Mortgage pain could return before Christmas

He says last week’s RBNZ 0.25% OCR cut to stimulate the economy and the 0.50% drop in October were not needed. “The chances are high the Reserve Bank has cut interest rates too far.”

He bases his assumption that long-term interest rates could rise before the end of the year on data released less than a day after the most recent OCR fall.

The ANZ Business Outlook Survey shows the number of businesses expecting the economy to do well over the next 12 months rising from 58% in October to an 11-year high of 67%, the number expecting their own activity levels to grow lifting to 53% from 45% – also an 11-year high and the number planning to hire more staff lifting to 19% from 15%, but investment intentions easing to 22% from 20%.

Other data shows retail spending rising to 1.9% in the September quarter rather than the commonly estimated 0.6%, the ANZ Roy Morgan Consumer Confidence Index firming to 98.4 from 92.4, the average expectation for inflation in two years’ time rising to 5.2% from 5.1% and the number of businesses planning to raise their prices  running at twice the average consistent with inflation near 2.3%.