RBNZ – Digital Finance Analytics (DFA) Blog

Kiwis Hold Their Breath On Property, And Rates.

We are crossing the ditch to New Zealand today to look at the latest home price data from the REINZ, and the latest inflation data from the RBNZ.

The New Zealand property market experienced a relatively quiet month in December 2024. Actually, sales increased by 1.8% nationwide compared to December 2023, rising from 5,420 to 5,518 but the median price for New Zealand decreased slightly by 0.6% to $775,000 year-on-year. Month-on-month, the national median price fell 1.8% from $789,000. Auckland prices were down 4.3% over the past year, and Wellington was down 5.4%.

National inventory levels have risen, increasing by 18.5% year-on-year to 29,478. However, inventory levels have decreased by 13.3% compared to the previous month, down from 33,984. Nationally, the days to sell rose 6 days year on year to 42 days.

The latest data from the RBNZ showed inflation slowed, though locally grown inflation was still sticky. Ahead, we can expect further rate cuts this year, as inflation tracks in line the RBNZ expectation, though external factors like exchange rates are in play, increasing uncertainty.

Whether the RBNZ will need to push the OCR below circa 3.25% neutral levels or have the OCR move higher remains to be seen, with monetary policy settings for 2025 and beyond highly conditional on the (still-uncertain) economic outlook.

This uncertainty flows back directly into the property market, and despite the lower rates ahead, the broader uncertainties and financial pressures many households are feeling will continue to hold the property market in a zone of uncertainty, especially given weaker demand as migration rates continue to ease. There is no easy upside breakout in property prices here.

http://www.martinnorth.com/

Digital Finance Analytics (DFA) Blog

Kiwis Hold Their Breath On Property, And Rates.

00:00 / 00:10:18

Kiwis See Another Rate Cut As The RBNZ Takes A Different Path!

The New Zealand Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate to 4.25% from 4.75%.

The bank’s updated projections are consistent with another 50-point reduction at its next decision on Feb. 19, Governor Adrian Orr told reporters at a press conference. “But it’s also conditional on economic projections panning out,” he said.

“Economic growth is expected to recover during 2025, as lower interest rates encourage investment and other spending,” the bank said. “Employment growth is expected to remain weak until mid-2025 and, for some, financial stress will take time to ease.”

This is a very different path compared with the RBA’s 4.35% well into 2025.

Sometimes a short sharp shock is better!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

Kiwis See Another Rate Cut As The RBNZ Takes A Different Path!

00:00 / 00:13:26

Inflation Fears Still Haunt (Especially Australia)…

The Washington-based IMF just published In its biannual world economic outlook, which said that central banks had scored a major achievement to return inflation to the pre-pandemic average without inflicting a global recession.

They go one to say that economic developments over the past four years have had a lot to do with how individual countries have deployed fiscal and monetary policies since the pandemic.

Australia’s choice to hold rates lower, whilst lifting government debt (across states and federally) with most new jobs created in the public sector, thus crimping productivity. This plus high migration has kept inflation well above band, and with little prospect of cuts any time soon, but so far have avoided a technical recession, although many households still are feeling the pinch.

New Zealand lifted rate faster and higher, and hit a recession, but is now cutting, has cut migration, and did not pump-up jobs in the public sector as Australia did. It will be interesting to see which strategy provides the better long-term outcomes.

But for now, the fear of entrenched inflation and higher interest rates for longer suggests that the inflation battle in Australia has yet to be won. And with an election due by May next year, this could well spell trouble for the current Government, though I am not sure the other mob are any better!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

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Digital Finance Analytics (DFA) Blog

Inflation Fears Still Haunt (Especially Australia)…

00:00 / 00:15:55

Inflation Fears Still Haunt (Especially Australia)…

They go one to say that economic developments over the past four years have had a lot to do with how individual countries have deployed fiscal and monetary policies since the pandemic.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

New Zealand Rates Held Higher For Longer As Hawks Fly!

The Reserve Bank of New Zealand left the Official Cash Rate at 5.5% on Wednesday, saying that Restrictive monetary policy has reduced capacity pressures in the New Zealand economy and lowered consumer price inflation. Their statement on Monetary Policy had a decidedly hawkish tone, signalling rate cuts will be delayed until around August 2025, which is implying that markets are pricing cuts about 12 months too soon. This is important as we will see, later.

And folks, 5.5% is significantly higher than the weaker 4.35% in Australia, suggesting that we could be facing higher for longer too.

The report said annual consumer price inflation is expected to return to within the Committee’s 1 to 3 percent target range by the end of 2024. That said, in an economic note, ASB says they continue to expect the RBNZ will remain on hold until early 2025, but the risks are tilted to a later start. The RBNZ’s forecasts have inflation holding up higher for longer, with inflation not back to 2% until 2026 (though it is a rounding error from that mark over the second half of 2025).

The RBNZ did discuss the possibility of lifting the OCR at this meeting but didn’t see the need given inflation is still expected to be comfortably back in the target band over the “medium term” i.e. the next couple of years. The clear conclusion, though, was that interest rates need to hold up for longer – as the forecasts showed.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

New Zealand Rates Held Higher For Longer As Hawks Fly!

00:00 / 00:09:02

New Zealand Rates Held Higher For Longer As Hawks Fly!

And folks, 5.5% is significantly higher than the weaker 4.35% in Australia, suggesting that we could be facing higher for longer too.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The New Zealand Hawk Stands Alone…

A significant gulf has opened up between New Zealand and Australia in terms of monetary policy, after RBNZ lifted another 50 basis points, while Australia held. Underlying this are a series of conflicting assumptions about how the economies will fare – but the risk of recession in New Zealand is now highly likely – some would say certain; while in Australia, the protection of the housing market appears to be front of mind, with the RBA willing to let inflation burn hotter for longer. Both cannot be right!

New Zealand’s Central Bank Lifts Interest Rates by 0.5%!

Adrian Orr, RBNZ Governor said they were listing the Official Cash Rate by 0.5% today, with a peak of 5.5% still on the cards. The recent Cyclone may also add additional inflationary pressure.

He also highlighted the importance of cash – and branches – at a time of crisis, like when the power goes out. And the risks to social cohesion when this is ignored. Just wow!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/