VIEW: ANZ writes: "The continued slide in......>

RBNZ: VIEW: ANZ writes: "The continued slide in inflation exp. poses a key risk

to the inflation outlook. Low inflation exp. reinforce low inflation into the

future & mean higher real interest rates, making life harder for the RBNZ. The

RBNZ should react aggressively if surveyed inflation exp. start to slide, as

they have done in the past. Survey respondents continue to expect subdued GDP

growth, with one- & two-year-ahead exp. broadly stable around 2.15%. This is

markedly lower than the RBNZ's Aug MPS forecasts, but roughly in line with our

own. House price inflation exp. jumped in Q4, with 4.5% y/y expected

1-year-ahead. In one year's time, the OCR is exp. to be sharply lower, at 0.61%.

It is worth noting that respondents' inflation exp. are predicated on this lower

OCR - so even with an OCR at 0.61% in one year's time, respondents expect low

inflation. The RBNZ will need to do more than this to see inflation exp. lift.

All up, the dip in inflation exp. makes the RBNZ's job harder & highlights the

risk that inflation will continue to fall short, supporting our call for an OCR

cut tomorrow and further cuts next year. The RBNZ have this survey data early,

so will have incorporated it into their policy deliberations."