Is a negative OCR now less likely?

Robertson has made an unprecedented public call for the central bank to consider runaway house price inflation, asking the independent central bank to include house price stability as part of its remit. 

The pressure from government could force the central bank to abandon plans of a negative official cash rate, according to economists.

ASB's Mark Smith believes a negative OCR "remains off the drawing board for now but will likely remain an option in future if need be".

Smith says the government pressure could impact the RBNZ's future choices.

"Governor Orr reiterated that the proposed changes to include house prices in the monetary policy remit will not change much in practice. That may be so, but the intent of the proposed changes is clear, and they will likely water down the notion of further OCR cuts when the housing market is booming. A housing crash may be a different matter."

Financial markets moved yesterday following Robertson's intervention. While they had priced in negative rates next year, they are now pricing only 8 basis points worth of cuts through 2021.

ANZ's Sharon Zollner also believes the odds of a negative OCR have shrunk – due to the strength of the NZ economic recovery. 

She pointed to "New Zealand’s successful health response, resilient business sentiment, commodity price strength, and vaccine news. In addition, monetary and fiscal stimulus have been very effective this year, providing a significant cushion to the economy.

"The outlook is finely balanced. It’s much less clear further monetary stimulus is justified and it wouldn’t take much to tip the balance and see us forecasting no further (or at least fewer) OCR cuts," Zollner added.