Wednesday, 7 August 2019

Reserve Bank takes massive bet against economy

“The Reserve Bank’s decision to cut the Official Cash Rate by two steps is another massive bet against the economy and a condemnation of the Government’s economic policy,” according to ACT Leader David Seymour.

“The Bank dropped the OCR a step in March, now they’re dropping it another step. It’s good news for mortgagees, for now, but more bad news for savers, and a terrible omen for the New Zealand economy.

“The decision also reflects the change in policy brought about by this Government. All through 2015 and 2016, inflation was almost nonexistent and certainly much lower than it is now. Now the Government has introduced an employment target, and the Bank is making big cuts to interest rates despite CPI being near the midpoint of the target.

“The Government’s policy of trying to influence employment with monetary policy is wrongheaded but that’s what they are trying and, along the way, the Reserve Bank is predicting employment will rise.

“This Government has wasted billions on corporate welfare, Fees Free, and all manner of handouts, while restricting foreign investment, banning whole industries without warning, and dangling a capital gains tax over the country for 18 months. It should be little wonder that the Reserve Bank doesn’t like the economy’s chances going forward.

“Of course, more responsible spending, tax cuts, and real reform to economic handbrakes such as the RMA could have given the economy real stimulus by now, but those options are all out of favour with this Government and we are all the poorer for it.”