The Reserve Bank is not expected to raise its official cash rate (OCR) from the current 1.75% when it meets on Thursday.
However, while it was ``highly likely'' the OCR would move up in the next two years, it would be wrong to think it was going to increase anytime soon, Mr Alexander said.
``Our view for now remains cash rate rises will start sometime in the first half of 2018 with the cash rate ending that year at 2.5%, then ending 2019 at 3.15%.''
Speculation was growing the Reserve Bank would raise the official cash rate this year because of slightly higher-than-expected inflation, an improving outlook for growth, increasing evidence of capacity constraints and rising inflation expectations, he said.
Those changes in policy expectations were driven by the view the Reserve Bank would need to slow the pace of economic growth by causing mortgage lending rates to rise.
``But here is the thing. They already have.''
The BNZ three-year fixed rate had risen 0.6% since the start of November. The two-year rate had gone up 0.5% and the one-year rate 0.2%. Floating mortgage rates had gone up 0.15%.
Last week, the BNZ again boosted its one-year rate another 0.1% to 4.59%, the four-year rate another 0.2% to 4.89% and the five-year rate another 0.3% to 6.09%.
In effect, monetary policy had already been tightened, especially as the New Zealand dollar was tracking higher than the Reserve Bank had built into its currency assumptions and 10% above the 10-year average, Mr Alexander said.
What was more, credit availability had declined.
In a post-Global Financial Crisis era, banks operating in New Zealand needed to decrease their dependence on the savings of foreigners, which could dry up when global financial markets hit turbulence.
Banks had to fund more of their lending in New Zealand from New Zealanders but Kiwis did not like saving, he said.
In the year to March 2016, the housing savings rate was minus 2.2%. A year before, it was minus 1.5%.
``Thankfully, the Government is into its third year of running a surplus and business profitability seems generally good although business investment is not growing strongly.
``But we banks are struggling to get the funds we need from Kiwis.''
In recent months, there had been an easing in the competition between banks for lending for house purchases and to developers, one of the riskiest groups to lend to, Mr Alexander said.
Throw in the official Reserve Bank tightening of rules on bank lending and there was an environment where the main thing monetary policy aimed to change - the cost and availability of mortgage finance - had tightened quite a bit in the past year even with the OCR falling from 2.5% to 1.75%, he said.
The BNZ floating mortgage rate was 5.79% at present. Just before the cash rate was cut from 2.5% in March last year, the floating rate was also 5.79%.
