News yesterday that two economists are now picking Reserve Bank Governor Alan Bollard to lift interest rates again next year will send a further chill down the spine of some homeowners.

The property sector was already unsettled this week by data from Barfoot & Thompson, Auckland's biggest agency, which indicated the average house sale price fell more than $14,000 last month.

Economists at Westpac Bank and Infometrics - both picking a hike of 50 basis points by June - remain outside the consensus view. But even their more conservative colleagues are pushing the prospect of rate cuts further into the future.

Like adding ice to a good single malt, there's something that's just not right about interest rates rising as the housing market falls.

In the United States, the Federal Reserve has pulled a high-speed u-turn and started cutting rates in the hope of avoiding a recession.

Alan Bollard isn't expected to do much more than change gears next year.

Stronger than expected GDP growth and ongoing inflation fears - driven by booming dairy prices and the tightest job market in 40 years - are making it tougher to pick which gear he'll choose.

The unappealing prospect of rising rates in a falling housing market is a symptom of the multi-headed beast the New Zealand economy has become.

The housing sector has little in common with the export sector, which in turn bears little resemblance to the New Zealand stock market.

The next few months look set to be confusing but fascinating.

A showdown - which has been looming for some time between the export sector and the domestic sector - may be coming to a head.

The ideal result would be a points victory to the exporters - correcting the current account deficit but not knocking out the domestic economy to the point where people start losing their jobs and their homes.

But the intensity of the opposing forces may mean a rough ride ahead.

Westpac economists predict the annual rolling average of house price inflation will have hit nil by the end of 2008. Twin pressures of lower net migration and higher interest rates are finally coming to bear.

Meanwhile, the end of 2008 looks likely to be something of a high-tide mark for world dairy prices, which have more than doubled in the past year and are pushing hundreds of millions of dollars into the economy.

On the sidelines - although not immune to the fallout - sits the stock market. Without Fonterra in its ranks, or any significant tourist industry presence, the market is a poor reflection of New Zealand's economy.