There is near-unanimous support on NZIER's shadow board for Reserve Bank governor Graeme Wheeler to raise the official cash rate again tomorrow, to 3 per cent.
Ahead of every review, the Institute of Economic Research asks a panel of nine economists and businesspeople to allocate 100 points across possible interest rates, to indicate in a probabilistic way what they think is the appropriate level for the OCR. The results are then combined to give a collective view of what the Reserve Bank should do - not what it will do.
"This round the shadow board's average recommended interest rate is 2.95 per cent, up from 2.77 per cent in the March round six weeks ago," said NZIER economist Kirdan Lees, who set up the board.
"The recovery in the economy is broadening. Households are starting to spend more after years of putting many decisions on hold following the global financial crisis. Businesses are buoyant and are returning to normal investment patterns. The Christchurch reconstruction effort continues to leap ahead."
Stronger consumption and investment would lift wages and prices, he said, and a rate hike now would help to dampen inflation.
"There is some support for holding rates to acknowledge the risks of a sharp drop in Auckland house prices or a downturn in China's economy that would significantly impact on global markets and the New Zealand economy."
The only panel member for whom it is a 50:50 call whether to raise the OCR again this time is MYOB executive director Scott Gardiner, though he acknowledged that business confidence at a 10-year high was boosting construction and manufacturing, and putting sustained pressure on wages and prices.
Professor Viv Hall of Victoria University said non-tradeables inflation continued to trend upwards, and offsetting effects from the high exchange rate seemed to be concentrated primarily in retail sectors.
"Increased pricing intentions and cost expectations in non-retail sectors are potentially a strong signal of further increased pricing and cost pressures. I've reverted to a small [20 per cent] downward risk probability, and hence no change from 2.75 per cent, to reflect potential risks associated with the Ukraine and associated European countries."
Bank of New Zealand economist Stephen Toplis said: "Interest rates need to rise to constrain domestic demand but one can't completely ignore the current level of the New Zealand dollar relative to commodity prices."