The Reserve Bank’s decision to hike the Official Cash Rate (OCR) again will stifle the export growth that needs to lead the economic recovery say the New Zealand Manufacturers and Exporters Association (NZMEA). There have been warnings from across the tradeable sector on the damage OCR hikes will do; this advice needs to be heeded.
NZMEA Chief Executive John Walley says, “Reserve Bank Governor Dr Alan Bollard noted that domestic demand, retail spending, housing turnover and business investment are all weak; this begs the question: why has he raised the rate again?”
“Hiking interest rates on the basis of business confidence and commodity prices is always going to be a risky practice. These are among the most volatile and unreliable forecasters of where the economy is going. Both of these indicators have dropped since its last announcement so the Reserve Bank should have put prudence before pride and put interest rates back on hold.”
“This must force some action from our politicians. The way the world is now we cannot afford to have a central bank policy that simply ignores growth today in order to focus on possible inflation a year or so down the track, particularly when most other central banks are pushing the ‘lower for much longer’ outlook.”
“As most of the others go ‘lower for much longer’ the RBNZ needs to accelerate the macroprudential measures to deal with inflation rather than using interest rates which tend to lift the exchange rate and are so damaging to the traded economy.”