Monday 1st December 2003
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"It is evident that little besides the New Zealand dollar is holding back growth and inflation. Business confidence, the labour market and the building industry continued to defy predictions that softer conditions were imminent," Macquarie says.
As well, commodity prices are improving, as is the outlook for growth for New Zealand's major trading partners, auguring well for exports, it says.
ANZ Bank isn't so sure. It says the RBA appears to have taken "an almost callous disregard" for the strength of the Australian dollar, but that our central bank is likely to give our strong currency a relatively high weighting in making its decision.
It likens the central bank's situation is like "having one foot in boiling water and the other foot in freezing water." On the one hand, the strong currency is depressing export incomes and reducing imported inflation while on the other hand, the domestic economy, particularly the housing market, is very strong.
It notes Reserve Bank figures show that bank mortgage lending rose 1.6% in October, the 14th consecutive monthly increase, bringing the annual increase to 16.4%.
Soaring mortgage lending was one factor behind the RBA's decision to hike rates. "Interestingly though, Reserve Bank governor Alan Bollard told the New Zealand Parliament's finance and expenditure select committee that household debt was not a problem for the stability of the financial system," ANZ says.
ASB Bank also expects the Reserve Bank to play a waiting game this week, noting that the New Zealand dollar is trading at six-year highs.
"We would not be surprised by a December rate hike but thing the odds favour the RBNZ holding off until January."
By then, the central bank will have a swag of new data including the September quarter growth and balance of payments data, the December quarter consumer price index and the latest business opinion survey.
Deutsche Bank, previously among the more dovish economists, also expects the OCR to remain unchanged this week but warns that the central bank will "deliver a firm message, emphasising its increasing concern about the continued strength of the housing market and upside risks to the inflation outlook."
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