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


Dr Bollard DO NOT cut the Official Cash Rate

Dr Bollard DO NOT cut the Official Cash Rate

Dr Bollard DO NOT cut the Official Cash Rate!! A cut in the cash rate to 6.5% is going to do nothing to help New Zealand’s property market or New Zealanders in general. New Zealand has been in recession for at least two quarters and “Mainstreet” is holding very well. This can chiefly be attributed to the very high employment levels. New Zealanders do not need an aggressive interest rate cut.

The reality of the Global Credit Crunch is that access to the Interbank market for cash is the most important factor. This cash is raised based on the London Interbank Offer Rate for New Zealand dollars. When our banks go to that market they need to be armed with a standout interest rate that they are able to pay. If New Zealand banks are forced to lower interest rates domestically it hampers their ability to outbid other countries for the cash they need. The Reserve Bank has a greater need to secure our banking system than it does to encourage domestic demand for debt.

International capital flows are based largely of the difference between each countries’ domestic interest rate. If “Interest Differentials between countries” narrow the cash will flow to the strongest country and New Zealand cannot possibly standout against the United States. Our only hope is offer a higher interest rate to offset the risk of lending to a small country.

It is in New Zealand best interest to have strong banks that have constant access to the funds they need to rollover their offshore facilities. The last thing banks need is to see their net margin reduced which in turn reduces their ability to raise cash internationally; cutting the OCR is a really bad idea.

Look through the eyes of an international bank. Why would they invest in New Zealand ahead of say the US? The only compelling reason is to gain a higher return and we must be in a position to offer them a risk premium to ensure access to the funds we as a country need. Dr Bollard, don’t cut the OCR.

Fraser Guthrie



© Scoop Media

Business Headlines | Sci-Tech Headlines


Water: Farming Leaders Pledge To Help Make Rivers Swimmable

In a first for the country, farming leaders have pledged to work together to help make New Zealand’s rivers swimmable for future generations. More>>


Unintended Consequences: Liquor Change For Grocery Stores On Tobacco Tax

Changes in the law made to enable grocery stores to continue holding liquor licences to sell alcohol despite increases in tobacco taxes will take effect on 15 September 2017. More>>

Back Again: Government Approves TPP11 Mandate

Trade Minister Todd McClay says New Zealand will be pushing for the minimal number of changes possible to the original TPP agreement, something that the remaining TPP11 countries have agreed on. More>>


By May 2018: Wider, Earlier Microbead Ban

The sale and manufacture of wash-off products containing plastic microbeads will be banned in New Zealand earlier than previously expected, Associate Environment Minister Scott Simpson announced today. More>>


Snail-ier Mail: NZ Post To Ditch FastPost

New Zealand Post customers will see a change to how they can send priority mail from 1 January 2018. The FastPost service will no longer be available from this date. More>>


Property Institute: English Backs Of Debt To Income Plan

Property Institute of New Zealand Chief Executive Ashley Church is applauding today’s decision, by Prime Minister Bill English, to take Debt-to-income ratios off the table as a tool available to the Reserve Bank. More>>