Housing market has bank looking on gloomy side

Reserve Bank Governor Alan Bollard managed to surprise the markets yesterday after all.

Not with his decision to keep the official cash rate on hold at 3 per cent. That was a done deal even before the Canterbury earthquake.

But the extent of the downward revisions to the Reserve Bank's forecasts for economic growth, and the outlook for interest rates, raised a lot of eyebrows among market economists.

"Things are tough. Things are scratchy," said ANZ National Bank chief economist Cameron Bagrie.

"But I'm not convinced this economy is going to grow at 2.5 per cent [a year] for the next three years. That's a little bit too downbeat."

He remains of the view that next year will see 4 per cent growth.

Westpac economist Dominick Stephens said the flow of economic data since the bank's June statement had been weaker, but not nearly to the extent that would justify the Reserve Bank's change of view.

To read the full NZ Herald article, click here

Posted: 17 Sep 2010

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