The New Zealand Manufacturers and Exporters Association has welcomed the official cash rate being cut to 3.25% but says the Reserve Bank should do so again in July if current conditions persist.
Yesterday the Reserve Bank of New Zealand (RBNZ) cut the OCR to 3.25%, reflecting low inflation, weakening demand, low commodity prices and a high exchange rate.
“It will help to bring New Zealand’s settings closer in line with that of our competitors, says NZMEA chief executive Dieter Adam.
“Manufacturers and exporters have been working hard to compete in trying conditions for some time and today’s cut will be appreciated. New Zealand’s interest rates have been an outlier compared to the rest of the advanced world for some time, and weakening conditions, low inflation and our overvalued currency justify the RBNZ’s move.
“The RBNZ continue to describe our currency as overvalued, which has been hitting exporters and import competing manufacturers’ competitiveness – this OCR reduction will help to bring our currency back in line and continue its downward trend. We would encourage the RBNZ to cut again in July if current conditions persist,” says Adam.
“The cut will help commodity exporters through lower borrowing costs and currency – but continued low commodity prices highlights the need for our economy to become more diverse, both in the products we make and the markets we sell them,” he says.
