Sir John Key says interest rates 'will stay up for a bit longer'

Former Prime Minister Sir John Key is predicting that interest rates will stay higher for longer.

Sir John announced on Tuesday he was stepping down after six years as chair of New Zealand's biggest bank ANZ.

He told Newshub the economy is doing better than the bank thought it would.

"When we look at, for instance, delinquencies and mortgages, they're probably lower than maybe the level we anticipated a few years ago," he said.

"Our corporate clients, we see pockets of distress, but again, still a lot doing quite well."

Sir John backed the call of ANZ chief economist Sharon Zollner who went against other economists' forecasts and predicted two more rises in interest rates this year.

"What Sharon's saying as chief economist, there's been a lot of stickiness in non-tradable inflation. And the question will be, is the Reserve Bank prepared to raise interest rates to try and slow that down even faster?"

Sir John admitted people who are doing it tough will find it even tougher.

"My sense is interest rates, I don't know whether they go up or down, but my sense is they stay up for a bit longer," he said.

"I think by 2025 we'll definitely see interest rates falling. But whether they come down much this year, not sure."

Sir John Key.
Sir John Key. Photo credit: Newshub

New Zealand's 38th Prime Minister, he took up the ANZ role in 2018, but has now decided to step down to spend more time with his wife Bronagh.

"I just need to be able to have a little bit more time to do some of the things that Bronagh and I want to do," Sir John told Newshub.

"She might actually discover she doesn't like me, but she's keen to go through the exercise at least."

Sir John finishes with ANZ on March 14 but will remain on the board of American cyber security company Palo Alto, and as a strategic adviser to Stonewood Homes where his son Max is an executive director.