Thursday, August 8, 2019

Crikey OCR


Is the economy so bad that we have to have negative interest rates to keep it moving in the right direction? 

That message is in itself enough to cause business confidence to decline at a faster rate than it is already.

There is a gaping disconnect between the actions of the Reserve Bank in reducing the OCR yesterday by 0.5% to 1.0%, and the words coming out of the Beehive. 

The RB's action says things are now more dire than they were during the Global Financial Crisis. 

The buzz from the Beehive is "Be happy. Life's Good. Vote Labour."

Given how little faith people have in politicians, I suspect consumers and business owners will take a lead from the actions of the Reserve Bank, but not the words of the Governor who says, "Save the economy: Borrow and spend".

Borrowing more is the last thing consumers and business people will do if the future is looking uncertain. 

They will do what people always do - batten down the hatches and weather out the storm.

Rather than save the economy, the RB Governor is more likely to have accelerated the decline.

Frank Newman is an investment analyst and former councillor on the Whangarei District Council.

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