Reserve Bank shouldn't need to do additional official cash rate hikes - Grant Robertson

This week's Government Budget has prompted some banks to forecast higher interest rates by the Reserve Bank (RBNZ) than previously forecast.

ASB economists were now picking a rise of 50 basis points to the official cash rate next week, and possibly a further 25bp hike in July - peaking at about 6 percent. 

The bank was previously picking a 5.5 percent peak in 2023.

But Finance Minister Grant Robertson said he didn't "think there was any cause for" additional rate hikes, based on his Budget.

"When you actually look at the extra spending that we're doing, in terms of cost of living type stuff, it's modest," he told Newshub Nation in an interview that aired on Saturday.

But Robertson said it was ultimately the RBNZ's decision whether further OCR hikes were necessary.

"It also has to take into account much more than what the Government's spending is. They have to look at the overall economy, issues to do with the supply chain, immigration, wage pressure… which is much bigger than just the Government's Budget."

Is more cooling needed? 

ASB said in a note on Friday while inflation had peaked, fiscal spending was "keeping up the heat" in the economy - something the RBNZ was trying to dampen.

Although the Government promised to trim and reprioritise money, Government spending will be $9.4 billion higher over four years than predicted in December and revenue will be $11b lower than forecast.

But Robertson insisted the Government made decisions that wouldn't "put undue pressure on inflation".

"Treasury forecasts do show that," he said. The Government's economic policy advisor had inflation coming in at 6.2 percent this year, down from the current 6.7 percent, before dropping to 4.2 percent in 2024.

Robertson said a chunk of the Government's spending, including the billions allocated to the rebuild from Cyclone Gabrielle, would be spread out over time.

He accepted the spending numbers looked big, "but, actually, when you spread them over a four-year period, I think it's a pretty pragmatic approach".

Robertson denied the Government and the RBNZ weren't on the same page when it came to inflation.

"I think what we do is mutually supportive," he said.

"We're taking that COVID spending that we did out of the economy which supports the direction of travel of the Reserve Bank, so I believe they are mutually reinforcing."

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