The announcement by the Reserve Bank of New Zealand (RBNZ) to leave the Official Cash Rate (OCR) at 3% on Thursday 9th December 2010 has once again confirmed that the previously projected forecasts in the growth of the NZ economy have fallen short.

 

“The pace of economic growth appears to have moderated. Corporate investment intentions are now below average. Household spending also remains weak, with household credit still flat and housing market activity slowing further.”

 

Allan Bollard made the comment that house prices may decline a little further in the near term and the continued household and business caution suggests that the low OCR and subsequent interest rates are not having the desired stimulatory effect that has been experienced in the past.

 

From our experience the housing market is still struggling and the general trend in the REINZ statistics shows that the total number of country wide sales is lagging behind last year. Recently released statistics for this year show that sales were down 3903 in October from 4323 sold in September, however despite the low sales volume the median price stayed firm at $350,000. Recent commentary from real estate agents would suggest that there has been an increase in the number of listings but we are yet to see if this will translate to an increase in sales and whether there is a positive negative impact on prices.

 

The general feel is that the OCR will continue to stay at a lower level which is now looking likely to be at least to the middle of 2011. The fact that the RBNZ has kept the OCR at 3% would suggest that we can also expect to see a similar continuation of the low interest rates we are currently experiencing.

 

To view the full statement released by RBNZ please click here.
 
Source: The Reserve Bank of New Zealand – News Releases.