Sharechat Logo

Economic slump may herald string of rate cuts in 2009

Monday 7th July 2008

Text too small?
New Zealand's economic slump means the central bank may embark on a series of interest-rate cuts that extend through to the end of 2009, some economists say.

"For borrowers, this suggests the opportunity to lock in fixed rate borrowing at lower levels is likely to present itself in coming quarters," Bank of New Zealand economists said in their June financial wrap last week.

"We are currently forecasting a relatively aggressive easing cycle," they said.

Helping firm up economists' rate cut expectations may be the New Zealand Institute of Economic Research's Quarterly Survey of Business Opinion, scheduled for release tomorrow. Confidence fell to a 33-year low in the first quarter, when the economy contracted.

"We fully expect activity indicators to be weak" in the latest QSBO, said Shamubeel Eaqub, head of research at Goldman Sachs JBWere.

Also this week, the Real Estate Institute of New Zealand releases its house sales data for June. Last week, real estate firm Barfoot & Thompson reported its average sales price in June fell 1.7% from May while new listings dropped 19% year on year.

Eaqub said national sales will probably follow Auckland's, though "we think this is only the first leg of the correction process and the impact on prices, household spending and residential construction are still to be seen."

Last week, state-owned Kiwibank cut its three, four and five-year fixed-rate home loans to below 9%, making them the lowest in a survey by the Good Returns web site.

Bank of New Zealand said the "crumbling housing market and slow-down in consumer spending is translating into slower economic activity," predicting a 0.2% contraction in second-quarter GDP.

"Our official forecasts have the central bank cutting 25 basis points to 8% in September and easing 25 basis points at every subsequent meeting, right through 2009," the bank's economists said.

By Jonathan Underhill

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

8th December 2021 Morning Report
New Zealand King Salmon Investments Limited (NZX: NZK) Market Update
Scales Corporation Limited (NZX: SCL) Market update
Delegat Group Limited (NZX: DGL) $333 million syndicated bank facilities
7th December 2021 Morning Report
Sky Network Television Limited (NZX: SKY) Transformation accelerates - Sky raises FY22 guidance
PGG Wrightson Limited (NZX: PGW) FY22 Operating EBITDA forecast to better last year
Vulcan Steel Limited (NZX: VSL) Trading Update & Earnings Upgrade
6th December 2021 Morning Report
Synlait Milk Limited (NZX: SML) Partnership to enhance soil health; test regen ag practices