Tauranga Property Investors' Association

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31-01-2014

RBNZ governor confirms rate rise

Mr Wheeler said on Friday the New Zealand economy was growing too fast to keep inflation in check, which was why interest rates needed to rise soon.

The economy grew about 2.7 percent a year during the past two years, compared with its non-inflationary capacity of a little over 2 percent.

On Thursday when he left the Official Cash Rate (OCR) unchanged at its record low of 2.5 percent, Mr Wheeler said the economy is now growing at about a 3.5 percent annual pace.

Mr Wheeler said a fall in house prices was unlikely but could happen if households became less able to pay their mortgages.

Rising house prices have been one of Mr Wheeler's greatest concerns. He said the situation was made worse by household debt levels at about 150 percent of household disposable incomes, and those debt levels were rising further.

Radio New Zealand news item

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