NZ urged to copy US interest drop

By Phil Boeyen, ShareChat Business News Editor

Thursday 4th January 2001

The New Zealand Reserve Bank is being urged to follow the move by the United States to cut interest rates.

Earlier today US Federal Reserve chairman Alan Greenspan cut interest rates by half a percent, even though no announcement was due until the end of the month.

The move took markets by surprise but they were quick to react positively to the news, with the Nasdaq steaming ahead almost 15% in one day, its highest-ever one day gain.

NZ Employers and Manufacturers Association spokesman, Alasdair Thompson, says the US Federal Reserve's early action to cut interest rates should be copied in New Zealand urgently.

"If it's good enough for Greenspan to bring forward his announcement on interest rates by nearly a whole month, it is critical that Dr Brash follows suit."

"Greenspan's quick response to the investment nosedive in US stockmarkets should invite Dr Brash to take look at the pitiful performance of ours, which has also been going on much longer."

Mr Thompson says official figures also show investment in New Zealand production capacity and new jobs has been slipping backwards for several years, and investment in manufacturing capacity, including dairy and meat processing, declined again in the September quarter last year by a further 22%.

"A drop in interest rates now should help correct this worrying trend. Any immediate fear of inflation is rapidly receding with a fuel price war underway and the NZ dollar steadily recovering."

Mr Thompson says there is no sign of any home grown inflation and the Reserve Bank must take the initiative with urgency.

"Unwarranted delay could put at risk the present, modest export growth spurt."

Comments from our readers

No comments yet