Reserve Bank governor Adrian Orr told journalists that while per-capita consumption has fallen, overall consumption is rising because of the growth in the population.
Stats NZ said earlier this month that there was a net migration gain of 118,800 people in the year ended September, the highest annual total on record.
“Per capita consumption is actually declining but overall consumption is rising because there are more New Zealanders,” Orr said.
The central bank raised its forecasts for the OCR from June next year out to December 2026 compared with its previous forecasts in August and indicated its earliest cut in the OCR wouldn't be until the March or June quarters of 2025.
There's also some chance of a further hike in the OCR next year from its current 5.5% level.
Ahead of the RBNZ's latest monetary policy statement on Wednesday, financial markets had been pricing in that the first rate would be in the second half of 2024.
Orr said the monetary policy committee had had “robust discussions” about whether another rate hike would be necessary but decided current settings are sufficiently restrictive at the moment that economic growth is subdued and will likely slow further so that inflation returns to the RBNZ's 1% to 3% target.
The Consumers Price Index in the September quarter came in at an annual rate of 5.6%.
The central bank's latest monetary policy statement (MPS) estimated that the average rate on outstanding mortgages is likely to increase from 5.4% currently to 6.4% by mid-2004 and that the share of disposable income going to debt servicing for households will rise from 15% currently to 19%.
While high net immigration has pushed rents higher, the outlook for house prices is “highly uncertain.”
RBNZ chief economist Paul Conway said while house prices have lifted about 2.4% off their trough, that came after a 15% fall – house prices peaked in November 2021.
While immigration has had an impact and nominal incomes have also grown, Conway said he still expects house prices growth will be “relatively subdued” out to the end of 2026.
The MPS forecast house prices will rise by between 4% and 6% a year through to the end of 2026.
The MPS said that banks are now having to pay more for term deposits and since the August MPS have been passing those higher costs on to mortgage rates.
“The spread between mortgage rates and wholesale rates remains low by historical standards but has increased over the past year,” the MPS said.
“Mortgage rates are likely to continue to increase relative to swap rates over the next few years as banks' cost of deposit funding increases.”
It noted the one-year fixed mortgage rate has increased by about 20 basis points since August while the two-year and five-year rates have increased by about 30 to 40 basis points.