The speech committed to bring operating expenditure back down to near 30% of gross domestic product in coming years and promised the May budget would contain “no-frills”. It was, of course, good news for workers.
This was not such good news for the central bank, which had forecast a slightly higher unemployment rate and slower wage growth. Labour market data released on Wednesday showed the unemployment rate holding on at 3.4% and private sector hourly wage growth up to 8.2% from 8.1%. This was lower than forecast by the RBNZ, but not enough on its own to declare victory. Recent data offers some signs that higher rates are cooling inflation but not to the extent that the RBNZ will be deterred from one last 25 point hike to reach 5.50%.Ĭonsumer price index data for the first quarter of 2023 showed a decline in the rate of inflation-at 6.7% annually, down from 7.2%-although the improvement was mostly imported.
The Reserve Bank of New Zealand (RBNZ) will likely end its rate hike crusade this month with one final increase to the Official Cash Rate in its May Monetary Policy Statement. The path of future monetary policy will be partly decided by whether Chris Hipkins’ makes good on his promise to deliver a no-frills Budget that doesn’t exacerbate inflation.
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