Economic Weekly: Travel bubble boost and RBNZ interest rate angst

The Reserve Bank of New Zealand’s (RBNZ) April Official Cash Rate (OCR) review on Wednesday is likely to be the key focus of domestic markets this week.  The April OCR review is typically a one-page statement plus a summary of the Monetary Policy Committee’s meeting, and does not publish updated forecasts.  The key focus of the RBNZ communication will keeping a lid on longer-term interest rate expectations - 10-year interest rates have jumped sharply in NZ and abroad over 2021.  This lift has been supported by improved global financial market sentiment as the end of the COVID-19 pandemic seems in sight.  And while that may be the case for the US, which could reach herd immunity within the next three months, there is still a long way to go in NZ before we can open the borders and return to normal.  The RBNZ will be wanting to avoid a premature tightening in monetary conditions in NZ.   The unexpected fall in December quarter GDP highlights the fragility of the NZ economic recovery over the year ahead.   Read our full RBNZ preview here.

Last week, NZ has finally confirmed a reciprocal travel bubble with Australia.  The announcement is likely to be some relief to those with friends and family across the ditch. It also opens the possibility for more New Zealanders to relocate back home from Australia.  However, the hopes that it would also boost the numbers relocating from further abroad were dashed somewhat, as it was revealed that some of the MIQ facilities that have been used for ‘low-risk’ Australian arrivals are not appropriate to safely manage arrivals from higher-risk countries.

For the economy, our view is that the Trans-Tasman travel bubble will have limited net impact on the economy, with the possibility of a small positive.   However, the bubble may only have limited benefits to the tourism industry. The bubble is more appropriate for those visiting friends and family, rather than holiday makers given there is the ongoing possibility of being stranded if there was a community outbreak.  Given the relative frequency of outbreaks due to MIQ breaches in both in NZ and Australia over recent months, a short-term pause or suspension of quarantine-exempt flights is likely at some point.  The Prime Minister has made it very clear that travellers need to be prepared for such a scenario.   Nonetheless, to the extent that Australian visitors here to see family may also take the opportunity to visit some of NZ’s tourism highlights, the travel bubble may help shift some of the spending towards some of the regions which have been struggling due to closed borders.  Over summer anecdotes suggest NZers preferred to holiday at the beach rather than Queenstown and the southern regions have been struggling.   However, with winter approaching, Queenstown could be set for a solid ski season with the possibility of both NZers and Australians keen to hit the slopes given the lack of other winter holiday alternatives.

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Jane Turner

Senior Economist

Originally hailing from sunny Nelson, Jane moved to Auckland to join the ASB team in 2008.  As Senior Economist, Jane's main focus is co-ordinating the team’s macro-economic forecasts.  In this key role, Jane was thrilled by the team’s twice consecutive win of the Consensus Economics Forecast Accuracy award.   

During her decade-long career in economic forecasting, Jane has gained a thorough knowledge of the New Zealand economy.  Her current focus is on New Zealand GDP growth, including both manufacturing and the construction sectors.  She has spent time forecasting most sectors of the economy, including inflation, trade, housing, labour and financial markets.

Prior to joining ASB, Jane honed her macro-economic forecasting skills at the Reserve Bank of New Zealand.  Jane is a qualified scarfie, attending Otago University and graduating with a Bachelor of Commerce in Economics with 1st class honours.  In 2014, she took a career break from ASB to travel the world and learn to snowboard.

Mark Smith

Senior Economist

Mark joined ASB in 2017, with over 20 years of public and private sector experience working as an economist in New Zealand and the UK.

His resume includes lengthy stints at ANZ and the Reserve Bank of New Zealand, and he has also worked at the Bank of England, HM Treasury and the New Zealand Transport Agency. Mark's areas of specialisation include interest rate strategy, macro-economic analysis and urban economics.

Born and bred in the Waikato, Mark studied at Waikato University where he graduated with a Master of Social Sciences, majoring in Economics.

Mark's key strengths are the ability to use his extensive experience, inquisitive nature, analytical ability, creativity and pragmatism to dig a little deeper and to deliver common sense solutions to tackle complex problems.

When not at work Mark likes to travel, keep fit and spend time with his friends and family.

Mike Jones

Senior Economist

Mike joined ASB in 2019 armed with almost 15 years of experience in applied macroeconomic and financial markets analysis.

Mike's career has been all about distilling the risks and opportunities of economic and financial market trends for business. Basically asking the "what does it all mean" question. Mike's enthusiasm and skill for drawing out practical, commercial insights from the murky world of economics has been honed over a relatively broad base of experience.

After spending the early part of his career on the tools at the Reserve Banks of both NZ and Australia, Mike had a lengthy stint at BNZ where he was NZ’s top-ranked currency strategist. His regular and topical macro research also saw him pick up several FX forecast accuracy gongs from Bloomberg.

Drawn in by the prospect of putting strategy into practice, Mike moved from Wellington to Auckland in 2013 to join Fonterra as GM Treasury Risk Management. In this role, Mike lead Fonterra’s macroeconomic research output, and was responsible for the strategy and execution of Fonterra’s foreign exchange, debt, and interest rate hedging programmes.