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Another Interest Rate Cut is Needed


03 June 2003

Another Interest Rate Cut is Needed

The Council of Trade Unions secretary, Paul Goulter, says the official cash rate should be cut to 5% this week.

“The reasons for a 0.5% cut are that there is now quite a strong combination of adverse factors affecting the economy and this could mean a sharper slowdown than previously anticipated,” he said today.

“In addition, such a cut is more likely to stem an appreciation of the New Zealand dollar which would be welcomed by the export sector.”

Paul Goulter said a cut of this nature would strengthen business confidence and ensure there was a continued incentive to invest in growth.

“Obviously workers feel the brunt of any slow down and we want to avoid that as much as possible,” he said.

“Recent data on housing, retail sales, producer prices, wages and trade point to a weakening economy and a low inflation outlook. Business confidence is also low.”

Paul Goulter also expressed concern at the weak global economy, with little sign of any substantive growth in our major trading partners.

“In this situation, the only sensible action for the Reserve Bank is to continue with the approach shown in April when the official cash rate was cut for the first time since November 2001,” he said.

“There is still plenty of room for the bank to act as our interest rates are still internationally very high.”


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