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Consumer spending is weaker and job ads are fewer but business and consumer confidence improved and the business PMI index ticked upwards. Commodity prices, food prices and the Global Dairy Trade index are also on the rise while house prices remained firmed. The strong housing market is one of the main factors preventing a more aggressive move from the RBNZ.
New Zealand's economy hasn't weakened enough to warrant more than 25bp rate cut but the exchange rate, which is their primary cause for concern has only strengthened. If the RBNZ wants to be proactive, they could send a strong message to the market with a 50bp cut but we believe they will go for a 25bp point move (to avoid invigorating the housing market) with a warning of more to come.
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