ASB has revealed a positive outlook for the remainder of 2016, with Gross Domestic Product growth tipped to be near the 4% mark, according to the latest ASB Quarterly Economic Forecasts.
ASB chief economist Nick Tuffley
says the key influences outlined in the bank’s February report remain key drivers in propelling the country’s overall growth.
“Strong population growth, lower interest rates and, since its highs of 2014, the weakened NZD continue to work to drive growth,” Tuffley says.
ASB has also changed some of its fixed rates, effective today.
Its new 2 year 'special' fixed home loan is down 20 bps from 4.39% to 4.19%, according to interest.co.nz., making it the equal lowest two year fixed rate in the market.
But the bank has also raised its special one year and 18 month rates by 10bps from 4.15% to 4.25%.
The report also forecasts the construction industry will regather momentum after slowing when the Canterbury rebuild hit its peak. The sector continues to be driven by strong population growth nationwide, as Aucklanders relocate to other regions.
Further interest rate cuts
Short term interest rates are currently sitting at historical lows and are likely to dip further, according to the forecast.
Developments since the March cut have tipped the odds towards further OCR cuts and ASB economists, in the report, think it is likely the RBNZ will cut the OCR by 50bp by August, 2016.
“However, with the inflation outlook arguing for lower interest rates, but the housing market heating up, there is a growing risk that the RBNZ will widen its investor lending restrictions to the rest of the country and come down even harder on Auckland,” Tuffley says.