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Bollard keeps OCR at 3%, but tightening expected

The official cash rate has been kept at 3% due to weak spending and a soft property market, however some tightening is still expected.

Thursday, October 28th 2010, 9:12AM

The official cash rate has been kept at 3% due to weak spending and a soft property market, however some tightening is still expected.

"Continued household caution has seen consumer spending and housing market activity remain muted, and many firms have become less optimistic about their future," Reserve Bank governor Alan Bollard said.

Despite some data turning out weaker than projected, the medium-term outlook for the New Zealand economy remains broadly in line with that assumed at the time of the September Monetary Policy Statement.

Bollard said it was appropriate to keep interest rates at what he has previously called "a very stimulatory" level but tighter monetary policy will probably be "required at some stage".

New Zealand's economic recovery from the worst recession in 18 years took a dent this year as households shunned spending in favour repaying debt, while the property market dropped into the doldrums as incoming migrants tapered off and more kiwis looked across the Tasman for brighter employment prospects.

The central bank will want to see "actual growth and evidence that growth is becoming self-sustaining" before hiking rates again, UBS economist Robin Clements said. "We don't anticipate this to be until March next year" with the OCR reaching 4% by end of 2011, he said.

Last week, Bollard told Parliament's Finance and Expenditure Committee he expects consumer spending to pick-up when confidence returns, the labour market improves, and when producers finish paying off debt and can take advantage of the strong commodity prices they've been enjoying.

Consumer confidence took another step lower this month according to last week's ANZ Roy Morgan survey, with people holding off from buying major appliances, even as the government hiked consumption tax 2.5 percentage points to 15%.

Yesterday's National Bank Business Outlook showed companies were more upbeat this month as export season approaches, though the strong kiwi dollar weighed on their expectations for offshore sales.

Earlier this month, the New Zealand Institute of Economic Research, which puts out the quarterly survey of business opinion, said a string of downbeat data during the September quarter raised the threat of a double-dip recession and raised questions about the sustainability of the recovery. Along with GDP and inflation, the confidence survey is closely followed by the central bank when setting monetary policy.

« Stuttering economy likely to stay Bollard's handFloating mortgage rates unlikely to rise for several months »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 5.65 5.55 5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society ▼8.60 6.75 6.40 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 5.95 6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - 6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.49 6.49 6.49
TSB Special 7.89 5.69 5.69 5.69
Unity 7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.10 6.05 5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.02 5.79 5.69

Last updated: 20 November 2024 9:45am

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