For 4th Quarter (December)
Provided by: Reserve Bank of New Zealand

The survey of businesses expectations showed inflation concerns falling for the 1-year and 2-year horizon. Inflation is expected to be 2.7% higher in two years, down from 3.0%.  Other expectations painted a grim picture, with hourly earnings expected to decline, the unemployment rate to rise to 5.5% by next September, and GDP growth to equal 0.3% for the year to September 2009. 

The survey also expects the RBNZ to continue lowering rates and the New Zealand Dollar to depreciate further against the Aussie and Greenback.

From the Release: "Consumer price index (CPI) inflation expectations for both the one and two year horizons have dropped significantly since the last survey. Average one-year-ahead (CPI) inflation expectations are now 2.8 percent, a fall of 0.8 percentage points since the September quarter survey. Two-year-ahead expectations have also fallen and are now 2.7 percent, compared with the previous figure of 3.0 percent. The median two-year rate is also 2.7 percent.

Expectations of quarterly changes in the CPI for December 2008 and March 2009 have both fallen to 0.5 percent. Last survey, respondents expected a quarterly change of 0.9 percent for the December 2008 quarter. These quarterly increases are equivalent to annual rates of 4.4 percent for the year to December 2008 and 4.2 percent to March 2009."

For 3rd Quarter (September)
Provided by: Reserve Bank of New Zealand

Business managers have increased expectations about inflation levels in the next few years, according to a Reserve Bank survey. Managers see inflation in the next year up 3.6%, and 3.0% in 2 years time. In the last survey managers expected CPI at 3.3% and 2.9%, respectively. Inflation in the June quarter (2Q '08) is running at 4%, up from 3.3% in the May quarter, but the Reserve Bank expects it to peak near 5% this quarter before retreating. The Bank, like many other central banks around the world, has to juggle concerns between slowing growth and high inflation. Unlike other banks, it has mainly avoided an external shock from high oil prices, though today's trade balance data wasn't encouraging. 

From the Release: "Consumer price index (CPI) inflation expectations for both the one and two year horizons have increased since the last survey. Average one-year-ahead Consumers Price Index (CPI) inflation expectations are now 3.6 percent, an increase of 0.3 percentage points since the June quarter survey. Two-year-ahead expectations are now 3.0 percent, compared with a previous figure of 2.9 percent. The median two-year rate is unchanged at 3.0 percent.

Expectations of quarterly changes in the CPI for the next two quarters have also increased. Expectations for the September quarter CPI have risen dramatically, from 0.7 percent last quarter to 1.1 percent this quarter. An increase of 0.9 percent is expected for the December 2008 quarter. These quarterly increases are equivalent to annual rates of 4.7 percent for the year to September 2008 and 4.4 percent to December 2008."

Provided by: Reserve Bank of New Zealand

Inflation is expected to increase in the next year and 2 years, according to the Reserve Bank of New Zealand's survey of business managers. Two-year-ahead expectations rose to 2.9% from the previous figure of 2.7%. The survey also showed that managers expect unemployment to increase to 4.1% by next March, it is currently at 3.6%. GDP is expected to increase 1.4% one year from now. Six months ago expectations were for a 2.3% growth rate. Also, the New Zealand Dollar is expected to depreciate against the US Dollar, with an exchange rate of US$0.74 at the end of September 2008, and to US$0.71 by the end of March 2009. Also, interest rates by March 2009 are expected to be lower.

The immediate response to the news was a rise in the Kiwi to 0.7919 against the US Dollar, testing resistance from May 5th. The Kiwi also gained on the Yen as Asian stocks gained and helped boost carry trade positions. Higher inflation expectations will also work to increase speculation that the Reserve Bank of New Zealand will keep their official cash rate at 8.25% for longer.

From the Release: "Consumer price index (CPI) inflation expectations for both the one and two year horizons have increased since the last survey. Average one-year-ahead Consumers Price Index (CPI) inflation expectations are now 3.3%, an increase of 0.3 percentage points since the March quarter survey. Two-year-ahead expectations are now 2.9%, compared with a previous figure of 2.7%. The median two-year rate is now 3.0%.

Expectations of quarterly changes in the CPI for the next two quarters are little changed. Expectations for the June quarter CPI have risen slightly, from 0.8% last quarter to 0.9% this quarter. An increase of 0.7% is expected for September 2008. These quarterly increases are equivalent to annual rates of 3.3% for the year to June 2008 and 3.5% for September 2008."

Provided by: Reserve Bank of New Zealand

"Consumer price index (CPI) inflation expectations for both the one and two year horizons are unchanged since the last survey. Average one-year-ahead Consumers Price Index (CPI) inflation expectations remained at 3.0%, and two-year-ahead expectations held at 2.7%. However, the median two-year rate rose to 2.8%. The increase in the actual CPI in the Decmeber 2007 quarter does not appear to have significantly influenced respondent expectations.

Expectations of quarterly changes in the CPI for the next two quarters are little changed. Expectations for the March quarter CPI have risen slightly, from 0.7% last quarter to 0.8% this quarter. An increase of 0.8% is also expected for June 2008. These quarterly increases are equivalent to annual rates of 3.5% for the year to March 2008 and 3.3% for June 2008."