RBNZ must respond to quantitative easing and lower interest rates elsewhere - 26 January

The Reserve Bank of New Zealand (RBNZ) needs to respond to unorthodox monetary policy implemented elsewhere if we are to see an export lead recovery this year say the New Zealand Manufacturers and Exporters Association (NZMEA). This morning the Reserve Bank announced an unchanged Official Cash Rate and no plans to match measures used in other countries – this will continue to damage our export sector via an overvalued exchange rate.

NZMEA Chief Executive John Walley says, “Around the world more money printing and other unorthodox monetary policy measures are already signalled and the policy divergence between the RBNZ and the Federal Reserve is manifest in the jump on the cross rate today. For exports to grow New Zealand must also take action on currency overvaluation.”

“The longer we run current account deficits, the more pain it is going to take to rebalance our economy.”

“Credit Suisse are already predicting that the United States Federal Reserve will print more money this year and we have seen cheap money in Europe re-fuelling the carry trade.”

“If the policy path chosen in New Zealand continues to ignore these developments, our tradable economy will continue to contract.”

“Interest rates that match those of our trading partners and other inflation control approaches that target non-traded inflation rather than headline inflation would be a good place to start.”

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