Cut the OCR - 14 September

Cut the OCR - 14 September

The Reserve Bank jumped the gun with Official Cash Rate (OCR) increases and the rate must now be cut say the New Zealand Manufacturers and Exporters Association (NZMEA). While the damage cannot be undone, a lower interest and exchange rate going into next year will provide a more stable recovery.

NZMEA Chief Executive John Walley says, “Manufacturing volumes are at a 10 year low according to Statistics New Zealand, and while our own surveys show things are starting to pick up, exporters need help to lead the recovery.”

“We have always been of the view that September should have been the first point to even consider a rate increase; add in the South Canterbury Finance collapse and an earthquake in Christchurch, and the OCR hikes are looking increasingly unnecessary.”

“In the Global Competitiveness Index released last week New Zealand ranked 79 out of 139 countries on interest rate spreads (difference between typical lending and deposit rates) compared with a ranking of 23rd overall,” says Mr Walley. “Exporters need better alignment.”

“Our high interest rates and the resulting high exchange rates are continuing to put the real economy at risk. Faltering recoveries in Europe and the United States have caused their central bankers to signal lower rates for much longer, threatening our export volumes and margins. We need a rate cut to send some strong signals on the exchange rate to support exporters.”

ENDS

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