And we had a cut today - it was 25 basis points down to 3 percent - and now there's the expectation that we will maybe get down to 2.5 percent before this thing bottoms out.
2.5 percent is where Jarrod Kerr has been saying for months that we need to get to.
But even though he's been saying it since at least September last year, if not earlier, the Reserve Bank has only just caught up with him. Up til now, they've been talking about 2.75 percent, 3 percent maybe.
Now, what you should take from this is that the Reserve Bank is surprised by what Jarrod Kerr - and you could argue many of us - have been seeing for ages, which is that the economy is properly, properly stuffed.
Like, stuffed enough that they should be cutting a lot more than they are.
Why this is a surprise to them is beyond me, because you just need to look at what's going on with businesses today to see it.
Fletcher: a massive loss.
Spark: profit down massively, huge job cuts there.
Kitchen Things: in receivership.
Now, some of that will be absolutely because of poor decisions, but some of that is because we are in an economic funk - recession - as bad as anything in my entire life.
I mean, the last time we saw anything this bad was the 80s, but some indicators say the 70s.
So why the Reserve Bank hasn't cut more, including today, is baffling. They debated it, by the way - it did occur to them.
Four of them voted for the 25 basis point cut that we got, two of them voted for a double cut of 50 basis points. That mean two of them can see what the rest of us can see, but the four win, unfortunately.
The fact that they cut today and indicated they will cut more than they had previously expected to cut is a sign that they made a mistake when they didn't cut last time and opted to hold instead.
The Reserve Bank is once again caught on the hop, making the economy worse than it needs to be.
If only Jarrod Kerr was running the joint.
Heather du Plessis-Allan is a journalist and commentator who hosts Newstalk ZB's Drive show HERE - where this article was sourced.
5 comments:
And the Consequences?
Currency Devaluation. More printed dollars, more debt monetization, weaker purchasing power.
Artificial Suppression of Yields… the bond market becomes a powder keg, manipulated and more dangerous.
Please stop doing economics, Heather. Yeah, Jarrod Kerr is right. Really? And all NZ's problems can be solved by monetary policy and the insights of the Chief (non) Economists at the rip-off Big Banks who have suckered you into promoting their views. Don't you know those Chief Economists aren't proper economists at all? They are performing a marketing function for their Banks by getting their blah blah empty nothingness reported for free by people like you. The Banks want lower rates to get a credit and speculative boom going to make more money for them. In fact, they are lobbying for damaging negative real interest rates. Newstalk ZB rubbish dressed up as insights is fuelling NZ's stagnation.
My observations of Business in New Zealand, that many enter into a Business and have no idea of either -
- Law - that will apply to their business, "Oh we leave that to our Lawyer"!
- Finance - you need money to start with, and using the " Mum & Dad Bank a/c" will only get you so far.
- Purchasing product, I will use 2 examples >
> home based items (plates, pots/pans, cutlery ) what market research is done prior, what other businesses are selling the same things?? Keep in mind there are >
- many stores in NZ that sell such products
- you can buy same or similar on line, not only from within NZ but also from overseas [research Ali-Baba, Temu or any other China based Company]
> Eateries - what is going to make your restaurant different - going gluten free will only get a small part of the trade, having a menu that sticks around for weeks will have people go elsewhere in this domain "foot traffic with money" brings in
the dollar
Other factors
> Customer service lack of training, poor interface with a client, staff not being asked " what can we do better"
> Staff. It would appear that in many businesses that we have a revolving door in this domain. My examples would be those businesses that sell "off the shelf" product - and many staff not knowing what is being sold or where it is within the store . Many "here today, gone tomorrow".
If you look at business "failure", then look at how they became established - Fletcher Industries is a prime example and who they "swallowed" in the move forward "cash flow" leads to what they are currently experiencing - Restaurants - failing to adapt.
The RBNZ was not involved in these but many businesses would have been looking at their Banks and the interest rates/ and repayment of same on finances obtained.
And when they do - "What finance measures do they implement, to stave off the inevitable"??
The other factor, a business that does not "place funds under the bed for a rainy day" and you get a Bill for either GST and/or from the NZ.IRS - and sadly that money is not available.
At this point "here comes the Liquidators". Followed very quickly by The Bank.
Heather, Jarrod is a smart young man and I was lucky enough to have a one on one chat with him last year. I'm unsure if he's the right man for the job but he can't be any worse that the last moron we had.
Perhaps the problem with companies like Fletchers is the total lack of top talent, on top of our silly belief that lawyers and accountants should have the top jobs.
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