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Economists looking for a kick start

Economists are expecting Reserve Bank governor Don Brash to cut the official cash rate again by at least 25 basis points on Wednesday when he releases the central bank’s latest monetary policy statement.

Monday, May 14th 2001, 2:48PM

by Jenny Ruth

That would bring the OCR down from 6% to 5.75%.

WestpacTrust and National Bank are hanging out for more, saying a 50 point cut is needed.

"We’ve been pretty disappointed with the lacklustre interest rate sensitive side of the economy. We were expecting more domestic spending momentum that we’re seeing," says WestpacTrust chief economist and former Reserve Bank chief economist Adrian Orr.

While the New Zealand economy continues to be out of sync with the rest of the world, growing while global growth is contracting, the Reserve Bank still has a window of opportunity to kick start the domestic side of the economy before the global contraction starts to weigh down the export sector, Orr says.

National Bank chief economist Brendan O’Donovan is of a similar view and says a 50 point cut is needed to resuscitate flagging business confidence.

He notes that domestic price and cost pressures are subdued and that the prospects for world growth are also considerably weaker than the Reserve Bank was expecting in March.

Nevertheless, there’s still a big risk that Brash will maintain his previous cautious stance and cut only 25 points, O’Donovan says. "It comes down to a should and a will argument," he says.

If Brash does opt for only 25 points, it will mean an even bigger difference between New Zealand interest rates and global rates. While both our Reserve Bank and the US Federal Reserve started this year with their benchmark rates at 6.5%, the Fed has cut its rate to 4.5%. Next Wednesday morning our time, the Fed is expected to cut its rate to just 4%.

ANZ Bank takes the more mainstream view that Brash should only cut by 25 points, citing domestic inflation risks. It points to last weeks figures showing the unemployment rate fell to 5.4% in the March quarter, its lowest level since June 1988.

While the decline was due to a decline in the number of people participating in the labour market, the participation rate at 65.6% is still high by historical comparisons, says ANZ Bank economist David Drage.

And while employment was flat in the March quarter, the 0.8% rise in full-time employment and 2.5% in part time employment still nets out at 0.3% growth in full-time job equivalents, he says.

"We still think the Reserve Bank will cut, given global growth concerns, but it (the employment data) will reinforce a lot of the concerns the bank voiced in April," Drage says.

« Home affordabilityBanks rush to cut rates following RB announcement »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 28 March 2024 9:42am

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