The Reserve Bank of New Zealand's monetary policy statement met expectations, but some aspects of it were less optimistic, given the current low level of interest rates, Westpac said in a Friday report.
At high levels of interest rates, gross domestic product (GDP) growth was expected to be 2.8% in 2026 and 2027, the report said.
However, despite stronger economic data, the central bank lowered its growth forecast for the second half of the year to 1.2% from 1.5%, which shows that the output gap will not fully close till the end of 2028 and the time to reduce unemployment is much slower than expected, the report added.
The RBNZ less optimistic view despite low interest rates also shows that there is no urgency to raise rates, Westpac said.
If growth does reaches 2.8% at low interest rates, it will reduce unemployment and lift household income, increasing the demand for housing and house prices, Westpac added.
Data has also showed that with 2.8% growth, house prices will rise "at least somewhat."
Flat house prices would however reflect a year-on-year GDP growth closer to 1.5%, leading to a likelihood of a rise in the unemployment rate and of the output gap not closing.
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