Banking giant unveils key findings from latest RBNZ Pulse Survey
Westpac NZ recently completed its third survey of global client views concerning the Reserve Bank’s (RBNZ) policy outlook, revealing cautious investor optimism despite trade uncertainties.
The survey, which garnered 136 responses, primarily from local businesses and institutions, highlighted the influence of global trade issues on RBNZ policy decisions amid new US tariffs.
Investor sentiment on trade and tariffs
Participants expressed cautious optimism regarding the global trade landscape, which remains a critical concern for RBNZ’s policy direction.
“Investors are rightly focused on the global trade environment as a key issue facing the RBNZ and the outlook. But they are uncertain about what is going to happen and have an optimistic view that the trade issues will blow over to a large extent,” said Kelly Eckhold (pictured above), Westpac NZ’s chief economist.
“I think they are right to think that we have no idea how the tariff situation will pan out. But I think it’s overly optimistic to expect the direction of the new US administration to change significantly from the direction the President campaigned on.”
The survey’s timing coincided with US President Donald Trump’s announcement of new 25% tariffs on steel and aluminum imports, adding to existing tariffs on Mexico, Canada, and a 10% levy on Chinese goods. These developments could potentially impact New Zealand exporters, with negotiations ongoing for North American tariffs.
Predictions for the OCR
The consensus among survey participants supports a 50 basis-point reduction in the OCR to 3.75% in the upcoming monetary policy statement. This reflects market expectations set by RBNZ’s guidance and recent economic data.
Looking ahead, while the November MPS projected the OCR at 3.55% by the end of 2025, the survey indicated a broader expectation for a more moderate easing path, potentially settling around 3.25%.
Views on future economic and policy challenges
Respondents highlighted several factors that could influence RBNZ’s easing strategy, including a weaker exchange rate and stronger domestic growth indicators.
Additionally, inflationary pressures from international fiscal policies and tariffs are seen as significant concerns that might prompt RBNZ to moderate its policy easing.
Inflation expectations and currency projections
Investors generally expect inflation to stabilise around 2.25-2.5% in the coming years, suggesting confidence in RBNZ’s policy effectiveness.
Regarding the NZD/USD exchange rate, opinions vary, with a slight bias towards depreciation from current levels around 0.56-0.57 cents by the end of 2025.
Assessment of tariff impacts and global trade dynamics
The survey also explored investor expectations on the potential rollback of US tariffs in exchange for trade concessions.
Domestic investors appear more optimistic about this outcome compared to their international counterparts, indicating a varied perception of future global trade conditions and their impact on New Zealand’s economy.
