Photo: RNZ
The Reserve Bank has been cutting the official cash rate since August, and has already knocked it down to 4.25 percent from 5.5 percent.
But how much of a difference has that made to the struggling economy?
BNZ chief economist Mike Jones said the jury was still out, to a large extent.
He said mortgage rates and 12-month term deposit rates had fallen further than the OCR so far, in part because markets were anticipating more cuts to come.
"The drops in interest rates to date are great news for new borrowers. For example, a prospective home buyer looking to purchase a median house with a 20 percent deposit is now looking at an annual interest bill about $9000 below where the calculations were landing at the start of the year."
But he said that was not translating into a surge in demand for additional borrowing, probably because of the weaker economic backdrop and uncertainty about the labour market.
He said for homeowners with existing mortgages, a lot of the impact was yet to be felt. The average interest rate being paid on existing borrowing even lifted marginally to 6.39 percent in October.
"Holding this rate up has been an increasing number of mortgage borrowers opting to roll on to higher-than-fixed floating rates, in anticipation of additional declines and lower interest payments ahead.
"The good news is that, over the coming six months, a record 51 percent of all mortgage borrowers will experience a rate reset on to likely lower rates. Thus, by mid-2025, we estimate the average paid mortgage rate will have dropped to around 5.7 percent, with further declines likely over the second half of next year."
He said it was likely that rate cuts from August had staved off what could have been a bigger correction in house prices.
"It put a bit of a floor under the market. We think we'll see things slowly recover and prices start to rise next year but it's definitely not a market that's roaring away."
Jones said construction was still in decline. Next week's gross domestic product data is likely to show another quarterly fall for that sector's activity.
He said it was likely that construction activity would settle about 15 percent below the 2021 peak, in part because of the increase in construction costs, lower house prices and high interest rates.
But he said the outlook was more positive. There had been signs of increases in building consents, particularly for standalone houses.
"With interest rates now falling, surveyed residential building intentions have rocketed to above average levels. Historically, these intentions provide a good lead on future consenting activity, suggesting the budding recovery in the latter can be sustained."
Building costs were not materially falling, though, and the cost of building new compared to the cost of buying an existing house was a constraint on building activity.
Retail was also still doing it tough, he said.
The 10 percent contraction in sales volumes over the past two-and-a-half years was the largest in the data going back to the mid-1990s.
"But we may be past the point of peak pain in that regard. Since the OCR was first lowered in August, we've had three consecutive increases in monthly retail card spending figures. While the timing lines up with the interest rate cycle, an easing in cost-of-living pressures is probably at least as influential in steadying spending activity. July's modest tax cut will have also helped."
He said things were "certainly not taking off" and much of the extra spending was going to paying bills rather than discretionary purchases.
"We've probably seen the economy shift out of reverse into neutral. Forward momentum is a story we think for the firs half of next year. The response to date has been more one of stabilisation than elevation. We saw in the middle of this year some pretty troubling sort of indicators but it does look like activity has stabilised.
"In terms of the overall response, the jury is still out."
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
