The Kākā by Bernard Hickey
RBNZ's dovish pivot revives rate cut hopes

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RBNZ's dovish pivot revives rate cut hopes

RBNZ holds, but more dovishly than expected; Markets strip out expectations of a hike in early 2024 & see two cuts by Feb 2025; Govt ignores Newshub pleas for help; John Key sees house prices doubling
The question now is which hint banks will take: the one from Orr that they pass on rate cuts, or the one from Assistant Governor Karen Silk saying they have some leeway to continue not passing them on. File Photo: Lynn Grieveson / The Kākā

TL;DR: The Reserve Bank held the OCR as most expected yesterday and talked dovishly about leaving the OCR high and tight through the rest of 2024.

Markets immediately lowered wholesale interest rates that drive fixed mortgage rates by about 15 basis points, putting pressure back on banks to either pass on lower market rates from the last six months, or keep the higher net interest margins to bolster profits. Governor Adrian Orr said he wanted banks to compete mortgage rates lower.

There is about 50 basis points of un-passed-on falls in wholesale rates since October that have been retained as higher bank profit margins until now, partly on doubts the lower wholesale rates would not ‘stick’ if the RBNZ switched back to hiking. Those fears have now been erased, begging the question: will the banks now cut their promotional fixed mortgage rates? Orr seemed keen. His deputy Karen Silk was less enthusiastic. (See more on that below)

Elsewhere in Aotearoa-NZ’s political economy at 9 am:

  • Broadcasting Minister Melissa Lee ignored pleas in December, January and February by Newshub’s owner Warner Bros to cut its Kordia fees and legislate to force payments for news by Facebook and Google. Newshub’s 300 staff were told yesterday morning the news operation would shut on June 30. Newshub

  • Lee and PM Christopher Luxon said there were no plans for a bailout of Newshub, and there remained plenty of diversity in news. Deputy PM Winston Peters, who has regularly refused interviews on both 1News and Newshub but talks regularly to The Platform and Reality Check Radio, described the closure as a disaster for democracy.

  • The Government passed legislation under urgency and amid heated debate last night to scrap Labour’s smoking reforms and Te Aka Whai Ora (the Māori Health Authority), which doctors and public health experts described as devastating and at odds with the evidence respectively. RNZ

  • Former PM John Key, who is retiring as a director of ANZ Group and as chair of ANZ New Zealand, said yesterday he expected house prices to double again over the next ten years, despite interest rates being high for longer. He cited high migration and rising wages. Newshub

(Paying subscribers can see more detail and my analysis on what the RBNZ decision and new forecasts mean below the paywall fold and in the podcast above. Also, FYI, Direct Messaging is now live on Substack and paying subscribers can DM me. Details on how to use it here and the announcement via Substack’s


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Will the banks now pass on 2024’s lower wholesale rates?

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The Kākā by Bernard Hickey
The latest daily snapshot of the news, detail, insight and analysis on geo-politics, the global economy, business, markets and the local political economy for citizens and decision-makers of Aotearoa-NZ.