Summarised by Centrist
Recent labour data shows unemployment increased to 4.6%, the highest rate in three years. Nearly half of the newly unemployed are between the ages of 15 and 24. Unemployment rates for those aged 15 to 19 exceed 20%, while for those aged 20 to 24, the rate is 8%.
Some economists are concerned about potential lasting economic damage and “wage scarring.”
Kiwibank’s chief economist, Jarrod Kerr, called next week’s OCR announcement as “the economist’s Superbowl.” There is a lot of anticipation there will be a rate cut by the Reserve Bank.
Although the Monetary Policy Committee previously indicated plans to hold the OCR at 5.50% until August next year, there is increasing pressure for an earlier reduction.
BNZ economists also support an immediate rate cut, though they caution that “stronger than expected labour data could prompt some traders to back away from predicting imminent interest rate cuts.”
ASB’s Mark Smith warned, “The labour market looks set to significantly weaken from here, and this could cause longer-term economic damage if the RBNZ maintains as much pressure on the monetary policy brakes as it does currently.”
