New Zealand’s National Party emerged from the General Election with the largest number of seats at 58, followed close behind by Labour at 45, New Zealand First with 9, Greens with 7 and ACT at 1 – resulting in no clear majority and thus a hung parliament.
Economists tipped the OCR would remain unchanged at the record low rate.
“The central bank may reiterate that its monetary policy to remain accommodative for a considerable time“.
The Reserve Bank has kept its benchmark interest rate on hold and says it will stay that way for the foreseeable future. “Numerous uncertainties remain and policy may need to adjust accordingly”, Mr. Spencer said.
New Zealand currency fifty, dollar note (file picture).
The RBNZ is unlikely to hike rates earlier next year and may not do so until 3Q18.
He said the economy was growing at a reasonable rate on the back of strong immigration and commodity prices. The trade-weighted index rose to 76.11 from 75.85 yesterday.
Mr Spencer said house price inflation continues to moderate due to loan-to-value ratio restrictions, affordability constraints and a tightening in credit conditions.
This hesitation and ambiguity is a major component of the New Zealand Dollar’s current weakness, weakness that is likely to continue until at least October.
Economists had expected the bank to play it safe and stick largely to the language of its previous statements at Mr. Spencer’s debut as acting governor, especially with the bank’s mandate under renewed political scrutiny. Indeed, Winston Peters, leader of the New Zealand First Party and kingmaker in this equation has since stated that no decisions will be made regarding coalition partners until the 7 of October, when the final voter tally is counted. “The outgoing Governor stated last week that he “… would have preferred a lower exchange rate” through his term, but caveated this with the comment that “… to a large extent the high exchange rate reflects the favourable performance of the economy, high terms of trade, and weakness in the U.S. dollar”.
The new government will also decide on whether to make Mr. Spencer’s position as RBNZ chief permanent or replace him after six months in his role as acting governor.