Ray White chief economist Nerida Conisbee said the RBNZ was continuing its measured approach to monetary policy easing as economic conditions remain challenging.
“This latest reduction comes as inflation increased slightly in the March quarter to 2.5 per cent, however, it is still comfortably within the RBNZ's target band,” Ms Conisbee said.
“The central bank, however, faces a complex environment with the government simultaneously reducing spending from $2.4 billion to $1.3 billion as economic growth slows below previous forecasts.
“The decision reflects the RBNZ's balancing act between supporting domestic recovery and managing external pressures, particularly with US tariffs affecting New Zealand's second-largest export market. Annual net migration has also dropped dramatically from 113,700 to just 32,900 people, reducing population-driven demand pressures.”
After a rate cut, Ms Conisbee said banks typically pass on the cuts within weeks, providing cheaper home loans and reduced monthly payments for borrowers.
“With the national median house price holding steady at $790,000 and available listings up 10.9 per cent to 36,870 properties, lower borrowing costs should improve buyer activity, particularly supporting first-home purchasers,” she said.
“Strong-performing regions like West Coast (+11.5 per cent price growth) and Southland (+5.6 per cent) become even more attractive relative to correcting metropolitan markets like Wellington (-6.2 per cent) and Auckland (-6.0 per cent).
“The rate cut provides monetary stimulus to offset fiscal tightening, supporting economic activity as the government pursues its return to surplus by 2029.
“Budget 2025's $2.7 billion infrastructure investment in rail, healthcare, and education will create localised property value increases, with lower interest rates enhancing these investment returns.
“While this measured easing provides welcome support for borrowers and the housing market, reduced migration flows and global trade uncertainties suggest the recovery may be more gradual than previous cycles.
“The RBNZ appears committed to supporting growth while maintaining its inflation mandate in an increasingly complex global environment.”
Ray White New Zealand chief executive Daniel Coulson said the rate cut was widely anticipated, with its delivery likely signaling the RBNZ sees tentative signs of recovery but remains cautious about inflation risks and global volatility.
“While it was expected by most, the move will still be welcome news for mortgage holders, would-be buyers and prospective sellers,” Mr Coulson said.
“While some may have hoped for a steeper cut, today’s decision reflects a central bank balancing the need to stimulate while considering the risks of overcooking the recovery.”
“We’ve seen that the housing market responds to monetary stimulus. The back-to-back 50 point cuts in October and November last year prompted a sharp lift in listings and sales. But the most recent cuts in February and April didn’t deliver the same energy, likely due to its predictability and the lingering household cost pressures.
“Still, momentum is building again. Transaction volumes and listings have continued to rise in recent months - not at breakneck speed, but steadily.
“This is now the sixth successive cut in this cycle and and in real terms, the OCR is now 40 per cent lower than this time last year.
“Confidence is growing and today’s decision helps reinforce a sense of stability in real estate - a stark contrast to the unpredictability we’re seeing in other investment classes.”
