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MNI INTERVIEW: RBNZ Set To Hike In October Despite Lockdowns

MNI (Sydney)

Former RBNZ senior economist Sharon Zollner says all the data points to an October hike.

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Robust business confidence data released on Monday is evidence that new lockdowns in New Zealand have not dented the strength of the economic recovery and pointed to the central bank going through with plans for a rate rise at its October meeting, according to a former bank official.

Sharon Zollner, the RBNZ's senior economist for eight years to 2006, said the central bank has set itself a "high hurdle of a net negative demand shock" for it not to raise rates, and there was little evidence so far that the current lockdowns had created such conditions.

"Last time they said it would take a lot for them not to raise rates at the next opportunity, so the burden of proof was not to hike," said Zollner, who is now chief economist for ANZ based in Auckland.

In July, Zollner forecast rate hikes out to the end of next year, see: MNI INTERVIEW: RBNZ To Hike To 1.75% By End 2022.


ANZ today released its Business Outlook Survey for September, based on interviews taken in the period up to September 10, which showed a seven-point rise in business confidence.

Zollner said this indicated that businesses could see the "light at the end of the tunnel" after the pandemic.

Other data, such as credit card spending and traffic movement data, was also showing that this lockdown "was not causing the same level of freak out the first one did."

The labour market continued to be very tight.


"People will be feeling a lot more comfortable that their job will be there on the other side of this because as an employer you would be made to let your workers go and assume you were going to get them back later," said Zollner, adding there was nothing in current data which would make the RBNZ hold off raising rates in October.

If the bank did not raise rates, she said, they would then "struggle to convince the market that they mean what they say they mean next time around."