The bank economists say the job market could make the Reserve Bank even more hawkish than it is already.
They say combining several trends could push unemployment down to 3%. And while they say this might seem an unfeasibly low level of unemployment, a low level of working-age population growth could push the number even lower, to the upper twos.
“Even in normal times, a 3% or lower unemployment rate would be considered pretty inflationary,” the bank's economics team said.
“But the labour supply is still highly disrupted by COVID. In short, the current labour market is not consistent with low and stable inflation. And that’s a concern for the RBNZ, which has already seen the CPI surge well beyond its 3% target range.”
The economists add New Zealand inflation often tracks closely to US inflation, which could make New Zealand price growth rise above the ANZ's current forecast of a 5.8% peak.
All of this will make the Reserve Bank's job even harder, and could push the OCR higher than already expected.
Several reports have said that as many as 70% of mortgage holders are due for an interest rate rise this year, and if the ANZ forecasts prove correct, then they could be in for another hike not long afterwards.