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

 

Orr urges business, govt to take advantage of cheap finance

(Headline abbreviated, original headline: RBNZ's Orr urges business, govt to take advantage of cheap finance)


By Rebecca Howard

Aug. 28 (BusinessDesk) - Reserve Bank governor Adrian Orr wants businesses and government to take advantage of low interest rates and invest in long-term projects, but says savers may need to re-think relying on low-risk term deposits.

"Businesses and governments should be re-assessing their hurdle rates on their investment projects. Low and stable global interest rates mean that what was once costly may now be a sound investment for the future," he said in a comment published on the Reserve Bank's web site after attending the annual central bankers’ gathering at Jackson Hole in Wyoming.

He reiterated that monetary policy remains as effective as ever and "for small open economies like New Zealand, the exchange rate plays a significant additional role in competitiveness." The kiwi recently traded at 63.60 US cents, down around 5 percent since the beginning of the year.

"Our research gives us confidence that even at these low levels of interest rates, monetary policy remains as effective as ever at providing timely economic stimulus," he said.

The interest rate lever, however, is "blunt" and it is "not personalised."

"Savers - investors - and consumers are treated equally, and are often the same person doing various activities. We make our interest rate decision to best bring about prosperity and wellbeing of all New Zealanders in the long-term," said Orr.

"There are different outcomes for different people. Homeowners may feel wealthier, those outside of this asset market would be facing a higher price to buy but at more affordable servicing costs. Savers in low-risk deposits will need to invest more actively - and so on," he said.

RBNZ data show New Zealand households held $180.9 billion in deposits at March 31, of which $177.98 billion was with banks.

New Zealand's central bank cut the official cash rate by 50 basis points earlier this month to a record low 1 percent due to an expected decline in trading partner growth, lower New Zealand inflation expectations, and a global swing to lower interest rates, said Orr. The rate cut also "reflected the ongoing funk global and domestic business confidence is in."

He said, however, central banks cannot operate alone.

Monetary policy "has its limitations and needs to be partnered with broader fiscal and structural economic policy - the domain of the government of the day," he said.

Likewise, business people need to consider a much longer-term horizon when investing.

Orr said the central bank understands that lower interest rates do not remove global political uncertainty "but they do offer greater certainty on the financial and investment front."


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

NIWA: Scientists Say Methane Emitted By Humans ‘vastly Underestimated’

NIWA researchers have helped unlock information trapped in ancient air samples from Greenland and Antarctica that shows the amount of methane humans are emitting into the atmosphere from fossil fuels has been vastly underestimated... More>>

ALSO:

SMC Expert Reaction: Record Dry Spells And Effects On Forests

With no rain forecast before Sunday, Auckland is about to break a record for the city's longest dry spell. Niwa says Auckland is likely to hit 40 consecutive days without rain this weekend . The upper North Island is seeing severe meterological ... More>>

ALSO:

Reserve Bank: Official Cash Rate Remains At 1.0 Percent

The Monetary Policy Committee has decided to keep the Official Cash Rate (OCR) at 1.0 percent. Employment is at or slightly above its maximum sustainable level while consumer price inflation is close to the 2 percent mid-point of our target range. ... More>>

ALSO:



Science Media Centre: Novel Coronavirus Detected In China – Expert Reaction

The virus was detected after more than 40 people were hospitalised with pneumonia in Wuhan City, China and the outbreak traced to a large animal and seafood market. The Centers for Disease Control and Prevention reports that person-to-person transmission ... More>>

ALSO:

NZ First: Launch Of Parliament Petition To Remove Aluminium Dross

This afternoon to a crowd of over 100 people in Mataura -- Mark Patterson, New Zealand First List MP based in Clutha-Southland launched a parliamentary petition regarding the aluminium dross issue in Mataura, Southland. The petition asks that the House ... More>>

ALSO: