadow Board participant, said the case for further tightening remained intact.
"Continuing to move the OCR towards more neutral territory seems appropriate. A gradual data dependent approach is appropriate. Core inflation remains too high, and supply shocks seem likely to be persistent," Eckhold said.
Others were less convinced. Dennis Wesselbaum argued the weak domestic backdrop justified caution.
"Overall, given the weak domestic economy and easing inflation expectations, holding the OCR seems the best choice for now," Wesselbaum said.
Where rates land by year-end matters more for borrowers
Beyond this week's decision, both surveys suggest the OCR has further to climb.
NZIER's Shadow Board members centred their one-year-ahead expectations on 3% to 3.25%. Westpac's clients, meanwhile, were split between what they expect the RBNZ to project in September — 64% expect a 3% projection — and what they think will actually happen, with a smaller 55% majority expecting the OCR to reach 3% by year-end and 31% picking 2.75% or lower.
Shadow Board member Jarrod Kerr (pictured right) of Kiwibank struck a more dovish note.
"We believe the Kiwi economy needs pro-growth settings and strategies to revive and restore the recovery. Growth solves many problems, and enabling growth is a bold, but beautiful move," Kerr said.
Mortgage rates set to stabilise, not fall, as OCR climbs further
For mortgage advisers, the message is one of gradual, not dramatic, upward pressure on borrowing costs.
Westpac's clients expect the NZ dollar to firm modestly toward 0.60 by year-end and Brent crude to ease, both factors that could take some heat out of imported inflation. But with most forecasters still pointing to a higher OCR over the next 12 months, advisers should prepare first-home buyers and property investors for mortgage rates that stabilise rather than fall in the near term, and for borrowing capacity that improves only slowly as the tightening cycle plays out.
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