Latest news with #Hawkesby
The Advertiser
3 days ago
- Business
- The Advertiser
Reserve Bank of NZ cuts rates again as inflation falls
New Zealand's central bank has cut rates for a sixth straight meeting, confirming inflation is under control, but amid concerns about the economy. The Reserve Bank of New Zealand (RBNZ) reduced the official cash rate (OCR) by 25 basis points to 3.25 per cent on Wednesday. It has also issued an updated future track, suggesting at least one and perhaps two OCR cuts to come. The tracking downgrades a previous forecast to have the OCR sitting at 2.9 per cent by year's end. Wednesday's cut was not a consensus call, with Governor Christian Hawkesby revealing one committee member dissented, preferring to hold. "Core inflation is declining and there is spare productive capacity in the economy," he said. Spare capacity might be an understatement. New Zealand is enduring a tough run of low growth, or as was the case last year, a deep six-month recession when the economy shrunk by more than two per cent. Mr Hawkesby said the economy was "recovering after a period of contraction" and was currently propped up by high commodity prices. Responding to the environment, as well as shrunken inflation, the RBNZ has cut by 225 basis points in nine months. Some bankers want it to go further, and quickly, to improve business conditions. Kiwibank chief economist Jarrod Kerr said domestic weakness and overseas uncertainty put the case for a bigger rate cut now, before landing at 2.5 per cent soon. "The economy needs stimulus, not restraint," Mr Kerr told Newstalk ZB prior to the decision. "These tariffs, no matter how much they get dialled back ... it's still a tariff across the world, it's still a negative. It still puts deflationary pressure on the economy. "We're saying get it into stimulatory territory and lets kickstart the economy into next year." Arguing for the prudent pathway of the 25 basis point cut, Mr Hawkesby said it was not clear how global heavyweights would respond to the US-led trade war. "For example, it is possible that China could respond to weaker economic activity with a sizeable fiscal stimulus," he said. He said the six-person committee was "literally locked in a room for a week and a half to work it through" and the lack of consensus "reflects the degree of uncertainty that we're dealing with at the moment". Banks, including ANZ and ASB, are still backing the OCR to hit a floor of 2.75 per cent this year. The RBNZ's new forecasts also predict shallow GDP growth of just 1.8 per cent this year, but in better news, an unemployment rate peaking at just 5.2 per cent. The lack of surety from the central bank prompted tepid moves from major lenders. While BNZ cut its floating rate by 25 basis points ahead of the decision, ANZ and Westpac moved after and cut by only 20 and 15 respectively. New Zealand's central bank has cut rates for a sixth straight meeting, confirming inflation is under control, but amid concerns about the economy. The Reserve Bank of New Zealand (RBNZ) reduced the official cash rate (OCR) by 25 basis points to 3.25 per cent on Wednesday. It has also issued an updated future track, suggesting at least one and perhaps two OCR cuts to come. The tracking downgrades a previous forecast to have the OCR sitting at 2.9 per cent by year's end. Wednesday's cut was not a consensus call, with Governor Christian Hawkesby revealing one committee member dissented, preferring to hold. "Core inflation is declining and there is spare productive capacity in the economy," he said. Spare capacity might be an understatement. New Zealand is enduring a tough run of low growth, or as was the case last year, a deep six-month recession when the economy shrunk by more than two per cent. Mr Hawkesby said the economy was "recovering after a period of contraction" and was currently propped up by high commodity prices. Responding to the environment, as well as shrunken inflation, the RBNZ has cut by 225 basis points in nine months. Some bankers want it to go further, and quickly, to improve business conditions. Kiwibank chief economist Jarrod Kerr said domestic weakness and overseas uncertainty put the case for a bigger rate cut now, before landing at 2.5 per cent soon. "The economy needs stimulus, not restraint," Mr Kerr told Newstalk ZB prior to the decision. "These tariffs, no matter how much they get dialled back ... it's still a tariff across the world, it's still a negative. It still puts deflationary pressure on the economy. "We're saying get it into stimulatory territory and lets kickstart the economy into next year." Arguing for the prudent pathway of the 25 basis point cut, Mr Hawkesby said it was not clear how global heavyweights would respond to the US-led trade war. "For example, it is possible that China could respond to weaker economic activity with a sizeable fiscal stimulus," he said. He said the six-person committee was "literally locked in a room for a week and a half to work it through" and the lack of consensus "reflects the degree of uncertainty that we're dealing with at the moment". Banks, including ANZ and ASB, are still backing the OCR to hit a floor of 2.75 per cent this year. The RBNZ's new forecasts also predict shallow GDP growth of just 1.8 per cent this year, but in better news, an unemployment rate peaking at just 5.2 per cent. The lack of surety from the central bank prompted tepid moves from major lenders. While BNZ cut its floating rate by 25 basis points ahead of the decision, ANZ and Westpac moved after and cut by only 20 and 15 respectively. New Zealand's central bank has cut rates for a sixth straight meeting, confirming inflation is under control, but amid concerns about the economy. The Reserve Bank of New Zealand (RBNZ) reduced the official cash rate (OCR) by 25 basis points to 3.25 per cent on Wednesday. It has also issued an updated future track, suggesting at least one and perhaps two OCR cuts to come. The tracking downgrades a previous forecast to have the OCR sitting at 2.9 per cent by year's end. Wednesday's cut was not a consensus call, with Governor Christian Hawkesby revealing one committee member dissented, preferring to hold. "Core inflation is declining and there is spare productive capacity in the economy," he said. Spare capacity might be an understatement. New Zealand is enduring a tough run of low growth, or as was the case last year, a deep six-month recession when the economy shrunk by more than two per cent. Mr Hawkesby said the economy was "recovering after a period of contraction" and was currently propped up by high commodity prices. Responding to the environment, as well as shrunken inflation, the RBNZ has cut by 225 basis points in nine months. Some bankers want it to go further, and quickly, to improve business conditions. Kiwibank chief economist Jarrod Kerr said domestic weakness and overseas uncertainty put the case for a bigger rate cut now, before landing at 2.5 per cent soon. "The economy needs stimulus, not restraint," Mr Kerr told Newstalk ZB prior to the decision. "These tariffs, no matter how much they get dialled back ... it's still a tariff across the world, it's still a negative. It still puts deflationary pressure on the economy. "We're saying get it into stimulatory territory and lets kickstart the economy into next year." Arguing for the prudent pathway of the 25 basis point cut, Mr Hawkesby said it was not clear how global heavyweights would respond to the US-led trade war. "For example, it is possible that China could respond to weaker economic activity with a sizeable fiscal stimulus," he said. He said the six-person committee was "literally locked in a room for a week and a half to work it through" and the lack of consensus "reflects the degree of uncertainty that we're dealing with at the moment". Banks, including ANZ and ASB, are still backing the OCR to hit a floor of 2.75 per cent this year. The RBNZ's new forecasts also predict shallow GDP growth of just 1.8 per cent this year, but in better news, an unemployment rate peaking at just 5.2 per cent. The lack of surety from the central bank prompted tepid moves from major lenders. While BNZ cut its floating rate by 25 basis points ahead of the decision, ANZ and Westpac moved after and cut by only 20 and 15 respectively. New Zealand's central bank has cut rates for a sixth straight meeting, confirming inflation is under control, but amid concerns about the economy. The Reserve Bank of New Zealand (RBNZ) reduced the official cash rate (OCR) by 25 basis points to 3.25 per cent on Wednesday. It has also issued an updated future track, suggesting at least one and perhaps two OCR cuts to come. The tracking downgrades a previous forecast to have the OCR sitting at 2.9 per cent by year's end. Wednesday's cut was not a consensus call, with Governor Christian Hawkesby revealing one committee member dissented, preferring to hold. "Core inflation is declining and there is spare productive capacity in the economy," he said. Spare capacity might be an understatement. New Zealand is enduring a tough run of low growth, or as was the case last year, a deep six-month recession when the economy shrunk by more than two per cent. Mr Hawkesby said the economy was "recovering after a period of contraction" and was currently propped up by high commodity prices. Responding to the environment, as well as shrunken inflation, the RBNZ has cut by 225 basis points in nine months. Some bankers want it to go further, and quickly, to improve business conditions. Kiwibank chief economist Jarrod Kerr said domestic weakness and overseas uncertainty put the case for a bigger rate cut now, before landing at 2.5 per cent soon. "The economy needs stimulus, not restraint," Mr Kerr told Newstalk ZB prior to the decision. "These tariffs, no matter how much they get dialled back ... it's still a tariff across the world, it's still a negative. It still puts deflationary pressure on the economy. "We're saying get it into stimulatory territory and lets kickstart the economy into next year." Arguing for the prudent pathway of the 25 basis point cut, Mr Hawkesby said it was not clear how global heavyweights would respond to the US-led trade war. "For example, it is possible that China could respond to weaker economic activity with a sizeable fiscal stimulus," he said. He said the six-person committee was "literally locked in a room for a week and a half to work it through" and the lack of consensus "reflects the degree of uncertainty that we're dealing with at the moment". Banks, including ANZ and ASB, are still backing the OCR to hit a floor of 2.75 per cent this year. The RBNZ's new forecasts also predict shallow GDP growth of just 1.8 per cent this year, but in better news, an unemployment rate peaking at just 5.2 per cent. The lack of surety from the central bank prompted tepid moves from major lenders. While BNZ cut its floating rate by 25 basis points ahead of the decision, ANZ and Westpac moved after and cut by only 20 and 15 respectively.
Scoop
4 days ago
- Business
- Scoop
The RBNZ Has Seen Enough To Cut More, But Not Enough To Do Enough
Another RBNZ meeting, another rate cut, and another forecast cut. Today's 25bps move to 3.25% is the sixth straight cut, and takes total easing to 225bps. And there's more coming. Although the path is highly uncertain. Policy is much closer to neutral now, but it is still not stimulatory. The RBNZ has lowered the forecast OCR track 25bps, from 3.1% to 2.85%, implying a good chance of another two rate cuts to 2.75%. It's another step in the right direction… and we continue to call for a move to 2.5%. The RBNZ has seen enough to cut again, and again, but not enough to do enough, in our view. We expect to see the OCR tracked lowered again in August towards 2.5%. The weakness in the economy is clear and demands more attention and less restriction. With all the risks offshore, think Trumpian tariffs, and the pain still felt onshore, there's a good argument to be made for taking policy into stimulatory territory. The RBNZ cut 25bps today. The cash rate sits at 3.25%. Were we surprised? Nope. Did we want more? Yes. There's no doubt that the Kiwi economy needs support. The risks to the growth outlook are tilted to the downside. As was revealed last week, the Govt's hands are tied (self-inflicted). So, we look to the RBNZ. In the current environment, with a future clouded by the tariff trade war, there's more for the central bank to do to support the recovery. Rightly so, the RBNZ is signalling more rate cuts. That's the key takeaway from the May MPS. The OCR track was lowered from a flat lined bottom of 3.10% to a 2.85% bottom in March 2026. So now another 25bps cut to 3% is fully baked into the cake. And from there, there's a 60% chance of another 25bps cut to 2.75%. Once again, we would love to have seen a bit more. We're still of the view that a 2.5% cash rate is what the Kiwi economy needs. And an OCR track bottoming anywhere below 2.75% would have signalled what we had hoped to see. But with each MPS, the terminal OCR has moved closer to our 2.5% view. Give them time, and they just might get there. But for now, such heightened uncertainty is making it harder for all policymakers to navigate. So, it's not surprising to see the committee err on the side of caution. The fact the RBNZ 'voted' 5-1, with one member voting for a pause to assess, throws some doubt on the timing of the next move, but not the direction. They are not on a 'pre-set course', and always data dependent. We think there's enough for them to cut again in July, but they may wait until August to cut again. It depends… on what? Everything. That seed of doubt caused a bit of a jolt in financial markets, especially short end interest rates. The pivotal 2-year swap rate rose 10bps, from 3.16% to 3.26%. It's not a big move… but it was one Governor Christian Hawkesby pushed back on. The telling comment from Hawkesby, when asked about the market reaction, was his reference to the new OCR track matching market pricing prior to the announcement. The RBNZ's OCR track matched market pricing of 2.85%. So they would not have expected much reaction at all. Again, we want to reinforce the key message of today's meeting is that the RBNZ is signalling more cuts.
NZ Herald
24-05-2025
- Health
- NZ Herald
Billionaire's family backs Friedreich's Ataxia research fundraiser for friend Flynn Mitchell
As he tried to get into the house, his wheelchair kept sliding backwards. With no one expected home for another four hours, Mitchell was left stranded in the cold. 'There was no way I could get up there. It would've been dangerous [but] if I'd stayed outside I would have frozen to death,' Mitchell said. 'I finally managed to open the door but couldn't get the wheelchair in, so I crawled into the house and pulled the wheelchair behind me. When I got in, I was freezing. I broke down and I bawled my eyes out. I thought, 'I can't do this anymore.'' Fundraising for a cure Mitchell, who graduated last week with a Bachelor of Entrepreneurship from Otago University, has Friedreich's Ataxia (FA)- a progressive, incurable neurodegenerative muscular disorder. There is currently no cure, and billionaire Graeme Hart's granddaughter Jemima Hawkesby, 21, is one of a group of Mitchell's closest friends raising awareness and funds for research into the disorder. They have a team, 'For Flynn,' in the Lend Us Some Muscl e campaign - to raise funds for future research and clinical trials. 'We are a group of mates in our early 20's from all over New Zealand, taking on the Lend Us Some Muscle Global Challenge 2025 for the second year running' says the blurb introducing their fundraiser. 'Flynn's one of the strongest, most determined people we know, and this is our way of backing him, and showing him how proud we are of his strength.' Hawkesby told the Herald, 'We want to help Flynn walk again. Each team will complete physical challenges like walking, running, golfing, swimming, and yoga- sadly all activities that Flynn and others with FA can no longer do.' So far, the friends have raised more than $16,500 of their $30,000 target. 'My friends keep me grounded.' Hawkesby and Mitchell boarded at Selwyn College, Otago in 2022 and instantly clicked, Mitchell confiding in her about why he chose to be in a wheelchair. Says Hawkesby: 'He got tired of people harassing him and taking the piss out of the way he walked. He knew he would end up in a wheelchair and thought, 'why wait'? It gets to me when my friends say, 'we're going on a hike' and obviously I can't go. Flynn Mitchell 'He was like a fourth brother to me. Flynny is one of us - we forget he's in a wheelchair. He shows up for everyone no matter what he's going through' Hawkesby said. 'I've had to take him to hospital a few times because he's been drunk and fallen out of his chair and banged his head. He doesn't like asking for help, but he always takes time to check in on me every day.' Mitchell says being around close, non-judgemental friends keeps him grounded. 'When I started walking funny, before I got a wheelchair, quite a few friends dropped off.' But his genuine friends stood by him - 'friends like Jemima, Jules and Xavier, my childhood friend from King's College.' I'd love to be a father one day. I'd like to be able to talk properly and be able to dance on two feet and walk without having to rely on my friends to lift me upstairs. Flynn Mitchell Hawkesby - public relations leader for Antipodes - now lives in Wellington with her partner Jesse Tashkoff, an all-rounder for the Wellington Firebirds. The pair caught up with Mitchell in Dunedin last week, when Hawkesby graduated with a Bachelor of Commerce and Mitchell with a Bachelor of Entrepreneurship. Hawkesby's grandmother, 'Mama' Robyn Hart - wife of Graeme Hart - has donated to the campaign and told the Herald Mitchell is much-loved by his friends. 'I admire him and his 'can do' attitude. One day he came to see me at home and announced there was going to be a drug that could reverse many of his FA symptoms. The look of hope on his face and the tears in his eyes as he told us was so special.' Hart told the Herald her fondest memory of Mitchell was at her granddaughter's 19th birthday. 'Drinking shots with Flynn in Dunedin - he out-drank me! That's not an easy thing to do' Hart said. One of Mitchell's university friends, Jules Aitken, 21, accompanied him to Melbourne last year for annual tests, treatments and monitoring. 'You never truly understand how much FA affects Flynn's daily life until you see it. I got a real insight being with him 24/7. Flynn will never talk about it or complain but you see how much more difficult it is for him.' 'For the Lend Us Some Muscle campaign we're trying to cover the length of NZ which is 1600 kilometers from the top to the bottom which is 8.6 kms a day. What motivates me is if my legs and feet are sore and I'm in pain and I don't feel like a run, I think how privileged I am to be able to exercise and raise money for my mate who would cherish the opportunity to go for a run.' The rare condition Friedreich's Ataxia is a life-shortening, progressive neuro-muscular disorder, and there isn't a cure yet. Mitchell's heart is fragile; he has lost co-ordination and the ability to walk, and talk clearly. It's the simple things he grieves the most. 'I used to be fully independent. I sailed, I could walk to the beach, play football in the park. It gets to me when my friends say, 'we're going on a hike' and obviously I can't go.' In New Zealand, as many as 1 in 90 people may be carriers of the gene. The diagnosis Mitchell grew up in St Heliers, Auckland, with his parents, Scott and Gesa, and his two younger brothers, Peer,19 and Yonas, 18. Gesa says when she first learned of her son's diagnosis, she couldn't breathe. 'It is hereditary, but we don't know anyone in our families who has it,' she told the Herald. 'It was quite a process for Flynn to be diagnosed. When he was 12, I noticed he was skinnier and shorter than the other boys, but I wasn't worried. Then he started losing his balance, and after he did the Ironman in 2013, he was struggling to breathe big-time. That was the first sign of hypertrophic cardiomyopathy which is part of FA.' Gesa describes her son as clever, kind curious, with a big smile on his face - a lover of marine life. She said it was devastating to see him unable to do the things he loves most: run, cycle, sail, ski and hike. 'You have to think outside the box. Last year, we took Flynn to the Sahara Desert,he didn't want to ride on a camel because it wasn't sustainable or 'the right thing for the camel,' so we put his wheelchair on the back of quad bike because Flynn didn't think it was ethical putting a wheelchair on top of a camel.' Mitchell hopes to finish his master's next February and start a business protecting the natural world and being amongst animals like his hero, Sir David Attenborough. He wants to fall in love and have his own family. 'I'd love to be a father one day. I'd like to be able to talk properly and be able to dance on two feet and walk without having to rely on my friends to lift me upstairs. 'I would love not to rely on anyone.' Carolyne Meng-Yee is an Auckland-based investigative journalist who won Best Documentary at the Voyager Media Awards in 2022. She worked for the Herald on Sunday from 2007-2011 and rejoined the Herald in 2016 after working as an award-winning current affairs producer at TVNZ's 60 Minutes, 20/20 and Sunday.
Scoop
23-05-2025
- Business
- Scoop
25 And Not Done. The RBNZ Has More Work To Do. More Cuts Are Required.
Press Release – Kiwi Economics The weakness in the economy is clear and demands more attention and less restriction. With all the risks offshore, think Trumpian tariffs, and the pain still felt onshore, theres a good argument to be made for taking policy into stimulatory territory … Next week's decision, with updated forecasts, is important. There's no doubt that the Kiwi economy needs support. There's no doubt the RBNZ should be aiming to stimulate, not restrict, the economy. It's just an argument around how much support is needed. The RBNZ has signalled a 25bp cut to 3.25% next week. If it was up to us, we would deliver a 50bp cut to 3%, a level broadly considered neutral, not even stimulatory. But it's not just about the cut, it's also about the trajectory. And we're focussed on their next move(s). They're saying just one more move (25bps) to 3.0% after next week. We're saying get to 2.5%. We're stubborn, and we're hoping they're flexible. They had to be very flexible last year. The weakness in the economy is clear and demands more attention and less restriction. With all the risks offshore, think Trumpian tariffs, and the pain still felt onshore, there's a good argument to be made for taking policy into stimulatory territory asap. Next week's decision, with updated forecasts, sets the scene for the next 3 months, at least from the RBNZ's perspective. Adrian Orr has left the RBNZ and Christian Hawkesby is in charge. Next week's decision is a chance to differentiate from the Orr era. The economic developments since the RBNZ's last MPS have deteriorated here, and especially offshore. The justification of a more 'go for growth' focussed RBNZ has strengthened. Hawkesby (hopefully Dovesby) could easily deliver a 50bp move next week and signal another 50bps to 2.5% to come. That would set policy about right for a recovery. And it's not mucking around with 25bps moves, delaying the inevitable. A more decisive RBNZ would be viewed positively across the road (Terrace), given the difficulty the Government had in balancing yesterday's budget. 2026 will be just as hard. If, however, Hawkesby decides to play the nightwatchman, then we may just get a 25bp cut and little else. That's precisely what we don't need. And we'd argue it would show an RBNZ out of touch with our economic reality. We highly recommend watching our latest podcast where we speak to Urgent Couriers's Managing Director Steve Bonnici. Urgent Couriers feel the ups and downs of the economic cycle before most. When asked about the current cycle and monetary policy actions of the RBNZ, Steve said: 'I'm frustrated (by the RBNZ's actions)…The lack of understanding of what Kiwi businesses were going through out there. The time for easing was the beginning of 2024, not the end of 2024… we're a bellwether… we've had more clients go into receivership or liquidation in the last 12 months than in any of the other cycles (back to the 1980s)'. That's what we're hearing for the vast majority of Kiwi businesses. There are three scenarios for next week: The first scenario, is lifeless. The RBNZ delivers a 25bp cut and leaves the OCR track at 3.1% or slightly below at 3.0%. This would not go down well. Wholesale market traders would drop bonds, pushing interest rates higher. The pivotal 2-year swap (interest) rate would rise from around 3.15% now to 3.25% (about 10bps). Mortgage rates would barely move… if anything, it might see a reduction in discounting. The second scenario, is what we think they will do. A 25bp cut accompanied by a lower OCR track to 2.8% (or close to). Currently, most economists sit between a low of 2.5% (Kiwibank) and a high of 3%. This scenario will push most economist forecasts below 3% to a 2.5-2.75% range. The wholesale rate markets imply a terminal rate of 2.85-2.9%. We should see a (very) slight reduction in rates, supporting current mortgage rates. The variable and 6 month rates would move lower, but the 1 year and beyond wouldn't move much at all. That's not what we need either. The third scenario, is 'go for growth', generate greenshoots. A Doveish Hawkesby should put a 50bp move on the table, and an OCR track to 2.5%. The shock without Orr would see wholesale rates poleaxed. The 2-year swap rate would immediately test 3% (down from 3.15%), and ultimately fall towards 2.75%. All mortgage rates are likely to be lowered, as needed. A slightly watered-down version could be a 25bp cut and a much more dovish track to 2.5% The RBNZ's current trajectory is unlikely, in our view. Get to neutral, and get the economy moving. Ultimately, it's better to act swiftly and decisively to get lower rates feeding through faster. More meaningful cuts are required here and now.
Scoop
23-05-2025
- Business
- Scoop
25 And Not Done. The RBNZ Has More Work To Do. More Cuts Are Required.
Next week's decision, with updated forecasts, is important. There's no doubt that the Kiwi economy needs support. There's no doubt the RBNZ should be aiming to stimulate, not restrict, the economy. It's just an argument around how much support is needed. The RBNZ has signalled a 25bp cut to 3.25% next week. If it was up to us, we would deliver a 50bp cut to 3%, a level broadly considered neutral, not even stimulatory. But it's not just about the cut, it's also about the trajectory. And we're focussed on their next move(s). They're saying just one more move (25bps) to 3.0% after next week. We're saying get to 2.5%. We're stubborn, and we're hoping they're flexible. They had to be very flexible last year. The weakness in the economy is clear and demands more attention and less restriction. With all the risks offshore, think Trumpian tariffs, and the pain still felt onshore, there's a good argument to be made for taking policy into stimulatory territory asap. Next week's decision, with updated forecasts, sets the scene for the next 3 months, at least from the RBNZ's perspective. Adrian Orr has left the RBNZ and Christian Hawkesby is in charge. Next week's decision is a chance to differentiate from the Orr era. The economic developments since the RBNZ's last MPS have deteriorated here, and especially offshore. The justification of a more 'go for growth' focussed RBNZ has strengthened. Hawkesby (hopefully Dovesby) could easily deliver a 50bp move next week and signal another 50bps to 2.5% to come. That would set policy about right for a recovery. And it's not mucking around with 25bps moves, delaying the inevitable. A more decisive RBNZ would be viewed positively across the road (Terrace), given the difficulty the Government had in balancing yesterday's budget. 2026 will be just as hard. If, however, Hawkesby decides to play the nightwatchman, then we may just get a 25bp cut and little else. That's precisely what we don't need. And we'd argue it would show an RBNZ out of touch with our economic reality. We highly recommend watching our latest podcast where we speak to Urgent Couriers's Managing Director Steve Bonnici. Urgent Couriers feel the ups and downs of the economic cycle before most. When asked about the current cycle and monetary policy actions of the RBNZ, Steve said: "I'm frustrated (by the RBNZ's actions)...The lack of understanding of what Kiwi businesses were going through out there. The time for easing was the beginning of 2024, not the end of 2024... we're a bellwether... we've had more clients go into receivership or liquidation in the last 12 months than in any of the other cycles (back to the 1980s)". That's what we're hearing for the vast majority of Kiwi businesses. There are three scenarios for next week: The first scenario, is lifeless. The RBNZ delivers a 25bp cut and leaves the OCR track at 3.1% or slightly below at 3.0%. This would not go down well. Wholesale market traders would drop bonds, pushing interest rates higher. The pivotal 2-year swap (interest) rate would rise from around 3.15% now to 3.25% (about 10bps). Mortgage rates would barely move… if anything, it might see a reduction in discounting. The second scenario, is what we think they will do. A 25bp cut accompanied by a lower OCR track to 2.8% (or close to). Currently, most economists sit between a low of 2.5% (Kiwibank) and a high of 3%. This scenario will push most economist forecasts below 3% to a 2.5-2.75% range. The wholesale rate markets imply a terminal rate of 2.85-2.9%. We should see a (very) slight reduction in rates, supporting current mortgage rates. The variable and 6 month rates would move lower, but the 1 year and beyond wouldn't move much at all. That's not what we need either. The third scenario, is 'go for growth', generate greenshoots. A Doveish Hawkesby should put a 50bp move on the table, and an OCR track to 2.5%. The shock without Orr would see wholesale rates poleaxed. The 2-year swap rate would immediately test 3% (down from 3.15%), and ultimately fall towards 2.75%. All mortgage rates are likely to be lowered, as needed. A slightly watered-down version could be a 25bp cut and a much more dovish track to 2.5% The RBNZ's current trajectory is unlikely, in our view. Get to neutral, and get the economy moving. Ultimately, it's better to act swiftly and decisively to get lower rates feeding through faster. More meaningful cuts are required here and now.
