OCR unchanged

Written By: - Date published: 11:37 am, June 5th, 2008 - 14 comments
Categories: economy - Tags: ,

The Reserve Bank has left the Official Cash Rate unchanged; no-one expected a rate cut this early.

It’s encouraging that Bollard has firmly signalled that interest rates will be coming down this year despite projected inflation reaching 4.7% in the September Quarter. There’s no use in the Reserve Bank strangling our economy with high interest rates when the inflation we are experiencing is coming from offshore in the form of high international prices for oil, food, dairy, and metals (underlying all of this, of course, is peak oil). In signalling rates will come down despite the inflation figure, Bollard is moving the Resave Bank away from a myopic, useless fixation on inflation and taking the overall interests of the economy and growth into account. After all, that’s what Australia does and they’re getting on just fine despite having 4.4% inflation.

No doubt, National and its allies will claim that Labour’s tax cuts were too large and prevented a rates cut but remember the Reserve Bank was expecting tax cuts of $1.5 billion this year, that amount has been in its model for a year, and that’s exactly what the Government has spent, so the government has hardly shocked the RB into not lowering rates. There was never going to be a rate cut this early.

So, no interest cut this time but a cut later this year. Politically, that’s going to be good for the Government tax cuts, higher Working for Families payments, lower mortgage payments, and higher benefit payments(?) all coming on-line before the election. But, more importantly, it’s good for the economy that the Reserve Bank is taking a realistic approach to international inflation and is prepared to lay off fighting inflation for the overall health of the economy.

14 comments on “OCR unchanged ”

  1. Lampie 1

    bugger

  2. burt 2

    Inflation seems to peak every time Labour win an election, funny that.

    http://www.rbnz.govt.nz/keygraphs/Fig1.html

    Seriously though, the predicted growth in unemployment (rising to 6% ?) is bad bad timing for the election. I reckon Labour should have pulled an early swift one on us about 3 months back. The economy has moved out of phase with the election cycle. The ship is listing badly. Call a snap election and save some crew while you can, let National ride the worst 3 years of the storm thats breaking. It’s inevitable, don’t be a passenger.

    Interesting the reserve bank can signal two interest rate drops before the end of the year.

  3. Anthony 3

    The whole economy is going down the gurgler. The Labour-led government’s 9 year spending spree is coming back to bite all Kiwis.

    If any of you work in government departments you’d better start getting your CVs ready, because once the crap hits the fan you’ll be the first to go.

    Bring on the revolution baby, National are going to steam roll this bloated, wreck of a government.

  4. IrishBill 4

    How old are you Anthony? It’s just you don’t seem old enough to remember what a real economic crisis looks like. I’ve seen a few of them and they don’t include record low unemployment, projected growth and a government with a surplus on hand to spend stimulating the economy. Even a technical recession isn’t being forecast by most people. Perhaps I just have a better memory than you.

  5. burt 5

    IrishBill

    So have we got this correct, record unemployment was the result of Labour policies but the current increasing unemployment is the result of external factors.

    Like inflation and high interest rates, the bad things are never caused by the govt and the good things are always caused by the govt – how old are you?

  6. randal 6

    burt has problems with logic. it is possible for employment and unemployment to be affected by more than one variable.

  7. IrishBill 7

    Burt, the current increase in unemployment is small and has not been matched by a similar increase in unemployment benefits. Add to this the highest birthrate in nearly two decades and the fact that the drop in employment participation has been greatest amongst women and I’d say we are seeing more people choosing to stay at home and have kids or look after the ones they already have.

    That is something else you don’t see in a bust.

    The high interest rates are certainly the fault of the government in that they should have changed the reserve bank act to allow for particular hotspots in the economy to be dealt with on a case by case basis rather than the one size fits all of the OCR but from what I hear of Cullen’s remarks on the matter last night, and from what I’ve heard out of the select committee hearing into it, I think there is little political will to do so.

    From what I see we are definitely heading into a slowdown but we are doing so in a fiscal situation that allows for stimulus such as tax cuts and increased government spending to make sure we don’t bottom out. Personally I would have put less into tax cuts and more into infrastructure spend as it is a more precise way to stimulate the economy and it ensures greater productive capacity in the next upturn. I get the feeling Cullen would feel the same but had too much political pressure for tax cuts.

    If you read the OCR report put out with today’s rate announcement [PDF] you will see that international food and oil prices are clearly the reason for our current inflation levels and this is, in my opinion, another area in which Labour has not done as well as it could have. If more political will had be exercised in terms of rail, alternative energy and energy conservation and landcorp properties had been switched to sustainable food production rather than dairy and forestry mono-culture then we might be in an even better position to weather this downturn.

    The problem is National would exacerbate the worst parts of our current governance while removing the good parts. I base this analysis on the little they have said and on their historical record. I would be happy to be proved wrong.

  8. vto 8

    IrishBill:

    “From what I see we are definitely heading into a slowdown ”

    Not being a smart-arse but do you live and work in Wellington? Because mate this ‘slowdown’ was here a while ago. It has already slowed down and from what I see the bottom of the cycle scavengers are doing their deals right now. This slowdown has been going since late last year and kicked in as heavy as I’ve seen 2 or 3 months ago. (imho it will be shortish tho).

    Both the peak and the trough always pass before the vast masses realise.

    I have maintained over the last couple of cycles that those in Wellington see things too late. (Perhaps a result of being removed from the coal face in that isolated part of the country called the capitalality.). Both Brash and Bollard have reacted too late and too heavily.

    I maintained last year that the then lifting of interest rates was unnecessary as the cooling was about to happen anyway. I think Bollard has caused an unnecessary amount of hardship.

  9. burt 9

    randal

    The only logic I have a problem with is that all good things are caused by Labour and all bad things are caused by National or external factors.

    I’m learning that although we have had a Labour govt for nearly 9 years, todays high interest rates, low wages and stagnating growth were caused by the failed policies of National in the 90’s. To me this defies logic and reason and also consigns Labour to the role of a caretaker riding a predetermined path laid out by National.

    I’m also learning that international crisis cause crisis here but global stability has no impact in the same way global periods of sustained growth have no effect. It’s taking me a while to work out that global [ good things ] don’t effect us, rather Labour simultaneously through prudent management creates the same for us here in NZ. It’s a shame Labour can’t just magic the good things more often, when they are not also happening elsewhere. If they could they could turn these uncertain times into boom times for us couldn’t they.

    How’s my logic now?

  10. IrishBill 10

    vto – I do live in Wellington but I have also spent a lot of my life in the provinces and am well aware that they are often the last to feel a boom and the first to feel a bust. Having said that I think I’ve seen enough cycles to get pretty good feel for where they are at and I think we are only just heading into this. In my opinion we will see a longish but not too deep trough led by the US (it will be a long time until that economy is back on its feet) but ameliorated by the current health of our economy.

    My fear is that too much capacity for stimulus is being frontloaded into tax cuts and my other fear is that we get a National government in power and that that government exacerbates the contraction by putting too much money into top bracket tax cuts (and subsequent high end discretionary spending which tends to be import focused) and pays for it by cutting govenment spending. If they follow previous patterns they would then try to increase “productivity” by lowering low to middle income wages and increasing unemployment. No money for guessing what I think about that.

  11. AncientGeek 11

    burt: It is good to see that you consider you are able to learn. I haven’t seen many signs of it myself. You just seem to be overwhelmingly negative to me.

    Of course if you’d care to look at what is happening with employment offshore over the last year since the sub-prime loan problem increased an existing international trend towards recession, you’ll see exactly how well off we are. I’d be worried if the unemployment didn’t go up during times of economic change. That would indicate a artificially static economy where people weren’t moving to new jobs and industries.

  12. Eddie 12

    I want to know if any Governor of the Reserve Bank at any time in its history has said to unions representing workers: “Yes! Now is a great time to negotiate higher wages, you go for it!”

  13. Anthony 13

    IrishBill – heres my introduction, I’m 32 and I only pay 7c in the dollar tax across 110k of income. Got sick of the government helping itself to my pay, so I restructured. If National get in, its good news for me, if Labour get in, I simply get another property and get my tax down to 0c in the dollar. I’m sick of being penalised for working hard.

Links to post

Recent Comments

Recent Posts

  • EV road user charges bill passes
    Transport Minister Simeon Brown has welcomed the passing of legislation to move light electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) into the road user charges system from 1 April.  “It was always intended that EVs and PHEVs would be exempt from road user charges until they reached two ...
    BeehiveBy beehive.govt.nz
    17 hours ago
  • Bill targets illegal, unregulated fishing in international waters
    New Zealand is strengthening its ability to combat illegal fishing outside its domestic waters and beef up regulation for its own commercial fishers in international waters through a Bill which had its first reading in Parliament today. The Fisheries (International Fishing and Other Matters) Amendment Bill 2023 sets out stronger ...
    BeehiveBy beehive.govt.nz
    18 hours ago
  • Reserve Bank appointments
    Economists Carl Hansen and Professor Prasanna Gai have been appointed to the Reserve Bank Monetary Policy Committee, Finance Minister Nicola Willis announced today. The Monetary Policy Committee (MPC) is the independent decision-making body that sets the Official Cash Rate which determines interest rates.  Carl Hansen, the executive director of Capital ...
    BeehiveBy beehive.govt.nz
    19 hours ago
  • Stronger protections for apartment owners
    Apartment owners and buyers will soon have greater protections as further changes to the law on unit titles come into effect, Housing Minister Chris Bishop says. “The Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act had already introduced some changes in December 2022 and May 2023, and ...
    BeehiveBy beehive.govt.nz
    22 hours ago
  • Travel focused on traditional partners and Middle East
    Foreign Minister Winston Peters will travel to Egypt and Europe from this weekend.    “This travel will focus on a range of New Zealand’s traditional diplomatic and security partnerships while enabling broad engagement on the urgent situation in Gaza,” Mr Peters says.   Mr Peters will attend the NATO Foreign ...
    BeehiveBy beehive.govt.nz
    22 hours ago
  • Keep safe on our roads this Easter
    Transport Minister Simeon Brown is encouraging all road users to stay safe, plan their journeys ahead of time, and be patient with other drivers while travelling around this Easter long weekend. “Road safety is a responsibility we all share, and with increased traffic on our roads expected this Easter we ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Cost of living support for over 1.4 million Kiwis
    About 1.4 million New Zealanders will receive cost of living relief through increased government assistance from April 1 909,000 pensioners get a boost to Superannuation, including 5000 veterans 371,000 working-age beneficiaries will get higher payments 45,000 students will see an increase in their allowance Over a quarter of New Zealanders ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Tenancy reviews for social housing restart
    Ensuring social housing is being provided to those with the greatest needs is front of mind as the Government restarts social housing tenancy reviews, Associate Housing Minister Tama Potaka says. “Our relentless focus on building a strong economy is to ensure we can deliver better public services such as social ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Kermadec Ocean Sanctuary plan halted
    The Kermadec Ocean Sanctuary will not go ahead, with Cabinet deciding to stop work on the proposed reserve and remove the Bill that would have established it from Parliament’s order paper. “The Kermadec Ocean Sanctuary Bill would have created a 620,000 sq km economic no-go zone,” Oceans and Fisheries Minister ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Cutting all that dam red tape
    Dam safety regulations are being amended so that smaller dams won’t be subject to excessive compliance costs, Minister for Building and Construction Chris Penk says. “The coalition Government is focused on reducing costs and removing unnecessary red tape so we can get the economy back on track.  “Dam safety regulations ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Drought support extended to parts of North Island
    The coalition Government is expanding the medium-scale adverse event classification to parts of the North Island as dry weather conditions persist, Agriculture Minister Todd McClay announced today. “I have made the decision to expand the medium-scale adverse event classification already in place for parts of the South Island to also cover the ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Passage of major tax bill welcomed
    The passing of legislation giving effect to coalition Government tax commitments has been welcomed by Finance Minister Nicola Willis.  “The Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Bill will help place New Zealand on a more secure economic footing, improve outcomes for New Zealanders, and make our tax system ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Lifting economy through science, tertiary sectors
    Science, Innovation and Technology Minister Judith Collins and Tertiary Education and Skills Minister Penny Simmonds today announced plans to transform our science and university sectors to boost the economy. Two advisory groups, chaired by Professor Sir Peter Gluckman, will advise the Government on how these sectors can play a greater ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Government announces Budget priorities
    The Budget will deliver urgently-needed tax relief to hard-working New Zealanders while putting the government’s finances back on a sustainable track, Finance Minister Nicola Willis says.  The Finance Minister made the comments at the release of the Budget Policy Statement setting out the Government’s Budget objectives. “The coalition Government intends ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Government to consider accommodation solution
    The coalition Government will look at options to address a zoning issue that limits how much financial support Queenstown residents can get for accommodation. Cabinet has agreed on a response to the Petitions Committee, which had recommended the geographic information MSD uses to determine how much accommodation supplement can be ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Government approves extension to Royal Commission of Inquiry into Abuse in Care
    Cabinet has agreed to a short extension to the final reporting timeframe for the Royal Commission into Abuse in Care from 28 March 2024 to 26 June 2024, Internal Affairs Minister Brooke van Velden says.                                         “The Royal Commission wrote to me on 16 February 2024, requesting that I consider an ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • $18m boost for Kiwis travelling to health treatment
    The coalition Government is delivering an $18 million boost to New Zealanders needing to travel for specialist health treatment, Health Minister Dr Shane Reti says.   “These changes are long overdue – the National Travel Assistance (NTA) scheme saw its last increase to mileage and accommodation rates way back in 2009.  ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • PM’s Prizes for Space to showcase sector’s talent
    The Government is recognising the innovative and rising talent in New Zealand’s growing space sector, with the Prime Minister and Space Minister Judith Collins announcing the new Prime Minister’s Prizes for Space today. “New Zealand has a growing reputation as a high-value partner for space missions and research. I am ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Concerns conveyed to China over cyber activity
    Foreign Minister Winston Peters has confirmed New Zealand’s concerns about cyber activity have been conveyed directly to the Chinese Government.     “The Prime Minister and Minister Collins have expressed concerns today about malicious cyber activity, attributed to groups sponsored by the Chinese Government, targeting democratic institutions in both New ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Independent Reviewers appointed for School Property Inquiry
    Independent Reviewers appointed for School Property Inquiry Education Minister Erica Stanford today announced the appointment of three independent reviewers to lead the Ministerial Inquiry into the Ministry of Education’s School Property Function.  The Inquiry will be led by former Minister of Foreign Affairs Murray McCully. “There is a clear need ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Brynderwyns open for Easter
    State Highway 1 across the Brynderwyns will be open for Easter weekend, with work currently underway to ensure the resilience of this critical route being paused for Easter Weekend to allow holiday makers to travel north, Transport Minister Simeon Brown says. “Today I visited the Brynderwyn Hills construction site, where ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Speech to the Infrastructure Funding & Financing Conference
    Introduction Good morning to you all, and thanks for having me bright and early today. I am absolutely delighted to be the Minister for Infrastructure alongside the Minister of Housing and Resource Management Reform. I know the Prime Minister sees the three roles as closely connected and he wants me ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Parliamentary network breached by the PRC
    New Zealand stands with the United Kingdom in its condemnation of People’s Republic of China (PRC) state-backed malicious cyber activity impacting its Electoral Commission and targeting Members of the UK Parliament. “The use of cyber-enabled espionage operations to interfere with democratic institutions and processes anywhere is unacceptable,” Minister Responsible for ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • NZ to provide support for Solomon Islands election
    Foreign Minister Winston Peters and Defence Minister Judith Collins today announced New Zealand will provide logistics support for the upcoming Solomon Islands election. “We’re sending a team of New Zealand Defence Force personnel and two NH90 helicopters to provide logistics support for the election on 17 April, at the request ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • NZ-EU FTA gains Royal Assent for 1 May entry to force
    The European Union Free Trade Agreement Legislation Amendment Bill received Royal Assent today, completing the process for New Zealand’s ratification of its free trade agreement with the European Union.    “I am pleased to announce that today, in a small ceremony at the Beehive, New Zealand notified the European Union ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • COVID-19 inquiry attracts 11,000 submissions
    Public consultation on the terms of reference for the Royal Commission into COVID-19 Lessons has concluded, Internal Affairs Minister Hon Brooke van Velden says.  “I have been advised that there were over 11,000 submissions made through the Royal Commission’s online consultation portal.” Expanding the scope of the Royal Commission of ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Families to receive up to $75 a week help with ECE fees
    Hardworking families are set to benefit from a new credit to help them meet their early childcare education (ECE) costs, Finance Minister Nicola Willis says. From 1 July, parents and caregivers of young children will be supported to manage the rising cost of living with a partial reimbursement of their ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Unlocking a sustainable, low-emissions future
    A specialised Independent Technical Advisory Group (ITAG) tasked with preparing and publishing independent non-binding advice on the design of a "green" (sustainable finance) taxonomy rulebook is being established, Climate Change Minister Simon Watts says.  “Comprising experts and market participants, the ITAG's primary goal is to deliver comprehensive recommendations to the ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Chief of Army thanked for his service
    Defence Minister Judith Collins has thanked the Chief of Army, Major General John Boswell, DSD, for his service as he leaves the Army after 40 years. “I would like to thank Major General Boswell for his contribution to the Army and the wider New Zealand Defence Force, undertaking many different ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Minister to meet Australian counterparts and Manufacturing Industry Leaders
    25 March 2024 Minister to meet Australian counterparts and Manufacturing Industry Leaders Small Business, Manufacturing, Commerce and Consumer Affairs Minister Andrew Bayly will travel to Australia for a series of bi-lateral meetings and manufacturing visits. During the visit, Minister Bayly will meet with his Australian counterparts, Senator Tim Ayres, Ed ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Government commits nearly $3 million for period products in schools
    Government commits almost $3 million for period products in schools The Coalition Government has committed $2.9 million to ensure intermediate and secondary schools continue providing period products to those who need them, Minister of Education Erica Stanford announced today. “This is an issue of dignity and ensuring young women don’t ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Speech – Making it easier to build.
    Good morning, it’s great to be here.   First, I would like to acknowledge the New Zealand Institute of Building Surveyors and thank you for the opportunity to be here this morning.  I would like to use this opportunity to outline the Government’s ambitious plan and what we hope to ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Pacific youth to shine from boost to Polyfest
    Minister for Pacific Peoples Dr Shane Reti has announced the Government’s commitment to the Auckland Secondary Schools Māori and Pacific Islands Cultural Festival, more commonly known as Polyfest. “The Ministry for Pacific Peoples is a longtime supporter of Polyfest and, as it celebrates 49 years in 2024, I’m proud to ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • 2024 Ngarimu VC and 28th (Māori) Battalion Memorial Scholarships announced
    ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Speech to Breast Cancer Foundation – Insights Conference
    Before moving onto the substance of today’s address, I want to recognise the very significant and ongoing contribution the Breast Cancer Foundation makes to support the lives of New Zealand women and their families living with breast cancer. I very much enjoy working with you. I also want to recognise ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Kiwi research soars to International Space Station
    New Zealand has notched up a first with the launch of University of Canterbury research to the International Space Station, Science, Innovation and Technology and Space Minister Judith Collins says. The hardware, developed by Dr Sarah Kessans, is designed to operate autonomously in orbit, allowing scientists on Earth to study ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Speech to the New Zealand Planning Institute
    Introduction Thank you for inviting me to speak with you today and I’m sorry I can’t be there in person. Yesterday I started in Wellington for Breakfast TV, spoke to a property conference in Auckland, and finished the day speaking to local government in Christchurch, so it would have been ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Support for Northland emergency response centre
    The Coalition Government is contributing more than $1 million to support the establishment of an emergency multi-agency coordination centre in Northland. Emergency Management and Recovery Minister Mark Mitchell announced the contribution today during a visit of the Whangārei site where the facility will be constructed.  “Northland has faced a number ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Celebrating 20 years of Whakaata Māori
    New Zealanders have enjoyed a broader range of voices telling the story of Aotearoa thanks to the creation of Whakaata Māori 20 years ago, says Māori Development Minister Tama Potaka. The minister spoke at a celebration marking the national indigenous media organisation’s 20th anniversary at their studio in Auckland on ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Some commercial fishery catch limits increased
    Commercial catch limits for some fisheries have been increased following a review showing stocks are healthy and abundant, Ocean and Fisheries Minister Shane Jones says. The changes, along with some other catch limit changes and management settings, begin coming into effect from 1 April 2024. "Regular biannual reviews of fish ...
    BeehiveBy beehive.govt.nz
    1 week ago

Page generated in The Standard by Wordpress at 2024-03-28T21:55:12+00:00