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

 


Deflation spectre portends cut to OCR needed

edia statement Friday, January 18, 2013

Deflation spectre portends cut to OCR needed

In light of the latest CPI result today the Reserve Bank should review how it assesses inflation and cut the official cash rate, the Employers and Manufacturers Association says.

"With inflation below the Reserve Bank's mandated target for three consecutive quarters now the official cash rate should be cut, said Kim Campbell, EMA's chief executive.

"Lowering the OCR makes sense for three important reasons:

1) It would help keep us in line with interest rate cuts in Australia, our largest trading partner, thereby maintaining the trans-Tasman cross rate at its present favourable level. Further falls in the Australian dollar could well stifle our exports to Australia and short circuit our fragile recovery.

2) It should keep us within the central bank's mandated target range for inflation by holding CPI prices between one and three per cent over the medium term.

3) It would make investment in productive enterprise more attractive; interest costs are a hand brake on investment.


"If we're lucky it might also help bring our exchange rate down marginally.

"The Reserve Bank needs to separate out the price inflation in Auckland's housing market from the deflation elsewhere in the economy. For example the Producers Price Index has been negative for many months, and Auckland's house prices are driven by insufficient stock due to few new houses being built over recent years.

"No adjustment to interest rates will make any difference to the present lack of housing.

"If housing affordability is an issue, that's hardly the responsibility of the Reserve Bank and we fail to see why the productive sector should be punished for a lack of housing stock.

"Some groups advocate a change to the Reserve Bank Act. That's unnecessary. All the Bank has to do is stick to its own rules."


ENDS

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Research: ‘Ageing Well’ Science Challenge Launched

Science and Innovation Minister Steven Joyce today launched the Ageing Well National Science Challenge, confirming initial funding of $14.6 million. More>>

ALSO:

Scoop Business: Govt Resisting Pressure To Pump More Cash Into Solid Energy

Prime Minister John Key says it is “not the government’s preferred option” to make a fresh capital injection into the troubled state-owned coal miner, Solid Energy, but dodged journalists’ questions at his weekly press conference on whether that might prove necessary... More>>

ALSO:

Lagest Ever Privacy Breach Award: NZCU Baywide Accepts “Severe” Censure In Cake Case

NZCU Baywide says that once it was found to have committed a breach of a former staff member’s privacy, it had attempted to resolve the matter... the censure and remedies for its actions taken almost three years ago are “severe” but accepted, and will hopefully draw a line under the matter. More>>

ALSO:

Scoop Business: PayPal Stops Processing Mega Payments; NZX Listing Still On

PayPal has ceased processing payments for Mega, the file storage and encryption firm looking to join the New Zealand stock market via a reverse listing of TRS Investments, amid claims it is not a legitimate cloud storage service. More>>

ALSO:

Housing Policy: Auckland Densification As Popular As Ebola, English Says

Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. More>>

ALSO:

Crown Accounts: NZ Government Deficit Smaller Than Expected In First Half

The New Zealand government's operating deficit was smaller than expected in the first six months of the financial year, as the consumption and corporate tax take rose ahead of forecast in December, having lagged estimates in previous months. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news