Reserve Bank Could Boost Business Confidence

The Reserve Bank could help boost business confidence by cutting interest rates tomorrow, says Business NZ.

Business NZ Chief Executive Simon Carlaw says if Reserve Bank Governor Don Brash decided to make a .25 or .5% cut in the official cash rate tomorrow, that would assist companies in reducing their costs, helping business confidence and helping to increase investment - which would lessen the Reserve Bank's inflation concerns.

"The Reserve Bank may be concerned about the inflationary impact of the weak dollar and the impact of any future wage increases, given our tight labour market," Mr Carlaw said.

"But the domestic market has been declining for the last two quarters, and while export growth has been good, it hasn't been enough to offset the fall in domestic growth. Also, the interest rate rises in 2000 were probably more than needed.

"So a cut in interest rates now is unlikely to be inflationary - and could do some real good for the business environment."

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