Bollard may give upbeat assessment of NZ in speech this week

Monday 13th February 2012

Reserve Bank of New Zealand Governor Allan Bollard may give an upbeat view of the economy this week in a speech to a Trans-Tasman Business Circle luncheon titled, “Could We Be Better off than We Think?”

The title of the Friday speech was confirmed by a central bank spokesman.

“The title certainly hints at a counter-weight to the barrage of negatively tinged reads we’ve become accustomed to over recent months, as the world looked a bit wobbly,” said Doug Steel, economist at the Bank of New Zealand, in a note.

The speech will be Bollard’s second this year, after he last month told a Canterbury business audience New Zealand’s financial system had weathered both Europe’s deepening debt woes and the Christchurch earthquakes.

He also flagged the Canterbury rebuild and rising bank funding costs as pressures on future monetary policy decisions.

Bollard left the official cash rate unchanged at the historically low 2.5 percent at last month’s review. BNZ economists predict the Reserve Bank will begin to hike rates later in the year, with the OCR gradually moving back up to 4.25 percent by the end of 2013.

In the central bank’s December Monetary Policy statement, Bollard forecast economic growth will accelerate to a 0.7 percent pace in the first quarter, and expanding at 0.8 percent in the second two quarters as the Christchurch rebuild takes off.

Last week, the Reserve Bank of Australian left is cash rate unchanged at 4.25 percent following a cut of 25 basis points each in November and December, and surprising analysts who wire picking more easing.

“The RBNZ Governor is no doubt looking at very similar things that persuaded the RBA to sit back last week,” Steel said. “Even so, we doubt it will be enough to kick domestic short end rates out of their domestic ranges.”

Traders are betting Bollard will hike the benchmark interest rate 10 basis points over the coming year, according to the Overnight Index Swap curve.

Last month, Bollard announced he will stand down as governor when his term finished in September. He was appointed as governor in September 2002.

(BusinessDesk)

BusinessDesk.co.nz

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