Wednesday, 2nd October, 2019

The RBNZ kept the OCR unchanged last week as we expected. Nonetheless, the expectation remains that the RBNZ cuts later this year. This week, the Q3 Quarterly Survey of Business Opinion provides us with a quality steer on current economic activity and will help us fine-tune the risks around our OCR view. Recall at this stage, we expect the RBNZ to cut the OCR in November, with the risk of further cuts in 2020.

Meanwhile across the Tasman, the RBA is odds on to cut its interest rate to 0.75% tomorrow, with markets pricing in a 75% chance of a move. Assuming a cut is forthcoming, Australian yields are likely to head lower, with NZ yields likely to follow. Indeed, if we are correct, the RBNZ will soon match the RBA again, as mentioned above.