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OCR should be cut to spur growth in productive economy

The Reserve Bank of New Zealand (RBNZ) should be seriously considering a cut in the Official Cash Rate (OCR) for tomorrow’s decision. With inflation remaining low and a currency which has been overvalued for a long time, a cut to the OCR could help improve conditions for manufacturers and our productive economy.

“Inflation remains low at 1.1% annually and our OCR, at 1.75%, still sits above most of our trading partners. Instead of signalling holding interest rates for longer, the RBNZ should go ahead and cut to help boost the productive sectors of our economy and help further moderate our high exchange rate to improve conditions for exporters and import competing manufacturers.” says Dr Dieter Adam, CE, The Manufacturers’ Network.

“The RBNZ has done some good work in the field of macro-prudential tools (Loan to Value Ratios) to help sure up the financial stability risk of bank lending into the housing sector - this should give RBNZ additional confidence to cut the OCR now. We would encourage the Bank to continue this work in this area, particularly in Debt to Income ratios." said Dr Adam.

ENDS

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