Westpac New Zealand Economic and Sustainability Strategy Update
Monetary policy
Inflation (annual %)
Westpac
forecasts
9
LO
5
A
3
RBNZ target band
м
2
2011
2014
2017
2020
2023
Inflation has picked up and is forecast to rise to 2.7% by the end of this year.
However, this rise is expected to be temporary. Inflation is being boosted by
base effects following last year's lockdown, as well as by disruptions to global
supply chains
As post-COVID-19 disruptions ease, inflation is forecast to drop back below 2%
over 2022. The economy is still grappling with the large hole in demand
resulting from the closure of NZ's borders and the loss of international tourism
spending. Unemployment is also above pre-COVID-19 levels
Westpac Economics expects that the Official Cash Rate (OCR) will remain on
hold until March 2024. The RBNZ is not likely to increase the OCR until the
borders reopen and longer-term inflation is comfortably on a path to 2%
Although Westpac Economics expect the OCR to remain on hold for some time,
there is a degree of tightening in monetary conditions already occurring. The
RBNZ has already slowed the pace of bond purchases in its Large-Scale Asset
Purchase programme. In addition the Funding for Lending Programme for
banks is unlikely to be extended beyond the end of 2022
LO
4
3
2-
1
2005
2008
Source: Statistics NZ, Westpac Economics
4
3
2
1
Official Cash Rate
Westpac
forecast
+
♡
2
0
2010
2012
2014
2016
2018
2020
2022
2024
Source: RBNZ, Westpac Economics
O
34
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