Official Cash Rate (OCR) – No Change

The Monetary Policy Committee has decided to keep the Official Cash Rate (OCR) at 1.0 percent. Employment remains around its maximum sustainable level while inflation remains below the 2 percent target mid-point but within our target range. 

Economic growth continued to slow in mid-2019 reflecting weak business investment and soft household spending. We expect economic growth to remain subdued over the remainder of the calendar year.

Trading-partner growth has also slowed. Growth in global trade and manufacturing is weak and uncertainty remains high, dampening global business investment. However, New Zealand’s export commodity prices have been robust, underpinning a positive terms of trade. The lower New Zealand dollar exchange rate this year is also providing a useful additional offset to the weaker global economic environment.

Domestic economic activity is expected to increase during 2020 supported by low interest rates, higher wage growth, and increased government spending and investment. The low level of the OCR has flowed through to lower lending rates more generally, which support spending and investment. Rising capacity pressures are projected to promote a pick-up in business investment.

Interest rates will need to remain at low levels for a prolonged period to ensure inflation reaches the mid-point of RBNZ’s target range and employment remains around its maximum sustainable level. RBNZ are committed to achieving our inflation and employment objectives. They will add further monetary stimulus if needed.

So looking ahead to 2020, we are likely to see some growth in property prices – but we doubt it will be the buoyant buying we’ve seen previously because banks just aren’t throwing money at investors at the moment.

By Chas Gunarathne

Published by chasgunaratne

Property Investment. Property Syndication. Asset Management. Property Management. Property Financing. Commercial Real Estate. Capital Raising. Strategic modelling and growth management. Acquisition and divestment of property.

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