Capacity pressures easing as higher interest rates dampen demand - Quarterly Predictions, December 2023

The easing in inflation pressures in the New Zealand economy is becoming more apparent, reflecting a combination of softening demand and increased supply. Although the Reserve Bank of New Zealand started increasing interest rates in October 2021, the dampening effects on demand have become more apparent in recent months. Many households are rolling off historically low fixed-term mortgage rates onto significantly higher rates. As households pare back on discretionary spending in the face of higher mortgage repayments, the effects of weaker demand are broadening across the New Zealand economy.