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Greens seek rate cut after low inflation

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Greens seek rate cut after low inflation

3News NZ

Greens co-leader Russel Norman says it can afford to cut the rate next Thursday

Greens co-leader Russel Norman says it can afford to cut the rate next Thursday

The Greens are urging the Reserve Bank to cut the official cash rate next week after inflation dipped below the bank's own target.

Figures from Statistic New Zealand today put the annual rate of inflation at 0.8 percent, its lowest point for almost 13 years.

The consumers price index rose 0.3 percent in the September quarter – half the increase tipped by economists.

The annual rate has not moved by such a small amount since it rose 0.5 percent for the year to December 1999.

Annual inflation is below the Reserve Bank's 1 to 3 percent target and Greens co-leader Russel Norman says it can afford to cut the rate next Thursday.

"Low inflation gives the Reserve Bank generous scope to cut the OCR as a first step to addressing our overvalued currency," he said.

He says a cut was likely to result in a decline in bank interest rates, which could work to lower the value of the New Zealand dollar.

The Greens want the Government to print money to lower the exchange rate to help manufacturers and exporters and fund the Christchurch rebuild, but the Government has rejected both measures.

NZN

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Comments

24/10/2012 11:27:26 a.m.

Tallica1 wrote:

Interesting, so inflation has not been this low while the Labour led government was in.

17/10/2012 9:03:06 p.m.

Daniel Lang wrote:

I don't think the OCR should be lowered at this point in time. Mr Norman has some good points about his view on quantitive easing policy but not on this.

16/10/2012 4:25:01 p.m.

Bill wrote:

This Idiot is trying so hard to help his mates across the ditch. Go home Ronald McDonald, your restaurant misses you.

16/10/2012 3:51:11 p.m.

Mike wrote:

Yes the reserve bank could cut the rate by 25 pts, but they also take the conservative approach and meedle as little as possible.

We already have the lowest rates in NZ in 30 years and they are not keen on moving it lower still.

Okay, say the reserve bank did lower the cash rate by 25 pts? What would happen?

We may see maybe 1 cent knocked off the exchange rate briefly, but we may not as we still dont have as low rates as overseas. Take Germany, they have their rate set so they charge interest on them holding money, such is the crisis in the EU! This means that NZ will still be overly popular to place money with which will hold our dollar up, not because our dollar is strong, but other currencies are weak.

What else? Mortage rates may lower. But the banks haven't been expecting the cash rate to drop so we wont see their rates lower for best part of a year as they adjust to the lower rate. This happened when the reserve bank lowered the rate to its current level, the banks didn't expect the rate to last, so it took around a year to see lower mortage rates.

So if the reserve bank drops the rate or not, NZrs wont see any real change, so is it worth meedling with? The reserve bank probably wont move the rate as they dont see the benefit.