ASB flags earlier OCR hikes as recovery strengthens
For Kiwi mortgage advisers fielding daily questions on where the official cash rate (OCR) goes next, ASB’s latest economic note from chief economist Nick Tuffley (pictured) points to a clear direction of travel: the risk is shifting towards earlier RBNZ rate hikes, not later.
According to Tuffley, New Zealand’s economic pulse remains surprisingly firm at the start of 2026.
ANZ’s Business Outlook survey shows business confidence easing from December’s 30‑year high but still “extremely strong”, with expected own activity “historically very high”. Reported past activity – a key high‑frequency proxy for GDP – points to a “solid Q4 GDP result” with strength “largely maintained into January”, even as pricing and wage intentions edge higher, signalling renewed inflation pressure.
High‑frequency data says economy has turned a corner'
ASB stresses that GDP is now a less reliable guide, given its lag and recent volatility, so the Reserve Bank is leaning harder on high‑frequency indicators of activity, prices, and employment.
“We use a variety of indicators to judge where the economy is moving… Taken together, this suggests that the economy has turned a corner,” Tuffley said.
Since the Q3 2025 GDP release, ASB notes broad improvement across key gauges. The PSI has finally moved back into expansion, the PMI is outperforming global peers, and both ANZBO and QSBO surveys show firmer sentiment and capacity pressures.
While house price growth remains “soggy” and card spending was weak at the end of 2025, ASB still expects around 20bp more effective easing as fixed loans roll onto lower rates – a temporary support rather than a lasting brake on future hikes.
Infometrics, however, cautions that the recovery “still looks unconvincing”, with households fatigued after several false starts and “hesitant to embrace any potential upturn” despite lower interest rates and healthier export incomes.
Westpac senior economist Satish Ranchhod, meanwhile, stresses RBNZ still has more breathing space than the RBA, with the first OCR hike pencilled in for December but a clear risk it arrives sooner if inflation keeps surprising on the upside.
Less spare capacity, stickier inflation
A key message for mortgage advisers from ASB is that the economy appears to be running closer to its “speed limit” than RBNZ assumed in its November 2025 MPS. ASB still judges a negative output gap, but “we do not think the economy is running as much below its speed limit than the RBNZ assumed”, citing strong Q3 GDP and rising capacity pressures.
With CPI at 3.1%, core inflation at 2.8% and sectoral models turning up, Tuffley concludes: “Taken collectively, a stronger economy and higher inflation move forward the timing of policy normalisation.”
Read the full ASB economic note here for more details.
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