RBNZ remains reluctant to act

RBNZ remains reluctant to act – 8 December

The Reserve Bank’s reluctance to act upon serious economic problems demonstrates the need for Reserve Bank Act changes say the New Zealand Manufacturers and Exporters Association (NZMEA). The Reserve Bank left the Official Cash Rate at 2.5 percent this morning.

NZMEA Chief Executive John Walley says, “The RBNZ has offered a dismal forecast with a worse alternative scenario which looks all too probable at this point, yet apparently there is no need for action.”

“The RBNZ has reported drops in its business investment forecast; the central banks of the USA, Europe, the UK, Canada, Japan and Switzerland have clearly stepped up but not the RBNZ.”

“We still lack the macroeconomic conditions to support export growth. The Reserve Bank’s comment that, ‘the depreciation of the New Zealand dollar provides some support for the tradable sector of the economy’ is really strange. A TWI under 60, not almost 70, would be needed to support the tradable sector.”

“A wider set of targets for the Reserve Bank to include export growth, and a focus on domestic rather than headline inflation, would help to galvanise the culture of inaction at the RBNZ.”

“Contractions in manufacturing volumes suggest that change is urgent. The Reserve Bank of Australia cut yesterday; we wonder just how bad the world has to get before we see the same sense of urgency from the RBNZ.”

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