Central bank rates compared to 2002

An interesting graphic from the ANZ “Charts that matter” publication in which they look at the increase in interest rates by central banks and compare the current rate with that of 2002. Norway, Australia and New Zealand stand out for not having gotten nearly that far.

In both Norway and Australia, household debt relative to disposable income is meaningfully higher than it topped out last business cycle, increasing the potency of monetary policy:

Norway: 254% now vs. a peak of 209% in 2009 Australia: 197% now vs. a peak of 179% in 2007 New Zealand: 160% now vs. a peak of 168% in late-2008.

New Zealand OCR

• December 2007 – 8.25%

• today 5.5%

New Zealand – interest rate forecast

Inflationary pressure continues to be supported by a tight labour market, with employment above its maximum sustainable level. The unemployment rate remained very low at 3.4 percent in the March 2023 quarter. Although most indicators show that labour market pressures have eased since last year, they remain strong.

Overall, high interest rates are still needed to further slow demand. This will help to reduce upward pressure on prices, leading to lower headline inflation.

Sources: ANZ and RBNZ

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