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RBNZ Expectations Survey Insights

In the latest economic update, the Reserve Bank of New Zealand's (RBNZ) Expectations Survey provides insights that could impact your mortgage and financial decisions. Let's break it down:

Inflation Expectations: Heading Downward

Good news for borrowers—business leaders and forecasters predict a drop in annual inflation rates from 4.7% to 3.22% by next year and further to 2.5% in early 2026. This aligns with RBNZ's goals and may mean steady interest rates in the near term.

 

Wage Growth and Inflation: A Coordinated Slowdown

The survey indicates a synchronized drop in expectations for both inflation and wage growth over the next few years. This could ease 'sticky' inflation pressures, impacting how businesses set prices and wages. As we assess the current employment scenario, it's apparent that growth has slowed in comparison to population expansion. Kiwibank's chief economist, Jarrod Kerr, attributes this to the Reserve Bank of New Zealand's (RBNZ) impactful decisions on the Official Cash Rate (OCR).

The RBNZ's strategic moves, aimed at managing inflation and employment, are showing signs of influencing household demand and business operations. Employers are adjusting, and the overall economic momentum is slowing down. Looking forward, predictions suggest a potential stall in employment growth, with the unemployment rate projected to surpass 5%.

Looking Ahead: Unemployment and Housing Market

Expect a modest rise in the unemployment rate. On the housing front, house prices are predicted to increase by 4.82% this year and 5.78% next year. The RBNZ's role in shaping economic policies has a ripple effect on various sectors. While the focus has shifted, with the RBNZ now emphasizing employment trends, the housing market is undergoing its own balancing act.

High employment traditionally supported housing, but challenges emerge as the number of building approvals for new homes declines. Independent economist Tony Alexander notes that this, coupled with rising demand, is pushing property prices higher. The return of tourists and foreign students further impacts the housing market as properties shift from long-term to short-term arrangements.

As conditions evolve, staying informed is key. At NZ Advice Group, we're here to help you make sense of these shifts and guide you in making informed mortgage and financial decisions.