PHOTO: ANZ chief economist Sharon Zollner. FILE
ANZ has cautioned that New Zealand’s housing market remains sluggish, with mixed economic data, suggesting that the Reserve Bank’s future decisions on rate cuts will be shaped by ongoing uncertainties in key sectors.
In a recent podcast, ANZ chief economist Sharon Zollner discussed the latest trends in the housing market, economic indicators, and their implications for the Reserve Bank of New Zealand’s (RBNZ) monetary policy.
Housing Market Faces Continued Decline
According to the latest data from the Real Estate Institute of New Zealand (REINZ), house prices continue to fall, with the House Price Index dropping by another 0.6% month-on-month, marking the third consecutive decline.
Zollner noted, “The House Price Index was down another 0.6% month on month. That’s the third fall in a row.” Although there are early signs of potential recovery, such as increased auction clearance rates, these have yet to translate into a significant rebound in house prices. Sellers are beginning to adjust their price expectations, leading to a modest rise in sales activity. However, Zollner cautioned that “it’s going to take a while for that to feed through into house prices.”
While the RBNZ has initiated its easing cycle, Zollner emphasized that economic data will play a critical role in determining the pace and scale of future rate cuts. She pointed out that some high-frequency indicators, such as job ads and the Performance of Manufacturing Index, showed improvement in July. However, 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 warned. If economic data continues to weaken, the RBNZ might be forced to implement larger rate cuts, but a quicker-than-expected economic rebound could prompt a more cautious approach.
Zollner also highlighted mixed performances across various sectors. For example, last week’s global dairy trade auction exceeded expectations, adding upside risk to ANZ’s forecast of an $8.50 payout for the next season. However, other sectors, particularly those heavily reliant on exports to China, are struggling. The trade environment remains challenging, with increased barriers affecting exporters, though there is some optimism in the kiwifruit sector, where export values continue to rise.
As New Zealand prepares for the release of Q2 GDP data, Zollner noted that this will be a critical factor in shaping economic expectations for the rest of the year. Reflecting a cautious outlook, ANZ has revised its GDP forecast slightly downward to a 0.3% contraction, while the RBNZ is predicting a steeper 0.5% decline.