The RBNZ struck a rather dovish tone when it cut rates by 50bp at its meeting this week. We think that the Bank's concerns about the state of the economy are well founded, especially with new data showing that household incomes continue to be squeezed by the ongoing downturn. Against this backdrop, there is a growing risk that the RBNZ will pull the trigger on a 75bp cut in November, as opposed to the 50bp cut that both we and markets are anticipating. Elsewhere, we learnt that new housing starts in Australia remained subdued in Q2, weighing on prospects for a pickup in housing supply going forward.
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