Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Time for an interest rate cut

Time for an interest rate cut

Both the timing and the environment are right for a cut in interest rates, says Business NZ.

The Reserve Bank reviews the official cash rate next Thursday 24 April.

Business NZ Chief Executive Simon Carlaw says a quarter or even half per cent could be shaved off interest rates, to ensure a 'soft landing' next year.

Mr Carlaw says there are nine reasons to cut the official cash rate:

* The Consumer Price Index for the March quarter (0.4%) was below market expectations and has resulted in the annual CPI falling from 2.7% for the year ended December 2002 to 2.5% for the year ended March 2003.

* Annual inflation is now comfortably inside the Reserve Bank's 0-3% target.

* Business confidence has fallen sharply to its lowest level since 1985, which is likely to impact negatively on intentions to invest and employ.

* There is widespread uncertainty over energy supply, and hardship being experienced by many firms exposed to high spot electricity prices.

* Exports are weak and commodity prices have continued to fall in NZ$ terms, with the ANZ Commodity Price Index 28% below its peak in April 2001.

* The domestic economy is showing signs of slowing, e.g. building consents falling in January and February, and patchy retail sales.

* Drought conditions in some regions will impact on farm returns over the next year.

* The international economic outlook remains negative (continued geopolitical uncertainty, weaker economic prospects for the US, Japan, and Europe, and the impact of the SARS virus on international trade and tourism).

* The Reserve Bank said on 23 January that a cut in the Official Cash Rate might be warranted if the NZ$ stayed on or above current levels. It has - as of 16 April the NZ$ has appreciated 2.4% against the US$, fallen 1.3% against the AU$ (which was needed as it was getting overvalued), and overall is slightly higher on the Trade Weighted Index (60.9 versus 59.6 - up 2.2%).

"The balance of probabilities has turned towards the pessimistic, and with inflation lower than expected, a 25 or even 50 point pre-emptive reduction would be justified," Mr Carlaw said.

ENDS


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Disasters And Insurance: NZ Ranked 2nd Riskiest Country

New Zealand is ranked as the second riskiest country in the world in a major international study released by Lloyd’s of London. The report looks at non-life underinsurance and insurance penetration data for 43 countries. More>>

Forest And Bird: Landmark Court Decision Protects Reserves From Mining

The Court of Appeal found that the Council cannot enter into an access arrangement that is incompatible with the primary purpose of the reserve and had to protect the natural and biological features of the reserve. More>>

ALSO:

Retail: International Websites To Pay GST

New rules would be aimed at imported goods valued at or below $1,000. Customs would retain responsibility for collecting GST on imported parcels valued more than $1,000. More>>

ALSO:

High-Level Advice: PM’s Business Advisory Council Membership Announced

The Prime Minister’s Business Advisory Council brings together a mix of experts, six women and seven men with small to large business experience, from across New Zealand, to provide advice. More>>

ALSO:

Improving: Report Shows New Zealand Air Quality 'Good'

Our air 2018, produced by the Ministry for the Environment and Stats NZ, shows that while some previously known issues persist, progress has been made and levels of some pollutants are declining. More>>

ALSO:

Greenpeace: Govt Extends OMV Exploration Permit

The Government has just granted oil giant OMV a two-year extension to drill in the Great South Basin, despite issuing a ban on new oil and gas exploration permits in April. More>>

ALSO: