A panel of nine economists and business leaders believes the Reserve Bank should leave the official cash rate at 2.5 per cent when it reviews it on Thursday, but with somewhat less conviction than they did six weeks or three months ago.

The members of a "shadow board" set up by the New Zealand Institute of Economic Research are asked to give a percentage value of how much they prefer each interest rate the Reserve Bank might go for.

The results are then aggregated to give a collective view which serves as an indicator of how convinced they are of the preferred option and how they see the distribution of risks around it.

The panel is 63 per cent in favour of leaving the OCR on hold, down from 68 per cent before the April review and 68 per cent at the last monetary policy statement, in March.


If the rate were to be moved they see a much stronger case for a cut than an increase, and more so than they did last time.

"This shift reflects higher global economic risks, particularly in Europe, the economy moving sideways, fiscal headwinds and low inflation," NZIER's head of public good research, Kirdan Lees, said.

As in the two previous polls the two board members favouring outright a cut to the OCR are Steel & Tube chief executive Dave Taylor and NZIER principal economist Shamubeel Eaqub.

Eaqub has become more dovish. Whereas he favoured a 50 basis point cut in April, his preferred option now is for a full percentage point off the OCR.

Bank of New Zealand head of research Stephen Toplis's preferred option, by an unchanged 60 per cent, is to leave the OCR at 2.5 per cent, but he has switched his next best view from a hike to a cut.

On balance Toplis believes the economy is on a modest growth path.

But he also believes that the potential growth rate, founded on trends in workforce growth and labour productivity, is relatively low, which means inflationary pressures will pick up at lower rates of economic growth and unemployment than in the past.

"Accordingly, we still believe that, over the medium term, there is a greater risk of interest rate hikes than cuts, albeit that it looks highly unlikely that the New Zealand cash rate will push higher until early to mid next year," Toplis said in a preview of the OCR decision.

If Europe imploded, all bets would be off and it might then be appropriate for the Reserve Bank to cut rates aggressively, Toplis said.

"But, we believe the bank would be well advised to be reactive rather than proactive," he said.

"If it were to cut rates as an insurance measure then it would reduce its ability to do anything meaningful in the event it needed to in the future."