Influential RBNZ Survey of expectations shows anticipated inflation of 2.02% in two years time, down from 2.09% in August; house price inflation expectations fall

By David Hargreaves

The latest quarterly Reserve Bank Survey of Expectations, has shown another drop in the anticipated rate of inflation over the next two years to just a touch over 2% - very close to the level of inflation the RBNZ explicitly aims to achieve.

Also falling are expectations of house price inflation - which are now being newly measured in this survey. House price inflation is expected also to be little more than 2% in two years time - which suggests that general opinion is that there will be no short-term uplift in the housing market.

Interestingly, and fairly unusually, though, the shorter term general inflation expectations - over the next year - have moved in the opposite direction to the two-year expectations, with a 10-basis-points rise to 1.87%. 

The latter move possibly represents a reaction to some perceived short term rises in actual inflation through things such as food price rises.

The Reserve Bank Survey of Expectations asks a sample of economists, business and industry leaders questions relating to perceptions and expectations on a range of economic indicators.

It is closely watched by the RBNZ itself and can be very influential in terms of the bank's thinking on interest rate moves.

The latest results, ahead of the RBNZ's latest Monetary Policy Statement and review of official interest rates on Thursday (9th), would suggest the expected 'steady as she goes' line from the RBNZ is justified.

As well as the one and two year picks for inflation, the RBNZ has now started (in the past two surveys) seeking views of longer term inflation too - as well as house price inflation expectations.

These longer term views have shown a fall since the last survey came out in August.

The survey respondents now expect inflation in five years time of 2.11%, down from 2.15 in August, while the pick for inflation in 10 years time is 2.03% down from 2.13%.

In terms of house price inflation expectations, this involves expectations of the annual percentage change in the Quotable Value Quarterly House price Index for one and two years out.

In the latest survey, the expectation is for a rise in the index over the next year of 2.31%. That's a sharp fall from the 4.2% expected in August.

As for two years out, the expected annual rate of increase has dropped from 3.46% in August to 2.01% in the latest survey.

Normally expectations don't move much from survey to survey, but on the back of some substantial increases in actual inflation earlier this year, there was a matching sharp increase in inflation expectations.

Back in February, the expectation of the inflation rate two years out jumped from 1.68% to 1.92%. That's a very big move by the standards of this survey. It then subsequently moved up well above 2% in the following survey.

However, the RBNZ didn't react either to the actual or expected rises in inflation, being prepared to 'look through' them in the belief that inflation would subside again.

The RBNZ is universally predicted to keep the OCR at 1.75% when making its next call on interest rates on Thursday, with the main point of contention whether it will move more to a 'tightening bias' with its monetary policy.

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" price inflation - which are now being newly measured in this (inflation) survey"

I didn't realize that, when did this come about ?

Looks like September....2017...according to the spreadsheet on the link. Cool. eh!

"Histoprical Expections since 1987" tab

So, house prices are expected to INCREASE by 2.31% over the next year - according to the respondents of the Reserve Bank's latest quarterly survey of inflation expectations.

It's pretty safe to assume that not too many of the survey's respondents are regulars who hang around here! As we note, a hefty majority of the regulars here think house prices are going to fall markedly in the short term - particularly in Auckland.

This underlines what has been evident for a long time: this blog is over-represented with pessimists - doom and gloom merchants. And they are NOT representative of the wider population: they create a distorted picture.

We have all witnessed how the pessimists here go bombastic in their desperation to drive house prices down. Anyone with an alternative viewpoint gets ridiculed, abused and ostracised. Such undiluted arrogance should sound alarm bells.

Personally, I'll look forward to 2018. It's set to be a year of reckoning.

As much as I'd like to, I don't anticipate picking up a cheap house in Central Auckland/Wellington........ and neither should you.


TTP, In doom and gloom there is many an opportunity. You just need to see the light. One opportunity is reported on Stuff right now. If I assume correctly this will eventually roll out nationwide. Mass rent increases? I think unlikely being that tenants are already tapped out. We have all heard it reported about how hard working School Teachers, Plumbers, Firemen and alike are just trying to get ahead by starting property portfolios! Stick to ya knitting I say:

I strongly recommend that TTP uses the current market inefficiencies and purchases multiple Auckland properties, preferably via using maximum leverage. If only we could see this occur in real-time, and then track the result over the next few years...

@Retired-Poppy Labor will be boosting support for low income families.

M13 Household inflation expectation, last released August 18. Next release 17 November. Median expected house price inflation 1 year - 0 percent., down from 3 percent Net percent expecting higher prices 39.5 percent, September quarter 2016 61 percent, September quarter 2015 70.4 percent. The M13 data is more reflective of the wider population, unlike the M14 data which is replete with bank economists, and distorted. What say the December quarter turns negative.

Clearly all of the people 'in the know' are reading the property press and not (according to ttp)

Tithepoint , Zachary Smith, Double GZ, all the same person trying to manipulate the votes. Property moves in cycles . It has boomed, and now it is going to bust. 2018 is going to be a crash, and it is right at the tipping point now with Auckland property prices going backwards. Once the momentum gets going then it will be a avalanche in panic sales crashing the market. GFC all over again. It's knowing when to get out of the market and stop being in denial .

Yes they all make the same sound..Just sold my mums house in chch. Took 8% hit.

GFC was what, a 15% correction?

"Tothepoint , Zachary Smith, Double GZ, all the same person trying to manipulate the votes."

Note that John Wheeler is not only a doom and gloom merchant, but a BS merchant too.


I am expecting the trend to continue... that is, nationally there will be a slight increase. Of course, regionally, Auckland will continue to decline. It seems that this is now a majority consensus forecast as based on the data...

Pureant, what do you mean that your mum took an 8% hit?
She lost money on what she paid for it or was the price she accepted 8% less than you wanted?
How long had she owned the home for?
What area was the home in as well?
Don’t personally know anyone in Chch that has lost money on property in the last 10 years!
Await your reply!