OCR Cut Justifies WestpacTrust's Bold Move

WestpacTrust is the New Zealand division of Westpac Banking Corporation, which is incorporated in New South Wales, Australia

14 March 2001

OCR CUT JUSTIFIES WESTPACTRUST'S BOLD MOVE

The Reserve Bank’s 0.25% cut in the Official Cash Rate today justifies WestpacTrust's bold move to lower its floating home loan interest rate in January to 8.25% per annum.

Before today, WestpacTrust was the only major bank to have lowered its floating interest rates this year.

“WestpacTrust customers have been saving over $1 million per month in interest since we lowered our rates on 11 January,” said WestpacTrust General Manager Retail Ross Aitken. “That really shows which bank is one step ahead and which banks are one step behind.

“Not only have we anticipated financial market developments, we have passed on the benefits of a lower floating interest rate to our customers. In doing so we have taken a significant financial risk that wholesale rates would not fall,” said Mr Aitken.

WestpacTrust chief economist Adrian Orr said: “The Reserve Bank today joined many other central banks in the world and lowered their official interest rate.

“The Reserve Bank clearly sees this move as a risky strategy, given the current high inflation pressures and strength in the export sector. However, the clouds hanging over the economies of the United States, Australia and Japan have outweighed these inflation fears, with the Reserve Bank buying some 'growth insurance'.

“Today’s lower interest rate from the Reserve Bank is aimed at breathing more life into domestic spending. This is a pre-emptive move to take up some of the potential slack in the economy if the demand for New Zealand’s exports slows. WestpacTrust anticipates economic growth of at least 3% this calendar year, with domestic spending picking up the pace, following in the footsteps of the export sector,” said Mr Orr.

ENDS

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