ANZ economists would be calling for a 50 basis point cut in the Official Cash Rate to 2.0% if it wasn't for the Christchurch rebuild.
Following today's unexpected jump in the unemployment rate to 7.3% in the September quarter household labour force survey, from 6.8% in June, markets moved to price in an 80% chance of a cut in the OCR by June 2013, up from a 60% chance before the release.
Following the figures, ANZ economist Sharon Zollner said were it not for the Christchurch rebuild, ANZ economists would be calling for 50 points of cuts to the OCR.
"But the rebuild effort is set to put huge strain on the economy, and the Reserve Bank will require more information on the implications for the pricing side of the economy before they are willing to cut," Zollner said.
"We think they will open the door to a cut in December, but wait until March to assess a broader range of economic indicators to corroborate or rebut the HLFS before deciding," she said.
"There is a risk of a second rise in the unemployment rate in Q4 as changes in benefit rules lift the participation rate, and the RBNZ would find it hard to resist the pressure should that pan out. For now, we are still calling no change in the OCR."
Meanwhile, ASB economists said they still saw the chance of a cut as limited, and that such action would probably be prompted by offshore events like a financial crisis emanating from Europe, rather than domestic factors.
"The domestic story, despite today’s data (and taking into account the recent volatility in employment data), remains one of gradual recovery. Given the patchy nature of that recovery, and offshore risks, we continue to expect the OCR to remain on hold until September 2013," ASB economists said.
BERL economists said that without changes to policy settings, "the short-term picture is not pretty, with our models projecting even further rises in jobless numbers."
"With the export sector in serious strife and little demand from the domestic economy, the wisdom of the government pursuing its budget surplus target must be seriously questioned," BERL chief economist Ganesh Nana said.
"A change of course is urgently required if New Zealand is to avoid yet another damaging recession," he said.
"Policy targets need to be refocused on resuscitating the export sector, bringing the current account deficit under control and avoiding deflation."