How rate hikes have hurt the economy

New Zealand has copped one of the most aggressive rate hiking cycles in history, but one top economist is dubious the Reserve Bank has done enough to hurt borrowers and bring inflation down from 6.7 per cent.

The RBNZ has taken the official cash rate from 0.25 per cent to 5.50 per cent since October 2021, but is expected to end the hikes his week with the market pricing in a pause.

“We suspect after inflation has been so high for so long, it just might take a little bit more,” ANZ chief economist Sharon Zollner told Markets with Madison as she pencilled in another small 0.25 per cent increase later this year.

She said the hikes to date had pushed the average mortgage rate to 4.8 per cent. Most major banks randomly lifted their rates late last week which may have increased it further.

Zollner said the impact was targeted to those with debt but anyone without a loan wasn’t that phased, suggesting the RBNZ’s power was limited.

“If they don’t have debt, [people] are still viewing this monetary policy tightening as someone else’s problem.”

While New Zealand’s economy was in recession, Zollner said the “freak out factor” was missing for most New Zealanders, because the majority were still employed - some even earning higher wages.

Watch her discuss the damage the RBNZ’s hikes have had on the economy and whether it’s enough to warrant a pause, in today’s episode of Markets with Madison above.

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Madison Reidy is the host of New Zealand’s only financial markets show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.