OECD said the persistence of inflationary pressures within New Zealand would limiting the flexibility for monetary policy easing this year.
According to the 2024 Economic Surveys report, “Inflation is likely to be persistent,” thus constraining the scope for lowering the OCR in 2024. OECD recommends maintaining OCR at 5.5% until there is tangible evidence of inflation moderating to the middle of RBNZ’s target range.
In addition, OECD emphasizes the significance of fiscal prudence and urges the government to adopt measures aimed at gradually reducing the fiscal deficit to attain budget balance. Specifically, it advocates for the implementation of operating allowances and tax policies geared towards fiscal consolidation. OECD emphasizes, “Any tax cuts should be fully funded by offsetting revenue or expenditure measures.”
OECD projects modest economic growth for New Zealand, with expectations of a 0.8% expansion in the year through December 2024, followed by improvement to 1.9% in 2025.
