Despite a rapid succession of OCR cuts, demand in the New Zealand economy has remained soft, reflecting the delayed passthrough of monetary policy easing and soft labour market conditions.
This lag (one to two years) in the transmission of monetary policy reflects the large proportion of New Zealand mortgages on fixed-term rates. Although lower interest rates are gradually filtering through to households as many borrowers reprice their mortgages onto lower rates, the soft labour market continues to weigh on discretionary spending.
Quarterly Predictions is an independent review of New Zealand’s economic outlook and includes comprehensive forecasts of the economy. The full publication is available exclusively to NZIER’s members.