The Reserve Bank seems to have recognised the weaknesses in our trading partners that should have prevented any Official Cash Rate (OCR) hikes until this point, but has not found the resolve to reverse earlier hikes.
The two hikes have and will continue to reduce growth in the export economy say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive John Walley says, “There has been talk of further quantitative easing in the United States, and the Bank of Japan has just intervened in currency markets to bring down the value of the Yen. We will see our growth prospects continue to suffer while these comparisons are ignored.”
“Debt has become the dominant force in the economy with businesses and households choosing to retire debt rather than invest or consume. This means lower inflationary pressure over the medium term.
“This begs the question: why has monetary policy stimulus been removed? The tradeable sector has never been an inflation driver, and with the domestic pressure gone there is no reason to inflict damage on the tradeable sector. As we have said previously, pride should not get in the way of a prudent decision.
“The message is simple; we will not see new export investment leading the recovery with the dollar at 72US cents.”