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Reserve bank leaves interest rate run late

Reserve bank leaves interest rate run late


Exporters say the balance of risk should have persuaded the Reserve Bank to drop interest rates today, the Employers & Manufacturers Association (Northern) says.


"Greater weight should have been given to our exporters' rapidly diminishing prospects than to the short term buoyancy of the local market," said Alasdair Thompson. EMA's chief executive.


"The most recent trade figures show the speed with which the overseas deficit is building.


"Our longer term export growth should not be sacrificed again to 'pay' for the short term, Indian summer of economic activity currently being enjoyed by the domestic building and retail sectors.


"New Zealand exporters to Australia are really hurting. Exports to the US were down for the year ended December by 1.8 per cent. They're lower now.


"The cross rate with the US has crept up further since January and the cross rate with Australia is back about where it was then after rising in the interim.

"A small drop in the OCR would not have sparked further domestic inflation - the rapid fall of export receipts is already achieving restraint. But it would have discouraged fund managers offshore from cropping our high, short term interest rates thereby lightening the pressure on our exchange rate.


"Hence the balance of risk for business favoured a small drop in interest rates today, to let the present spate of growth slowly recede.


"Now the risk is increased that greater currency volatility will eventuate later in the year when the current overrun of economic activity grinds to a halt."


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