By Lucy Craymer
WELLINGTON (Reuters) - Reserve Bank of New Zealand Governor Adrian Orr said on Thursday the central bank was confident domestic inflation was now tracking lower.
"We are at the low end globally and we are tracking in the right direction," Orr said in response to questions from parliament's Finance and Expenditure Committee.
On Wednesday, the RBNZ increased the cash rate by 50 basis points to 3.0% as it seeks to get inflation under control. New Zealand inflation is currently at three-decade highs having hit 7.3% in the second quarter.
He added that labour shortages were a key constraint on economic activity and that was a reason the central bank was working to consciously slow demand to better match capacity.
"Our outlook ahead shows that as spending growth slows, labour is freed up," he said. He added that the central bank is also projecting an increase in inbound migration.
The central bank expects house prices will fall around 20% by mid-2023 from their peak at the end on December 2021.
Orr said even with these falls, prices would be above pre-COVID levels.
"But there will be and there is financial stress in many households because people have taken on significant mortgages, significant commitments," he said.
He said, however, New Zealand was in a very good place to manage through this period of higher mortgage rates.