RBNZ Deputy Governor Christian Hawkesby provided insights into the central bank’s current monetary policy and the economic outlook in an interview today. He discussed timing of rate cuts, and impact of rising immigration.
RBNZ’s revised forecast does not foresee rate cuts until mid-2025. Explaining the rationale behind the delayed rate cuts, Hawkesby emphasized the need for RBNZ to ensure that inflation expectations are securely re-anchored. He also pointed out that the New Zealand economy had experienced overheating and now requires a period of cooling, marked by a negative output gap.
The interview also highlighted the impact of recent demographic shifts on the The RBNZ had initially perceived rising immigration as a mitigating factor for inflation risk, considering its potential to alleviate labor shortages and reduce wage pressure. However, Hawkesby revealed that the immigration surge has been more significant than anticipated, now contributing to increased demand in the economy.
Hawkesby remarked, “Net migration has peaked at higher levels, so that’s news in itself, important news.” He further explained that the “demand-side impacts” of this trend are becoming more evident. He added, “The fact you have got to house a bigger population and the impact that that has, particularly on rental inflation and things like that.”
New Zealand’s population witnessed a substantial increase of 2.7% in the year through September, the largest in over three decades, with net annual immigration reaching a record high of 118,835.
