The Reserve Bank's decision to cut the official cash rate (OCR) from 3.5% to 3% triggered a rapid response from retail bankers.
BNZ announced it was passing on the full OCR rate cut for agribusiness overdrafts and business overdraft and variable rates.
"Matching today's OCR cut signals our continued support for our client base through what are clearly challenging times," said Craig Haycock, the general manager of BNZ Partners in a statement.
Retail banks have been copping flak from some industry lobbyists, particularly Federated Farmers, for allegedly being slower to pass on rate cuts to farmers and other businesses, than to households with mortgages.
Mr Haycock said the bank was also signalling that it had a strong appetite for quality "new-to-bank" business.
Its rapid repay farming rate was cut from 8.45% to 7.95%, an agribusiness farm first overdraft rate from 10.45% to 9.95%, and a farm first variable rate from 10.20% to 9.70%. A rate for agribusiness old overdrafts dropped from 11.95% to 11.45%, and a revolving credit rate from 11.35% to 10.85%.
Similarly, business overdrafts fell from 10.95% to 10.45%, rapid repay business loans from 9.75% to 9.25%, corporate prime loans from 10.35% to 9.85%, and personal overdrafts from 13.60% to 13.10%.
Westpac New Zealand said the 50 basis point drop in the OCR was what it had expected and that customers would benefit with a 0.4% cut to Westpac's floating mortgage rate (to 6.49%) becoming effective for its customers on March 19 - a change which was actually announced a month earlier.
At the same time Westpac reduced its six-month fixed rate to 5.79% from 5.99%.
Westpac said it was still reviewing other rates, but said significant cuts to fixed term mortgage rates were unlikely because the expectation of today's cuts had already been included in its calculations.
ASB economist Jane Turner said the OCR cut to 3.0% "slightly disappointed" the market, which she said had been expecting a cut double that size, of a full percentage point.
"The RBNZ is now sending a strong signal that it does not want to cut the OCR by much more," she said.
The key was in the last paragraph of central bank's statement, in which the RBNZ emphasised future cuts will be significantly smaller, saying: "We do not expect to see in New Zealand the near-zero policy rates of some countries. New Zealand needs to retain competitiveness in the international capital markets".
Ms Turner said she now expected the RBNZ to finish off the easing cycle at 2.5%, with 25 basis point cuts in both April and June.
But she also warned there was potential for interest rates to be taken lower despite the RBNZ's reluctance, because its medium term growth forecasts were very optimistic, in expecting the economy to exit the recession by mid-2009.
"We think early 2010 more likely," she said.
The RBNZ was also "optimistic" when it forecast only a very shallow downturn in business investment and a very strong recovery in export volumes, aided by a very weak exchange rate.
"There remains a possibility of the cash rate still going to 2%," she said.
