Recent economic data indicates a slightly better-than-expected unemployment picture in New Zealand, yet economists are still predicting a 50-basis point rate cut by the Reserve Bank of New Zealand (RBNZ) this month.
New Zealand’s unemployment rate rose to 4.8% in the September quarter, slightly below the 5.0% forecast set by RBNZ.
The seasonally adjusted labour force participation rate for the September 2024 quarter stood at 71.2%, reflecting a decline of 0.5 percentage points from the previous quarter and a drop of 0.8 percentage points compared to the previous year.
Additionally, increases in labour costs were lower than anticipated and are expected to ease further as we move into 2025.
“A frontloaded pace of policy easing remains appropriate for now, with another 50 bp OCR cut expected in November (to 4.25%),” ASB Bank senior economist Mark Smith said.
Kiwibank senior economist Mary Jo Vergara also commented, “The labour market has crumbled under the weight of the RBNZ’s heavy-handed interest rate hikes.”
“We continue to expect a 50-bp cut at the RBNZ’s final meeting for the year. And potentially a third 50-bp cut in February.”
Analysts believe that discussions about a 75-basis point cut are now off the table. The focus will likely remain on how the economy responds to the existing rate adjustments and whether further cuts will be necessary in 2025.
The official cash rate currently stands at 4.75%. The Reserve Bank of New Zealand is scheduled to announce its next monetary policy decision on November 27.