In the race to level out from the COVID-induced economic rollercoaster, Australia's Pacific neighbours, New Zealand, have the ball firmly gripped in their hands and are about six strides in front.
After cutting rates during COVID, the Reserve Bank of New Zealand (RBNZ) was one of the first to do a U-turn and started increasing its official cash rate (OCR) in October 2021.
Its first increase was one-quarter of a percentage point, with a couple more same-sized rate rises after that.
But it really ramped up in April, hiking by half a percentage point, followed by another double hike in May.
The RBNZ is widely tipped to go for another half a percentage point rate hike today, at midday AEST.
That would take its OCR from 0.25 per cent in September 2021, to 2.5 per cent by July.
"There's an awful lot of people who can't remember the last time the Reserve Bank deliberately slowed down the economy in order to beat inflation," ANZ chief economist Sharon Zollner told The Business ahead of the decision.
Which is exactly what the RBNZ, the Reserve Bank of Australia (RBA) and central banks around the world are trying to do by raising rates.
"It's not a fun process, not nearly as pleasant or easy to explain as trying to boost growth," Ms Zollner said.
New Zealand's inflation rate of 6.9 per cent is around treble its target of between 1 and 3 per cent.
That could make it something of a canary in the coal mine, a test case for the RBA to watch as it tussles with bringing inflation down from 5.1 per cent.
Are the rate hikes working?
Residential property prices in New Zealand peaked in November 2021, and the 1.75 percentage points' worth of rate hikes have seen prices fall just shy of 6 per cent since then.
"The impact on housing is pretty clear," Ms Zollner said.
But she warned there is much further to fall.
She said house prices would need to fall 30 per cent to get back to pre-COVID levels.
"Very few people are sitting in a house that's worth less than they paid for it, even fewer in a house that's worth less than the debt that they owe on it," she said.
Home prices in New Zealand are generally tipped to fall 10 to 15 per cent.
Forecasts are similar for Australian real estate, even though rates here have so far risen by a smaller 1.25 percentage points from COVID lows, and national average property prices are down only half a per cent so far.
Consumer confidence is also slipping in New Zealand.
"That fall started perhaps before interest rates started going up, but it's all part of, from where the consumer sits, a much higher cost of living," Ms Zollner said.
"That, of course, is centred in necessities like food, petrol and mortgage payments and, if you've got debt as well, it all feels like part of the same kind of pressures for households."
Ms Zollner said the rate of decline in business confidence in New Zealand has been softer.
"There's been more a slip, rather than a plunge, like we've seen in consumers," she said.
"For those firms who are planning on cutting investment, certainly interest rates are one of the factors that they are quoting as one of the reasons."
In Australia, consumer sentiment has been dropping every month this year, with the latest reading showing a 3 per cent fall in July to around recessionary levels.
Business confidence in Australia has also slipped but, as in New Zealand, not by anywhere near as much as consumer sentiment.
Two peas in a pod
Ms Zollner said the RBNZ and RBA are fighting the same battle.
"The issues are quite similar," she said.
"That's partly because the labour market is so tight, there's upward pressure on wages and a lot of job vacancies."
Australia and New Zealand both had extended periods of closed international borders, which exacerbated labour shortages in both countries.
Many economists have now acknowledged that this has contributed to historically low unemployment rates and wages pressure either side of the ditch.
The risk of moving too far, too fast on rates and triggering a recession is just as feasible in both New Zealand and Australia.
But Ms Zollner said the aggressive rate rises are necessary.
"From where the Reserve Bank sits, the most important thing is anchoring medium-term inflation expectations and not going back to the 1970s," she said.
"It's better to have a regular recession now, because in the end, recessions are inevitable, you're probably just bringing one forward, rather than doing really structural damage to the economy by allowing inflation to become truly embedded."
The RBA will no doubt be closely watching the RBNZ and how its interest rate hikes impact the economy there, as it contemplates its next move here.
"As the evidence mounts that it [lifting the cash rate] is actually working and the economy is slowing, that people are starting to lose their jobs, certainly lose confidence, then you would expect the debate about whether the Reserve Bank is doing the right thing would get louder," Ms Zollner said.
'You've got one job'
Ms Zollner said the biggest lesson Australians could take from New Zealand was to take the central bank at its word.
"Do not underestimate their absolute determination to get on top of inflation," she said.
She added that as consumers and businesses tackled rising costs, the spotlight was firmly planted on the RBNZ, the RBA and their peers around the world.
"The whole credibility of independent central banks' inflation targeting is on the line," she argued.
"This is 'you had one job' kind of stuff."
RBA governor Philip Lowe has repeatedly said the Reserve Bank is "committed to doing what is necessary to ensure that inflation in Australia returns to target over time".
But perhaps the contest to temper inflation is one most Australians will be happy for New Zealand to win.
