As expected, the Reserve Bank of New Zealand (RBNZ) decided to leave its official cash rate (OCR) unchanged at 5.50% at its Nov meeting. In its accompanying press release, the RBNZ said that “interest rates are constraining economic activity and reducing inflationary pressure as required”. 

3Q23 GDP figures will be due on 14 Dec. But, overall, we forecast New Zealand’s GDP growth to slow to 0.9% in 2024, from 1.1% in 2023. As for inflation, our forecast for 2023 is at 5.7%. For 2024, we expect inflation to ease further to 3.0%. 

Tighter fiscal policy will further weigh on growth, though most fiscal measures will likely be announced only during the May 2024 budget, and implementation likely to take some time. Nonetheless, we think the RBNZ will have to cut rates sooner than its own projections imply.