There are a number of reasons for this, none of them individually definitive, but all pointing in the same direction: in brief the financial markets have already effectively tightened conditions as a result of more costly funding; the New Zealand private sector is reducing debt and cautious about new borrowing; most borrowers are on shorter duration mortgages and the steeper yield curve does not much encourage lengthening this; increasing policy rates in the shadow of Australia should be easier than being a world leader; and, finally, we believe there may be alternative ways of influencing over-exuberant bank lending through macrofinancial policies.
Our economic recovery is out of its first stage of intense fragility, and into a new phase of rebalancing growth. But a final caution: recovery so far has been full of surprises. There will be more to come! BIS Review 62/2010  9