Reduction in interest rate and coordination with government welcome

The CTU welcomed the Reserve Bank's significant 0.5 percent reduction in the Official Cash Rate to 2.5 percent today. "This recognises not only the effects of the disastrous Christchurch earthquake but the fact that the economy is in - or is at least close to - recession again. It was the right action to take," said Bill Rosenberg, CTU Economist.

Alan Bollard noted that even before the earthquake, GDP growth was much weaker than the RBNZ had expected.

"We also welcome the action taken by the Reserve Bank to coordinate its decision with government actions. The Bank consulted with the Minister of Finance in order to co-ordinate monetary and fiscal policy. While the Bank justified this on the basis of the National Emergency, we believe that closer coordination of policies in general would add to their effectiveness."

The CTU hopes that the government will focus on the needs of Christchurch and the recessionary conditions in its direct response to the earthquake and in the May Budget. "There is continuing high unemployment which has not been addressed. Christchurch clearly has high needs for a generous response. The Reserve Bank has shown that it is ready to do its bit, although it could also consider provision of funding for the earthquake rebuilding and to assist investment in the wider economy", said Rosenberg.

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