ANZ economists now expect the Reserve Bank (RBNZ) will have to cut the Official Cash Rate to 2.5% as the economic recovery progresses at a slower-than-expected pace. 

They had previously forecast the RBNZ to pause at 3%. The rate is currently sitting at 3.5%. 

Recent data suggested the economic recovery, while certainly well under way, was looking a bit more stop-start than our current forecasts imply, ANZ chief economist Sharon Zollner said. 

“In addition, persistent uncertainty on the global trade front and a darker and murkier outlook for global growth is likely to dampen investment and broader risk-taking to some extent. 

“We therefore now think that the economy will require a bit more support from monetary policy to ensure that the recovery remains on track.” 

Zollner expected the RBNZ’s forecast revisions would have “the same broad flavour” in next month’s Monetary Policy Statement. 

ANZ has revised down its forecast for GDP and the housing market. 

It now sees an annual average GDP growth of 1% for 2025 (down from 1.3%) and 2.6% in 2026 (down from 2.9%). 

ANZ chief economist Sharon Zollner at ANZ Tower Albert Street. New Zealand Herald photograph by Corey Fleming 25th March 2025 

“Our forecast for annual average growth in 2027 has been revised up from 2.4% to 2.6% as stimulatory monetary policy settings eventually flow through.” 

Softer economic momentum would be expected to leave the labour market loose for a little longer, she said. 

“After ending 2024 at 5.1%, the unemployment rate is expected to lift to 5.3% in early 2025 and remain around that level for most of the year.” 

Thereafter, the trajectory for the unemployment rate was similar to prior forecasts: on a path towards 4.3%. 

House price expectations had been downgraded to 4.5% growth for 2025. 

Previously, ANZ had anticipated growth of up to 7%. 

ANZ would also be reducing expectations for CPI inflation but would wait until after tomorrow’s first quarter data was released to get an updated starting point. 

Lower inflation is likely due to falling oil prices (on the tradable side) and the economy running further below capacity (on the non-tradeable side, Zollner said. 

ANZ had not yet “centralised” the downside risks of tariff fallout or the upside risk of higher bond yields. 

Like the RBNZ, it would continue to take a wait-and-see approach. 

But trade tensions and ongoing uncertainty surrounding the global growth and markets outlooks had very likely weighed on confidence across both households and businesses, “eroding a key pillar of support to the recovery”, Zollner said. 

“As a result, we think further policy support is required to keep the recovery on track.” 

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.