Business managers and finance professionals lowered their inflation expectations in the latest Reserve Bank survey.

Respondents to the central bank's quarterly survey predict consumer price inflation of 1.71 per cent a year from now versus 1.97 per cent in the prior quarter. Two-year expectations were for inflation of 1.86 per cent versus 2.01 per cent in the prior survey.

A net 78.7 per cent of respondents believe current monetary conditions are easier than neutral. That is up from a net 64.7 per cent in the previous quarter's survey. "Easier than neutral" indicates rates which are low enough to stoke growth.

A net 80.9 per cent of respondents believe monetary conditions in one year's time will be easier than neutral.


The survey comes just ahead of the Reserve Bank of New Zealand's monetary policy statement and rate decision tomorrow afternoon. The central bank is widely expected to cut its official cash rate by 25 basis points to 1.25 per cent in a bid to stoke inflation, protect the economy from a global economic slowdown and to prevent the New Zealand dollar from rising too much.

The survey's respondents trimmed their outlook for economic growth. They now expect annual GDP growth of 2.10 per cent one year ahead, down from 2.19 per cent in the prior survey. Two years ahead, they see it lifting at an annual rate of 2.15 per cent versus 2.17 per cent in the prior survey.

The unemployment rate is seen at 4.31 per cent in one year and 4.34 per cent in two years. The latest Stats NZ data released earlier today had unemployment at 3.9 per cent in the June quarter.

One-year ahead expectations for annual growth in wages fell to 2.75 per cent from 2.89 while two year ahead expectations fell to 2.68 per cent from 2.93 per cent in the latest survey.

The September 2019 quarter survey was conducted from July 17 to July 22.