Chief economist gives weekly update
ANZ warned that New Zealand’s housing market remains sluggish and economic data mixed, signaling that the Reserve Bank's path to rate cuts will be heavily influenced by ongoing uncertainty in key sectors.
In a recent podcast, ANZ chief economist Sharon Zollner highlighted key developments across the housing sector, economic data, and the implications for the Reserve Bank of New Zealand's (RBNZ) policy decisions.
Housing market continues to fall
The latest housing market data from the Real Estate Institute of New Zealand (REINZ) shows a persistent downward trend in house prices, with the House Price Index falling another 0.6% month-on-month, showing prolonged softness in the market.
“The House Price Index was down another 0.6% month on month. That's the third fall in a row,” Zollner said.
Although there are some early signs of potential recovery, such as a rise in auction clearance rates, these indicators have yet to translate into a meaningful rebound in house prices. Zollner noted that sellers are becoming more realistic about their price expectations, leading to a slight increase in sales activity.
However, she cautioned that “it's going to take a while for that to feed through into house prices.”
Economic data remains mixed
RBNZ might have kicked off its easing cycle, but Zollner emphasized that economic data will continue to influence the pace and extent of future rate cuts. She pointed out that although some high-frequency indicators, such as job ads and the Performance of Manufacturing Index, showed improvement in July, others, like the Business Outlook Survey, remain weak.
“The data will have a lot to say about the pace of cuts and where rates end up,” Zollner said, warning that if economic data remains weak, the RBNZ might be compelled to implement larger rate cuts, but a quicker-than-expected economic rebound could lead to a more cautious approach.
She also provided insights into the performance of various sectors, noting mixed results.
For example, the global dairy trade auction last week exceeded expectations, with upside risk to ANZ’s forecast for an $8.50 payout next season.
However, other sectors are struggling, especially those heavily reliant on exports to China.
The overall trade environment remains challenging, with increased trade barriers affecting exporters. Despite this, there is some optimism, particularly in the kiwifruit sector, where export values continue to rise.
Looking ahead
As New Zealand awaits the release of Q2 GDP data, Zollner indicated that this will be a critical factor in shaping economic expectations for the rest of the year. Reflecting the cautious outlook, ANZ has revised its GDP forecast slightly downward to a 0.3% contraction, while the RBNZ is forecasting a steeper 0.5% decline.
