OCR cut may not be needed- Westpac

House prices may get a shot in the arm from current low interest rates and the government’s decision to scrap any chance of a capital gains tax.

Westpac’s chief economist Dominick Stephens says house price inflation could reach 7% over the coming year from 1.3%.

Stephens said the dramatic decline in interest rates would be a game changer for the economy, which had been slowing in line with the global economy over the past year.

Earlier this month the RBNZ cut the OCR to a record 1.5% after being on holdings for more than two months, a move it said was aimed at getting “ahead of the curve” and helping to give support to the domestic economy. The central bank was ambivalent about whether any further cuts might be needed.

Westpac was forecasting the economy to grow just above 2% this year before rising.

He said low inflation had been a feature of the economy for several years and was not going away.

 

However, he said the current economic environment was making it difficult for businesses to pass on cost increases.

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