RBNZ must wait until September, at least

RBNZ must wait until September, at least

The Reserve Bank must resist the urge to hike the Official Cash Rate (OCR) until at least September say the New Zealand Manufacturers and Exporters Association (NZMEA). A rate rise now would pose significant risks to the tradeable economy which is already suffering through the lack of profitability caused by an overvalued currency.

NZMEA Chief Executive John Walley says, “The argument for an OCR hike just doesn’t stack up. Export sales, business investment, job numbers and retail sales figures are weighing against an OCR rise. If the OCR is increased it could further threaten any future export recovery.”

“Comments from BERL back up results from our own survey, finding that the March quarter improvement in unemployment numbers masked the decline in jobs in our productive industries. Jobs in agriculture, forestry and fishing were down by 1,400, those in manufacturing were down 8,000, and construction employment dropped by 5,700 from March last year. These industries are the real drivers of the economy.”

“If the OCR is raised prematurely we are likely to end up in the same destructive cycle we experienced prior to the economic crisis of an overvalued exchange rate stifling our traded sector and fuelling unsustainable growth in the domestic sector,” says Mr Walley. “Central Banks in Europe and North America have shown no inclination to move up their official interest rates and our Reserve Bank should take its cue from them.”

“While the recovery remains fragile and significant international risks remain any rise in the OCR will do far more harm than good, and any signal about lower for longer will be of significant assistance to the real economy.”

ends

© Scoop Media