The economy's getting its breath back

The economy's getting its breath back

Mortgage Rates

BNZ Markets Outlook illustrates the situation saying it is like watching a jogger walking lampposts to get their breath back (having sprinted too much in earlier laps), not one about to collapse in a heap on the footpath.

"All that the recent data has made us unsure about is the point at which the jogger feels comfortable enough to resume, well, jogging."

BNZ says it still believes the economy is making good underlying progress, that GDP growth will strengthen this year  and that inflation will become more of a niggle sooner than many appreciate, thus forcing the Reserve Bank to resume nudging the cash rate higher.

ANZ Market Focus also responds to calls to cut the OCR saying while no-one can debate the weakness we are seeing across core pockets of the economy, a fair portion is structural as the New Zealand economy returns to a more balanced growth path.

"It's not the Reserve Bank's job to give a cyclical lifeline to sectors undergoing structural change, as the household sector rebuilds its savings buffer.

"Indeed it would be somewhat ironic if, after reiterating the need to save more and spend less, the Reserve Bank dished out a cut to the OCR."

ANZ says it thinks the economy is entering an inflection point where the hangover of weak 2010 data is still to be worked through but prospects for 2011 look better.

ASB Economic Weekly says the lack of traction at present simply reinforces the need to keep interest rates low for the foreseeable future.

ASB sees the risks to its view being an even later start. ASB also puts around a 10% chance on that the Reserve Bank cuts rates this year, though that is an event that would be preceded by clear signs that the economy, particularly the interest rate sensitive parts, are heading down over 2011 rather than re-gathering from last years softness.

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