Three out of three is definitely good for the Reserve Bank (RBNZ).
Results are out from the final of three quarterly surveys the RBNZ now has that look at future expected levels of inflation. And, like the results from the first two released in recent days, these latest results show that expectations of future inflation are moderating.
While such an outcome would not have been a deal maker or breaker for the expected cut by the RBNZ to the Official Cash Rate next week (taking it down to 2.25%), the survey results will give an extra level of comfort to the RBNZ Monetary Policy Committee when it makes its decision on Wednesday, November 26.
Last week we had the latest release from the 'experts' survey, the Survey of Expectations. Then on Monday of this week, we had the results from the Household Expectations Survey.
And then on Tuesday we got just the third official results from the more recently developed Tara-ā-Umanga Business Expectations Survey
The RBNZ might have been a bit nervous about these ones. Last time out this survey showed rising inflation expectations and results that set this survey somewhat apart from the other two.
And remember of course that since the previous quarterly round of surveys, actual inflation has risen to the top of the 1% to 3% target range.
The RBNZ has spent a lot of time developing this latest survey and clearly expects a lot from it in future as it has a large and broad sample size across a range of businesses and sectors.
In the event the results have come out very much as, if not better, than the RBNZ might have expected.
According to the RBNZ mean business expectations for annual CPI inflation declined across all time horizons. Mean one-year-ahead annual inflation expectations decreased from 2.53% to 2.42%. Mean two-year-ahead annual inflation expectations decreased from 2.64% to 2.39%. Mean five-year-ahead annual inflation expectations decreased from 3.16% to 2.81%. Mean 10-year-ahead annual inflation expectations decreased slightly from 3.57% to 3.56%.
The data for this quarter were obtained from 585 businesses by Research New Zealand – Rangahau Aotearoa on behalf of RBNZ. Field work for the September quarter survey was run between October 21 and 29, 2025 after release of the September quarter inflation figures.
The point of these, now three, surveys the RBNZ has, is not to get a precise reading of what inflation will be in the future - since that's never going to happen.
Rather, the point is for the RBNZ to gauge the mood on whether people see inflation increasing or decreasing. And these surveys are for the RBNZ to pick up signs of 'inflationary expectations' rising. If people expect future inflation, they will put prices up, thus increasing inflation. The vicious circle.
The upshot is that the RBNZ will have been greatly reassured by the outcomes of all three of the latest surveys.
9 Comments
2.25% isn't particularly low for the last couple of decades. It was 1.75% in 2016, 1% before Covid, and 0.25% after. I don't think we will get back to 0.25% without a global event, but perhaps 1% could happen.
https://www.rbnz.govt.nz/monetary-policy/monetary-policy-decisions
Surveys are cute, but at the next CPI update we'll almost certainly print over 3% for the year - It only needs 0.6% for the quarter to go above 3% for the year.
This suggests they've cut too far too soon, and failed to meet their single mandate.
Not necessarily, their mandate allows them to focus on the medium term, one quarter of 3% is not a failure. If it stays above 3% for most of next year then that is probably a failure.
You forgot the 4th light - it's orange and warning of a stagnant and contracting economy in 2026 with rising unemployment. This is the light that has the RBNZ really worried and cuts to the OCR are an attempt to avoid full blown deflation - not just the predicted disinflation.
However, a falling OCR also means a falling NZ dollar and this will be inflationary for all imported goods into NZ. The RBNZ are between a rock and a hard place.
Morning fellow CEOs of Australian banks, he said. With the 1 year swap rate at just over 2%, its obvious there is room to drop our 1 year mortgage rate from 4.5%. May I have your permission to drop our rate please
No, they replied, lets continue to group together and hold the line and stick to our arrangement. The 4 of us must work together to maximise profits to our Mother Ships. Don't worry about the minnow SBS offering 3.99% or the toothless commerce commission who wouldn't dare take us on.
The banks are meeting their fiduciary duty to their shareholders - to maximize return on investment - within the confines of the law. This is exactly what the Ozzy banks are doing and they are doing it exceptionally well in NZ.
Not that different to the electricity sector which also has a laser focus on maximizing profit and returns above all other considerations. In order to have something different you would need to offer public options that favor overall economic benefit above profit.
Public utilities in finance and electricity is what characterized the post WW2 economies in the West. Today, only China operates with these types of mandate.
so you're ok with price fixing and anti-competitive behaviour then?
That's not what I said. My point is that you will need to convince NZ voters to return to publicly owned and utility operated banks as an option. Likewise with the electricity sector. However, this requires higher levels of taxation and greater government engagement in the economy. It requires a government prepared to use deficits effectively to stabilize employment and the business cycle. These are things that Kiwi voters are afraid of and our economics profession is completely devoid of Keynesians. They have been erased from the conversation.
OK thanks for your feedback fellow bank CEO's, I'm fine to stay in line with the pack. We can always go to 3.99% after the OCR announcement to pretend that metric actually matters in our pricing. PS lets keep this conversation in our private WhatsApp chat group only ok.
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