An official cash rate of 3.5 per cent, which would have been base camp in previous cycles, is now being seen as the highest it will climb this time. ANZ, Westpac and the ASB are all predicting that the next move in the official cash rate will be lower.

Westpac chief economist Dominick Stephens put a 40 per cent probability on an OCR cut this year but thinks it more likely the Reserve Bank will wait until the rampant housing market has cooled and the economy has slowed before cutting the OCR. Which could be “years away”.

New Zealand had benefited from a "gigantic global disinflationary impulse", reinforced by a strong exchange rate, so that even though nominal wage rises had been weak, in real terms wage growth in the year to March 2015 was the highest for a decade, Stephens said.

The gains in household wealth from rising house prices, low mortgage rates and a migration-fuelled surge in population were all adding to the strength in household spending.

Of the big four banks only the BNZ remains outside the camp calling OCR cuts.

The Treasury yesterday reported a tax take nine months through the current fiscal year 8.3 per cent up on the same period last year, and a deficit less than a third of what it had forecast.

On April 30, the Reserve Bank said it may have to cut the official cash rate from 3.5 per cent should demand and inflationary pressures track lower than would be consistent with its inflation target.

The Reserve Bank's quarterly monetary policy statement and OCR review is scheduled for June 11.

Source: Nzherald