VIEW: ASB Sees RBNZ On Hold, First Cut In 2025

ASB notes the slowing in the NZ labour market in its piece on the Q3 data and believes that the “hurdles” to further rate hikes remain “high” but easing isn’t imminent. It expects further moderation in the jobs market going into next year and for the unemployment rate to exceed 5% by end-2024.

• “Hurdles to OCR moves over the next few months remain high. The RBNZ will want to see inflationary pressures continue to cool and will retain restrictive monetary settings for long as necessary to hit its 1-3% inflation target. OCR cuts still look a long way off,” believes ASB. It expects the first cut in 2025 and for policy to be restrictive until at least mid-2026.
• “Q3 labour market figures confirm an easing in tight labour market conditions, with hiring falling and the unemployment rate at its highest in 2 years.” But ASB thinks that employment growth is currently too high to be sustainable.
• “Labour cost growth looks to have peaked in the private sector, with increasing spare labour market capacity set to push wage and core inflation lower over time.” “However, the risk is that elevated labour cost growth in the public sector filters through into the private sector.”