Bank of New Zealand Research Hub

BNZ research highlights a complex intersection of geopolitical tension and local economic shifts, where the US-Iran conflict remains a primary driver of market sentiment. Despite fragile global conditions, BNZ's risk appetite index surged to 80% following a US-brokered ceasefire, even as Brent crude fluctuated significantly between $94 and $112. Domestically, the Reserve Bank of New Zealand maintains a hawkish posture with a 3-3 split vote, signaling potential rate hikes as early as July to combat a steady 3.1% CPI. While Q1 retail sales grew by 0.9%, providing evidence of a pre-conflict recovery, the outlook for discretionary spending is increasingly dampened by rising fuel and housing costs. Labor market dynamics are also shifting, with the BNZ-SEEK report showing a 0.7% monthly decline in job ads and a projected rise in unemployment to 5.7% as labor supply begins to outpace demand. These factors have contributed to a flattening local yield curve and a strengthening NZD/AUD cross, particularly as cooling Australian inflation contrasts with the RBNZ’s aggressive stance.