- Geoff Bascand, RBNZ Deputy Governor
The largest increase in migration in a century has helped support New Zealand's economic growth, but has also boosted the labour force, keeping a lid on wage inflation, Reserve Bank Deputy Governor Geoff Bascand said. Slack in New Zealand's labour market has been the main factor to the RBNZ's decision to loosen monetary policy. In March the RBNZ cut the OCR to a record-low 2.25% in bid to spur inflation, which was at a more than 15-year low in the December quarter. Bascand said recent weak consumer inflation was largely due to falls in commodity prices and the strong New Zealand Dollar. Bascand also noted that the higher productivity of the economy from rapid growth in the labour force also explains some of the remaining weakness in inflation. Annual inflation was just 0.1% in 2015 and is predicted to have climbed to just 0.4% in the three months ended March 31. The March CPI data is due for release on April 18 and will help markets assess whether the RBNZ will cut the official cash rate on April 28 or hold off until June 9. There is a 55% probability that the bank will lower the OCR to 2% this month, and a 45% likelihood it will remain at 2.25%. New Zealand has been experiencing record high levels of immigration over the last few years, as the nation's economy has been relatively strong. While the growing population has boosted demand for goods and services, it also adds to supply in the labour market, which Bascand says can have an "ambiguous" impact on inflation.
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