Although this week’s inflation numbers were slightly above expectations, it is still too early for the Reserve Bank of New Zealand to increase the OCR without yet more collateral damage to the manufacturing and exporting sector, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive John Walley says, “While domestically we are seeing some positives, our value added exporters and import competing manufacturers are still confronting volume and margin challenges.”
“Increasing our OCR, in stark contrast to the rest of the world, would be making a choice to further elevate our currency from levels that are already too high. It is better to deal directly with the property problem and the underlying threat to financial stability.”
“A rising bias to our OCR would put us out of step with most other economies, world markets remain fragile and most countries are still holding or even relaxing their own monetary policy.”
“The recently reported price increases are not widespread throughout the economy and at this point the full effectiveness of the LVR restrictions are not yet clear.”
“There is still time and space to wait and see what the world brings and likely hold off any increases in the OCR for much of 2014.”
“Our NZMEA Survey of Business Conditions showed total turnover for November increasing by 10.53%, with domestic turnover decreasing 3.95%, and export turnover improving 24.86%.”
“This is a change from the trends throughout 2013, which saw domestic activity generally improving, while exports experienced a more downward trend.”