Monetary policy outlook diverging

The New Zealand unemployment rate fell in Q4 and our labour market suite showed an even sharper tightening in the labour market. That’s one reason why we don’t expect the RBNZ to cut rates and why we actually expect policy tightening. Indeed, the Bank already appears to be tapering its asset purchases and we think it will end them altogether by the middle of the year. By contrast, the RBA has recently committed to a second round of quantitative easing and we think it will announce a third round in June.