Inflation pressures seem to be slowly but surely losing their strength, according to the latest business confidence survey.
ANZ’s April survey showed a net 44 percent of respondents expect the economy to deteriorate this year, barely changed for the past three months.
Inflation expectations eased slightly, from 5.82 to 5.7 percent last month, while those expecting to raise prices eased to its lowest level in two years.
ANZ chief economist Sharon Zollner said the Reserve Bank (RBNZ) was getting the bite it wanted from higher interest rates.
“That said, it’s far from ‘job done’ with the proportion of firms experiencing high costs and intending to raise prices still problematically high.”
There was a question about how far pricing intentions could fall if cost expectations remained high, but looking overall at responses on wages, the expectation was for an easing in pay increases in the coming year, she said.
Employment expectations turned positive, but that was seen as a reflection of more people available for work than an improved demand for workers.
Export, investment, and profit expectations all remained negative.
Zollner said the RBNZ would be “encouraged” to see the continued fall in the inflation indicators, which it would have been expecting as a result of the rises in the official cash rate.
Those indicators would be looked at to see how quickly inflation was headed back into the 1-3 percent target band, and if the time is approaching for the rate rises to stop, she said.
“There are risks on both sides: inflation could get stuck north of the target band, or global markets could deliver a side-swipe, for example.
“But the overall message from this month’s survey is ‘on track’.”