New Zealand signals cash rate rise, could Australia follow?

author-avatar By on May 27, 2021
New Zealand signals cash rate rise, could Australia follow?

Yesterday, the Reserve Bank of New Zealand (RBNZ) left its cash rate on hold at 0.25% but said it could increase the rate in 2022.

RBNZ is 'conditionally projecting' its first 25 basis point rate rise to 0.50% by mid-2022, and up to 150 basis points (1.50%) in hikes by 2024, bringing the maximum cash rate to 1.75%. 

However, this is contingent on a few projections: annual GDP growth of 3.9% by late 2022; a 4.3% unemployment rate by the "second half of the projection"; inflation above 2% "by the end of the projection"; and annual wage growth of 2.6% "later in the projection", among other factors.

RBNZ said these figures are partially reliant on increased economic activity, fewer COVID restrictions, and a strong vaccination rollout.

In Australia, Reserve Bank Governor Dr Philip Lowe has maintained that the cash rate here will stay at 0.10% until 2024, however some experts have predicted the RBA will drop this deadline before then.

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

RBNZ Governor Adrian Orr's address yesterday seemed to echo Dr Lowe's latest statements on monetary policy.

"The Committee agreed to maintain its current stimulatory monetary settings until it is confident that consumer price inflation will be sustained near the 2% per annum target midpoint, and that employment is at its maximum sustainable level," Mr Orr said.

"Meeting these requirements will necessitate considerable time and patience."

Westpac NZ acting chief economist Michael Gordon said RBNZ's projections could be a little optimistic.

"It signalled that the Official Cash Rate could start to rise from the second half of next year, much earlier than our forecasts suggest," he said.

"It expects a significant lift in wage growth, even as the unemployment rate struggles to move lower.

"We recognise that our point of difference with the RBNZ hinges on the degree of capacity in the labour market, something that’s inherently difficult to judge."


RBNZ's 'overnight cash rate' projections

House prices also on the radar

RBNZ yesterday also highlighted house prices as one of its 'key factors' in its economic projections.

In March, RBNZ, which also acts as prudential regulator, introduced a variety of loan-to-value ratio (LVR) restrictions in an attempt to rein in its house price growth.

It has also stopped investors being able to claim mortgage interest as a tax deduction against rental income, while also tightening capital gains tax criteria.

Due to these policies, RBNZ expects house price growth to slow from 21.5% in 2021 to flatline in 2022, and then rise 'modestly' by 2.6% in 2023. 

"This slowdown is both larger and faster than expected in the February Statement," the Bank's statement said.

"This is due to the Government’s housing policy package announced in March that is assumed to reduce housing demand from residential property investors and support housing supply.

"No further significant house price increases are expected until the latter half of the projection, when moderate house price growth returns."

However, because of this, RBNZ is predicting a slowdown in 'consumption', also called the wealth effect

"Consumption is projected to be weighed down by the impact of weaker house price growth on consumer confidence and wealth accumulation, although a more resilient labour market provides some offsetting support," the Bank's statement said.

Experts here have said Australia is 'unlikely' to follow New Zealand's path to rein in house prices, with price growth here comparatively low at 3.6% through 2020.

Photo by Martin Bisof on Unsplash


The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure,, Performance Drive and are part of the Firstmac Group. To read about how manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Harrison is's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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