By BRIAN FALLOW
Second marriages have been called the triumph of hope over experience.
The Reserve Bank's conduct of monetary policy lately looks like the reverse.
Its hope, indeed its forecast, is that this economic cycle will evolve quite differently from the last one, with the export sector stronger and the domestic economy more subdued than last time.
It is forecasting that interest rates will peak a good 2.5 percentage points lower than in the last cycle, depending in part on the theory that households are now more sensitive to interest rate rises because they are carrying much more debt. It hopes so.
Partly for that reason, but also because of migration flows, it does not expect the housing market to be the inflationary hotspot it was last time. At least it hopes not.
And it is entitled to hope that Finance Minister Michael Cullen will be as good as his word and run fiscal policy in a way that moderates rather than amplifies the cycle (although his recent comments about front-loading spending commitments are a little ominous on that score).
Such are the hopes.
But wariness born of experience appears the more potent factor.
The experience of the current cycle so far is in some respects disconcertingly similar to the early stages of the last one.
The bank points to similarities in the pace of the recovery (especially the rip-roaring acceleration in the second half of last year) in domestic spending and in the trade position.
In addition, the 1998 recession was a lot shallower than the one in the early 1990s, so there was less spare capacity in the economy coming out if it, and there has been no equivalent of the Mother of All Budgets constraining demand.
The experience of the last cycle was that the Reserve Bank underestimated the inflationary risks at first and was too slow to tighten.
The horse bolted, and reining it in again was a brutal business, especially for the export sector.
That experience, which no one would want to repeat, helps to explain the aggressive and pre-emptive tightening, 2 percentage points in six months, we have seen.
But we are now in a phase where the data is mixed. Some, like retail sales and housing starts, suggest higher interest rates have already started to bite.
The bank is still foreshadowing further interest rate rises over the next year.
It is talking about another half a percentage point or maybe three-quarters of a point, but at nothing like the fast and furious pace of the past six months.
But it is more than usually emphatic that it is a highly conditional event unfolding as it forecasts.
That means growth resuming a robust pace and the dollar responding to an improving balance of payments position.
"Wait and see" is now the watchword.
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