Rate cut welcomed but it won't stimulate spending

Media release

Newmarket Business Association

Thursday 12 March 2009

Rate cut welcomed but it won't stimulate much extra spending

A key Auckland retail group says the Reserve Bank's latest cut to the Official Cash Rate will be welcome news to many mortgage holders, but New Zealand's retailers won't be holding their breath.

"After six months of doom and gloom, the consumer is very wary. I think householders that find themselves with any extra money are probably now more likely to save it than spend it. Consumers are very gun shy at the moment and so I don't think this cut will stimulate much extra spending," says Cameron Brewer, head of the Newmarket Business Association.

"It's also important to note that about 80% of mortgage holders are on fixed mortgages, so for them there is no immediate relief. What's more for the likes of retirees burnt by finance companies and now relying on bank interest, cuts only reduce their spending power."

“Overall this cut is a positive signal and will help some people and businesses clear some debt before winter," says Cameron Brewer.

ENDS

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