Calls yesterday by the Green Party for Reserve Bank
governor Graeme Wheeler to cut the official cash rate from the
current 2.5% to protect New Zealand jobs are not likely to be
Green Party co-leader Russel Norman said yesterday that with
inflation running below expectations and the New Zealand
dollar trading at near record levels, Mr Wheeler should act
to protect jobs in the export and manufacturing sectors by
cutting the OCR.
''The governor cannot continue to sit on his hands while the
runaway dollar leads to job losses and reduces the
competitiveness of our export sector.
''A lower OCR is likely to take pressure off our overvalued
exchange rate, helping exporters and manufacturers who
compete with imports.''
A decision to leave the OCR unchanged today was a conscious
decision that would wreck a vital part of the New Zealand
economy, Dr Norman said. ''It's time for Graeme Wheeler to
start fighting for New Zealand's productive economy,'' he
BNZ senior economist Craig Ebert said there were some broad
factors counselling a softer OCR policy but he still expected
Mr Wheeler to ''play things down the middle'' and keep the
OCR at 2.5%.
Among the signs that were pointing to a softer policy were
low inflation and the high New Zealand dollar.
Annual inflation was likely to remain subdued over the first
half of this year, promising to further dampen inflation
expectations. And as it stood, the New Zealand trade-weighted
index - the basket of currencies of New Zealand's trading
partners - was about 3% higher than the December Monetary
Policy Statement assumed for the first quarter, he said.
Rural production concerns were starting to arise for some
North Island areas, given the recent hot and dry weather.
''We could feel all the more of a drag considering the superb
year-to-June growing season.''
There were also signs of a cooling in the Australian economy,
Mr Ebert said.
But there were factors pointing for less OCR stimulus,
including the strengthening of the New Zealand growth
indicators. Some of those suggested economic growth (GDP) of
4% this year, well above current growth. There was
accumulating evidence of a rebound in construction.
''While this is, understandably, centred on the Canterbury
rebuild, there are signs it is drawing on resources from
other parts of the country.''
Other factors included a housing market heating up, a pick-up
in credit and immigration turning positive.
In theory, there were still big things to keep the Reserve
Bank cautious. But in practice, there were emerging trends to
broach the subject of a higher New Zealand OCR.
''We don't envy the Reserve Bank's task in weighing it all