Hopeful forecasts prevent much needed OCR cut
Overly optimistic forecasts are again behind the decision not to cut the Official Cash Rate (OCR) say the New Zealand Manufacturers and Exporters Association (NZMEA). Continued low growth, and broader economic conditions that prevent any realistic expectations of faster export growth, justify a cut.
NZMEA Chief Executive John Walley says, “It is clear to anyone involved in the export sector that current performance is poor and prospects for future growth are no better. This is largely the result of the Reserve Bank’s high interest rate policies that drive up the exchange rate reducing export returns.”
“The International Monetary Fund (IMF) has stated that a 15 percent drop in the NZ Dollar would be needed to balance our current account in their Country Report on New Zealand – this should be an aim for the Government, Treasury and the Reserve Bank.”
“The overcooked forecasts we see underpinning the actions of the Reserve Bank and Government are a result of a lack of absent connections to the real economy by our institutions. Clearly those building these forecasts are out of touch with our trading reality.”
“We need a cut in the OCR next time around and a clear statement that more will be done in the macroprudential area to take some speculative pressure of the currency and give exporters a chance. Quite why the Reserve Bank stands by as 95 percent home loans reappear in the market again so soon after a housing bubble is beyond me.”