In a bid to dispel global investor uncertainty surrounding the new Labour-led coalition government’s policies, Governor Spencer said fiscal changes proposed by the new government are likely to stimulate economic growth by around half a percentage point in each of the coming three years. He further noted that the injection should help offset weakness in the important construction sector.
When combined with a lower currency, these developments are forecast to lift inflation to the middle of the central bank’s 1.00% to 3.00% target band almost a year earlier than previously expected. The Kiwi Dollar’s recent retreat also prompted the Reserve Bank to move forward its rate hike timetable, with a possible interest rate increase arriving as early as the second quarter of 2019. Investors responded to the latest monetary policy pronouncements by bidding up the NZDUSD pair to as high as 0.6971 in early Thursday trade.