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The Reserve Bank of New Zealand hikes interest rates again but the RBA may not follow for some time

The Reserve Bank of New Zealand has raised the official cash rate for the second meeting in a row as it moves to counter rising inflation, but Australia is not in the same boat yet.Key points:New Zealand’s central bank has raised its cash rate by 25 basis points to 0.75 per centIn contrast, the Reserve Bank of Australia () is unlikely to raise here until 2024But bank economists are predicting that wages will rise faster than the central bank is expecting and could force its hand sooner. Some also predict 10 per cent house price falls by 2023.New Zealand’s central bank on Wednesday raised its cash rate by 25 basis points to 0.75 per cent.The bank’s second consecutive rate hike comes as it withdraws pandemic stimulus that has helped drive consumer price inflation to its highest point since 2010.It expects CPI inflation to jump above 5 per cent in the near term before returning towards its 2 per cent target over the next two years.”The near-term rise in inflation is accentuated by higher oil prices, rising transport costs and the impact of supply shortfalls,” the bank said in a statement announcing the interest rate hike.”These immediate relative price shocks risk generating more generalised price rises given the current domestic capacity constraints.”The central bank flagged further tightening given the medium-term outlook for inflation and employment.In contrast, the Reserve Bank of Australia (RBA) is sticking to its thesis that interest rates on this side of the ditch will not likely rise until 2024, despite bank economists predicting that wages will rise faster than the central bank is expecting and could force its hand sooner.Why bank economists think the RBA will move on rates by 2023The Commonwealth Bank predicts Australian house prices will be about 7 per cent higher before a 10 per cent drop in 2023.Key to CBA’s forecast is that the Reserve Bank of Australia will move on lifting the cash rate to at least 1.25 per cent by the third quarter of 2023. Australian property prices have surged more than 20 per cent in the last 12 months, but they are preditced to fall by up to 10 per cent in 2023.(ABC News: Mark Leonardi)”Interest rates become a headwind on property prices if they are rising,” the bank noted in the recent report.”That is the place we believe we are moving towards over the next two years given our expectation for the RBA to commence normalising the cash rate in late 2022.”Its report predicted that the economy will be at full employment by the third quarter of 2023, and that annual will have pushed to the RBA’s desired 3 per cent range, forcing the central bank to lift the cash rate.CBA’s report also argued the return of migration will lift demand for inner-city apartments more than standalone initially. “A lift in population growth as the international border reopens will boost the underlying demand for bricks and mortar, particularly inner city apartments,” it noted.”As such, we expect house prices to decline by a little more than apartment prices over 2023.”Reserve Bank says there may not be a rate hike before 2024But RBA governor Philip Lowe last week all but ruled out a cash rate hike in 2022, saying that wages growth would remain slow, and therefore it is unlikely the central bank will move on rates soon. RBA governor Philip Lowe says it is “still plausible that the first increase in the cash rate will not be before 2024″.(ABC News: John Gunn)”I would like to repeat a point I made a couple of weeks ago – that is, the latest data and forecasts do not warrant an increase in the cash rate in 2022,” Dr Lowe said at the Australian Business Economists lunch last week.”The economy and inflation would have to turn out very differently from our central scenario for the board to consider an increase in interest rates next year.”Dr Lowe added that the RBA board was “prepared to be patient”.”It is still plausible that the first increase in the cash rate will not be before 2024,” Dr Lowe said.Other major banks are also forecasting house prices falls in 2023.Westpac is forecasting prices to rise 8 per cent rise in 2022, and drop by 5 per cent in 2023.ANZ tips housing prices will rise 21 per cent this year, 6 per cent next and fall 4 per cent in 2023.”House prices are set to slow in 2022, and fall in 2023,” ANZ economists said in their report.”The 20 per cent-plus gains in house prices over the past year won’t be repeated in 2022.”Affordability constraints are biting, new listings have lifted strongly, and macro prudential tightening and higher mortgage rates are set to constrain lending over the coming year.”And while a return to immigration in 2022 will be a plus, these negatives are likely to more than offset that positive.”It said a “faster-than-expected rise in interest rates “increases the risk that prices slow more than we currently expect”.