Forum Archive Index - January 2001

["Ian Andrews" <iandrews@i4free.co.nz>]

A short term interest rate cut would be difficult to justify in New Zealand immediately because of the structural changes which have made the economy less efficient over the past year - compared with our trading partners.Only a cyclical dip in the exchange rate this year has masked this.We're a lot less cost-conscious than we were. The Employment Relations Act will increase unit labour costs, so there seems to me to be a real risk to inflation in a rate cut - even if long rates have already fallen in December & given us a "negative yield curve" for the first time in 2 years.

 

New Zealanders may be telling pollsters they feel more confident as consumers & businesspeople, but they are not yet reflecting this in their investment behaviour. Dr Brash seems to be waiting for us to stop telling pollsters we intend raising our prices. To reveal what we are really thinking, look at the interest rate statistics at www.rbnz.govt.nz - NZ financial markets don't seem to be preparing for lift-off anytime soon.

 

Ian Andrews