The governor of the Reserve Bank says the economy is recovering at a faster pace than previous months and is ready for slow interest rate rises.
The Official Cash Rate has remained at a record low of 2.5% for a year and Dr Bollard told a business audience in Dunedin that this providing a boost to the economy.
Dr Bollard says the cash rate will be raised in coming months even though households remain under pressure.
He says the economy is being boosted by generally strong exports and this, along with weak import growth, is boosting the trade balance.
Dr Bollard says even though the household sector remains soft, policy stimulus will be removed in coming months.
The financial markets have been picking interest rates to start rising in small steps from the middle of this year, and Dr Bollard says the central bank shares that view.
He says the official cash rate won't need to rise as high as it did in the last cycle.