They also claim that now is not a good time to purchase a property
The Reserve Bank of New Zealand (RBNZ) said it would keep the official cash rate (OCR) at 0.25% for the next 12 months. With the worsening economic impact of COVID-19, experts doubt the central bank’s promise.
Finder’s latest RBNZ Official Cash Rate Survey, which interviewed 11 experts and economists, revealed that 45% of the respondents predicted a further OCR cut this year. Meanwhile, 15% expected that the OCR would ease on May 13.
Brad Olsen, a senior economist at Infometrics, said emerging issues caused by the pandemic might force the RBNZ to take back its promise.
“With economic conditions now far worse, we see there to be scope for a further [OCR] reduction in early Q3 [2020], as the wage subsidy runs out and businesses see increased costs and survival pressures,” Olsen said.
Dr Oliver Hartwich, the executive of NZ Initiative, added: “a rate cut should be expected given New Zealand’s rapidly deteriorating economic circumstances.”
Alfred Guender, an associate professor at the University of Canterbury, said: “There is too much uncertainty about the depth of the oncoming recession. Other central banks, notably the Fed and the ECB, have left their main policy instrument unchanged for the same reason.”
Read more: Reserve Bank works with financial sector to ensure financial stability
Majority of experts (55%) also voted against buying a property at this time despite the RBNZ’s decision to axe LVR restrictions for the next 12 months.
They predicted that prices would drop by as much as 8% in Auckland, with the median property price most likely to fall from $950,000 to $874,000. They also expected price dips in Dunedin (-6%) and Wellington (-6%).
“First home buyers with a secure job are being presented with a unique opportunity to enter the market sooner than expected. But the combination of a looming recession, job cuts and no vaccine as of yet means it’s shaky territory on the employment front,” said Kevin McHugh, Finder’s publisher in New Zealand.
