There's no easy way down for New Zealand's economy, as high inflation poses a persistent problem.

Westpac's latest economic overview predicts the Official Cash Rate will rise further and peak at five percent next year.

Its acting chief economist says despite hikes this year, monetary policy takes time to have a full effect on the economy.

Michael Gordon says many borrowers will be rolling on to higher interest rates in the next six to 12 months.

He says some rates might be three percent higher - which will have an impact on household budgets and spending.

Gordon says it’s more likely the bank would be forecasting an outright recession,  were it not for the recovery in international tourism.

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