QSBO Doesn’t Change Things For RBNZ

Westpac note that “today’s QSBO report doesn’t change the arithmetic for the RBNZ ahead of next Wednesday’s OCR decision. It’s clear the OCR is on the way up. Inflation is already at a multi-decade high, and today’s survey suggests that further substantial price rises are in the works. We continue to expect that the RBNZ will deliver a third consecutive 50bp hike next week. Going forward, the key area to watch (in addition to inflation) is whether signs of cooling demand are becoming more pronounced. In addition to today’s drop in business confidence, we’ve already seen household confidence fall sharply. If that translates to softer demand and a softening in the labour market, the RBNZ is likely to sit up and take notice. On this front, we are forecasting softening consumer spending and economic growth through H2 2022, and today’s report is certainly consistent with that.”