All eyes will be on incoming data to see what RBNZ is most likely to do

The odds of a rate cut in RBNZ’s July decisions is “diminishing by the day” according to BNZ’s newly published Markets Outlook Report.
However, BNZ still maintains its forecast of a 25-basis-point cut. Head of research Stephen Toplis (pictured above left) said that he is waiting for the NZIER Quarterly Survey of Business Opinion – the “best and most comprehensive of the business surveys” – and changing the OCR call before it is released would be ill-advised.
The report notes that ANZ’s surveys of households and businesses are projecting much higher inflation than has been suggested by QSBO, with ANZ’s business survey revealing that a net 46.3% of businesses. However, it also takes a jab at the series and says it has “gone rogue of late,” and so BNZ economists are largely discounting it.
ASB also noticed that the risks are “starting to tilt,” and adjusted its forecast to just one more cut to 3%.
Jarrod Kerr (pictured above right), chief economist at Kiwibank said that the case is still there for rate cuts as New Zealand is “crawling out of the recession.” Kerr said that the RBNZ is “fluffing around and trying to find neutral.”
“If you look at the interest rate-sensitive parts of the economy, they’re still very weak,” he said. “Everyone is expecting the second quarter to be pretty rough.”
Westpac said that RBNZ will “most likely sit out the next meeting on 9 July,” and will then reduce the OCR again in August. It also echoed Kiwibank’s concerns of a subdued June quarter, and has lowered its estimate for June quarter growth.
The takeaway for advisers – keep cash flowing
Advisers have been pushing through a relatively subdued property market despite lower rates. Commenting on the coming six to 12 months, Frank Cui, managing director at EverBright Finance said that the market still is not “back on track.”
“Interest rates will be a factor over the next year, but bear in mind that we’re still technically in a recession period, and the business confidence is not there,” Cui told NZ Adviser. “Even if you drop the Official Cash Rate, it’s still going to take a while for business to get back on track.”
Cui also pointed out New Zealand's diminished global competitiveness, partly as a result of pandemic-era isolation. He said that we cannot isolate ourselves from the opportunities – or the risks – of the rest of the world, and it’s going to take some more time to regain overseas market share.
“We missed a lot of opportunities during the COVID-19 era,” he said. “We shut the door for too long, and didn’t sell our products as actively as other countries did. We have at least about two years to catch up.”
While nobody expects the property market to heat up substantially again – and some argue, it shouldn’t – Cui said we can still expect to see some modest increases. That said, a lot depends on what our friends overseas decide to do amid the current volatility.
“We naturally have to be aware of what’s happening in the US market,” he said. “If their rates increase for whatever reason, we’ll have to make a tough decision on whether to follow or not. If you look at the last 15 years of trends, New Zealand and the US are pretty much parallel.
“It’s all very uncertain right now,” Cui said. “For advisers, cash flow is king. If you’re in a good business, make sure you maintain it well.”