Comment: New Zealand's housing market is set for another boost tomorrow when the Reserve Bank cuts the official cash rate from its present 3.25%.
Auckland's already overheated market is being pushed harder by investors keen to get in before the new rules starting on October 1 requiring all overseas investors to have a New Zealand bank account and an IRD number.
In the regions, the housing market has been flat for months but with interest rates falling, activity - going from past experience of lower interest rates - will start to increase.
A lack of supply throughout the country has been a problem for people seeking to get a foothold in the property market. In Auckland, it seems almost impossible for first-home buyers to get into property if they need a 20% deposit to qualify for a mortgage.
Further south, a 20% deposit is not such a stretch and young people may be able to get into their own homes as people remortgage to move up a step on the ladder.
Lower interest rates could also flow through into retail shopping with larger chains sure to continue offering longer, interest-free terms. Already, interest-free terms of 50 months are becoming common. Deals are becoming increasingly common as retailers struggle to compete. People who decide to take advantage of lower interest rates to make big-ticket interest purchases will help boost the domestic economy.
The trick will be to make the purchases soon as the New Zealand dollar pushes further down in value and imports start costing more. Yesterday, the dollar moved back up to US66 cents on the back of comments from Prime Minister John Key, who retains confidence in the economy.
But increasing interest rates in the United States will push the greenback up and the kiwi down.
The question now is how low the OCR will go this year.
Westpac is predicting a new low of 2% by December with a 0.5% cut tomorrow a possibility.
BNZ senior economist Craig Ebert is forecasting a low of 2.5% for the OCR with a 0.25% cut tomorrow.
While acknowledging there was a chance of a 0.5% cut tomorrow, he believed the central bank would be happy with a smaller cut while framing a clear easing bias in its available one-page of commentary.
Exporters will benefit from both lower interest rates and a lower dollar, particularly with an increasing gap between the Australian and New Zealand currencies.
The slowing of the Chinese economy, while still brisk at 7% annually, means exports of some key products will slow to New Zealand's second-largest market.
Finance Minister Bill English says China is sitting on ''mountains'' of excess dairy product, part of a global glut, but he remains confident prices will recover this year.
Dairy prices hit a six-year low this month amid global oversupply, sending the New Zealand dollar plunging to the lowest level in six years against the US dollar.
Mr English, back from a week-long trip to China, said there was a picture of an international glut of dairy products, which would keep prices lower for some months ahead.
There has also been a slew of bad news since the central bank's June monetary policy statement.
Economic growth has proved weaker than expected, thanks mainly to the drought. Business and consumer confidence has continued to come off the boil and Canterbury's construction/housing impetus has shown clear signs of peaking and even reversing.
While many things have been moving around - some of them a boost for the New Zealand economy and inflation - the balance of the information has been negative.
This has reinforced the view the Reserve Bank will cut the interest rate 0.25% and indicate further cuts in September and October.
