The Canterbury Rebuild (and NZ monetary policy)
On Friday, following the previous day’s OCR, I had a catch up with the Head of Forecasting at the RBNZ.
The price action suggested that market had seemed somewhat confused by what the OCR review and the Governor’s maiden speech on Friday morning was telling them. The OCR was perceived as hawkish while the speech, some 24 hours later, elicited a dovish reaction.
Amongst many things discussed came the statement that the RBNZ viewed the rebuild as ‘real’ and for me that statement is really the kicker given the last paragraph of the OCR statement…
|”While annual CPI inflation has fallen to 0.8 percent, the Bank continues to|
|expect inflation to head back towards the middle of the target range. We will continue to|
|monitor inflation indicators, such as pricing intention and inflation expectation data,|
|closely over coming months.|
What they are saying here is that they expect inflationary pressures to come out of Canterbury as firms compete for (tight) labour and materials and that they are watching closely.
For a gauge on the timing of any such effect I thought this graph in this week’s ANZ’s Market Focus was interesting.
The chart clearly suggests that building activity died in Canterbury the year after the quake (as you’d expect) but now the rebuild is becoming FULLY UNDERWAY.