The Reserve Bank of New Zealand (RBNZ) cut the OCR today to 3.25%, reflecting low inflation, weakening demand, low commodity prices and a high exchange rate. This is welcome news for manufacturers and exporters, as it will help to bring New Zealand’s settings closer in line with that of our competitors, say the New Zealand Manufcturers and Exporters Association (NZMEA).
NZMEA Chief Executive Dieter Adam says, “We are pleased to see the RBNZ take action and cut the OCR. Manufacturers and exporters have been working hard to compete in trying conditions for some time and today’s cut will be appreciated. New Zealand’s interest rates have been an outlier compared to the rest of the advanced world for some time, and weakening conditions, low inflation and our overvalued currency justify the RBNZ’s move.
“The RBNZ continue to describe our currency as overvalued, which has been hitting exporters and import competing manufacturers’ competitiveness – this OCR reduction will help to bring our currency back in line and continue its downward trend. We would encourage the RBNZ to cut again in July if current conditions persist.
“Risks in our economy still remain, particularly around the Auckland housing market and lower commodity prices. More action may be needed to ensure house price inflation does not increase in response to lower interest rates.
‘The cut will help commodity exporters through lower borrowing costs and currency – but continued low commodity prices highlights the need for our economy to become more diverse, both in the products we make and the markets we sell them, focusing on adding value and making the most of the resources and skills we have – a strong manufacturing sector can play a leading role in achieving this and has the potential to contribute much more to our economy.”