ASB’s quarterly economic forecasts forecast an increase in OCR from August 2022

The forecast for rising interest rates was brought forward 12 months in ASB’s latest quarterly economic forecast. Chief Economist Nick Tuffley now expects the RBNZ to start raising OCR from its current level of 0.25% as early as August next year.

However, Mr Tuffley said a rate hike would not take place until the New Zealand border opens. He says the RBNZ will also want to be confident that the economy is warming up, the pressures on labor market capacity are strengthening and inflation settling above 2%. An increase in OCR by August of next year is a full year ahead of expectations just three months ago in the ASB’s quarterly economic forecast for November.

Rate hikes for our major trading partners are expected to move further away, with Mr Tuffley saying central bankers will want to ensure the current rebound is entrenched before raising key interest rates. “We expect the US Federal Reserve and Reserve Bank of Australia to be firmly on hold for at least the next 12-18 months.”

Mr Tuffley says the past year has been a mad rush for New Zealand. From a sharp contraction of COVID-19 to a rapid rebound in late 2020, he describes the New Zealand economy as one of the first to see the sun rise after the COVID eclipse.

“New Zealand has so far overcome this in an amazing way compared to the forecast for 2020, however, as we saw last week, things can change quickly and we will have to keep rolling with the punches. fist.”

After contracting 12.1% in the first half of 2020, the economy rebounded significantly, posting a 14% increase in GDP in the third quarter, pushing the economy back above pre-levels. COVID. GDP is now expected to reach 0.7% above last year’s levels by the December quarter. By comparison, if the pandemic had not occurred, the annual GDP growth forecast would have been around 2.5%.

The latest ASB economic forecast shows that while parts of the economy have faced headwinds, the construction industry has easily surpassed pre-pandemic levels.

“We expect that most of the growth in economic activity in the first half of this year will come from the construction sector. The housing market remains under-supplied, and low interest rates and rising house prices have whetted appetites for construction, as demand for building permits increased in the last months of 2020, ”said Mr. Tuffley.

From a global perspective, better-than-expected momentum towards the end of 2020, forecasts of a vaccine-induced recovery and the prospect of further economic stimulus have strengthened international sentiment in recent months and prompted analysts to reassess their forecasts.

“Although the grim news of COVID-19 continues to grab international headlines, the continued deployment of the vaccine around the world sheds light on the horizon. With the new administration, the US economy is expected to benefit from a significant stimulus in the coming months and the very accommodating policies of the central banks mean that the global economy continues to enjoy strong support. All in all, the global growth forecast for 2021 has been revised upwards since our last quarter, although there is still some way to go. “

Meanwhile, the vaccine rollout and expected spike in spending triggered a global boom in market share, with commodity markets also experiencing a strong recovery. Oil prices are approaching 12-month highs and dairy prices have risen in recent auctions, which Tuffley says is benefiting New Zealand.

“The New Zealand economy has proven to be more resilient than expected in 2020, but we remain cautious about the pace of growth in 2021 and 2022. export performance. The government hopes to roll out the vaccinations in the second half of the year, but risks and uncertainties remain, with the potential for production delays and COVID-19 mutations reducing the vaccine’s effectiveness. “

“In our view, it will be some time in 2022 before New Zealand and the global economies properly enter ‘recovery mode’ and allow above average GDP growth rates. “

The latest quarterly economic forecasts from the ASB will be available online at

Other recent ASB reports covering a range of comments can be found on our ASB Economic Insights page:

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