Reserve Bank Too Quick to Hike OCR

3 July 2002

Once again the Reserve Bank has stepped out of line with international practice. “The hike to an OCR of 5.75 per cent is a little bit premature bearing in mind that the Australians have chosen to leave theirs at 4.75 per cent,” said John Walley, Chief Executive of the Canterbury Manufacturers’ Association.

Tightening interest rates in NZ while there is no change in Australia has multiple impacts on NZ manufacturers. The cost of interest locally will increase and there will be a negative impact on the cross rate with the Australian dollar, widening the competitive gap with this key market for our manufacturers.

Australian pragmatism versus New Zealand’s economic purity perhaps?

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