Reserve Bank breakfast briefing summary


Priority One was pleased to host Yuong Ha, Chief Economist and Head of Economics at The Reserve Bank of New Zealand last week. Yuong shared the current outlook on New Zealand’s economic activity and discussed the bank’s role in stimulating economic recovery.

Yuong explained the context of the Reserve Bank’s approach to monetary policy and recovery from the pandemic alongside its stated goals to maintain employment and keep inflation within the 1-3% band.

The key messages were:

  • The New Zealand economy has fared well compared to international counterparts. While GDP has dropped, the effect on unemployment has been relatively low.
  • The wage subsidy was beneficial in cushioning the blow of the economic downturn and maintaining activity.
  • RBNZ expects unemployment to rise to 6.5% as the workforce transitions; unemployment is currently at 5.3%.
  • RBNZ has a policy of reducing interest rates while economic indicators are relatively weak.
  • Yuong acknowledged the effect that low-interest rates are likely to have on housing markets and noted retail banks’ role in managing lending risk.
  • The full impact of Covid-19 has not been felt to its full extent in the tourism industry. As the tourism season approaches, these impacts may become more evident.

“It is really pleasing to see that the relatively positive outlook for the Western Bay economy is mirrored by the national economy”, said Chloe Thyne, Data and Insights Manager at Priority One. “It is a swift bounce back from the lockdown we had earlier in the year, and unemployment remains much lower than the forecasts made under uncertain conditions.”