Interest rate cut no surprise

The Reserve Bank's quarter per cent cut to interest rates today won't be the last this year, the Employers & Manufacturers Association (Northern) says.

"With tourism stumbling, exporting stalled, and production other than for housing going south, the interest rate cut today looks cautious," said EMA's chief executive Alasdair Thompson.

"New Zealanders should be concerned that we haven't seen more investment in skills and equipment that can expand our value added production base while the good times lasted.

"But investment growth has largely been restricted to primary agriculture and housing stock, neither of which has the capacity to sustain our standards of living should a world recession take hold.

"With our interest rates still well above Australia's, and 3.75 per cent higher than the US official rate, arbitrage activity has seen our exports contributing to the wealth of US and other managed funds offshore.

"We have consistently said our interest rates have been on a higher plateau than necessary. We are optimistic the Reserve Bank will come to the same conclusion.

"To stimulate investment-led growth we need to see a one off downward adjustment to re-align our economic prospects more realistically with those of our major trading partners."

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