Interest rate cut was the right move, Key says

Reserve Bank governor Alan Bollard took "absolutely the right step" when he lowered the Official Cash Rate from 3 percent to 2.5 percent, Prime Minister John Key says.

"He'll have given confidence to the rest of the country," Mr Key told reporters in Christchurch today.

"Lower interest rates help consumers, they help business and they help the construction sector."

Mr Key said New Zealand now had competitive interest rates and the exchange rates were increasingly competitive as well.

Finance Minister Bill English said the Government and the Reserve Bank were trying to work through "quite a lot of uncertainty".

He said the economy was weaker than had been expected during the last half of last year as people saved more and less money went into retail spending and housing.

Mr English also thought the rate cut was a confidence-boosting move and said growth would pick up over the next two to three years.

"In the financial year we are in we are going to be spending a lot more than we budgeted for in May last year," he said.

"But in the budget (in May this year) we will be looking at how we can offset the increased debt that we are taking on right now."