Economy could take rate cut - shadow board

Last updated 07:51 04/12/2012

Can you fix the NZ economy?

Share your stories, photos and videos.

Relevant offers

National business

NZX offices get a facelift for the next decade Caniwi Capital buys hostel for $33m Burger King headquarters on the market Hunt on for retailers to fill shopping outlets Petrol 'watchdog' keeps an eye on Hamilton Google reveals trump card to build new headquarters in California Nelson designer's product brings order to the home 'Bugger' sheep billboards bring hope Business confidence takes a dive, but from high levels Jo Doolan: Budget takes aim at child poverty, but does it do too much?

The Reserve Bank should hold the official cash rate at 2.5 per cent this week, but the NZIER shadow board recommends a cut rather than an increase, should it move.

The board placed about a 40 per cent weight on lower interest rates being appropriate, compared with 56 per cent for leaving rates on hold.

New Reserve Bank governor Graeme Wheeler is widely expected by bank economists to leave rates unchanged yet again at Thursday's official cash rate announcement. If so, it would be the 14th review without a change.

NZIER's head of public good research, Kirdan Lees, said recent domestic figures showed a mixed picture.

Unemployment was at a 13-year high of 7.3 per cent, while inflation is down to just 0.8 per cent, slightly below the bottom of the Reserve Bank's target band.

Recent retail sales figures have also been disappointing, down 0.4 per cent in the September quarter.

The economy was expected to grow as little as 0.2 per cent in the September quarter.

Lees said high unemployment and low inflation suggested ample room for the economy to grow without strong economy-wide price rises.

But he said there were pockets of price pressures in the Auckland housing market and the Canterbury building sector as the Christchurch rebuild gathered steam.

The NZIER shadow board is independent of the central bank and aims to promote debate about interest rate decisions. It includes bank and academic economists as well as a representative from NZIER, among its nine members.

Ad Feedback

- The Dominion Post

Comments

Special offers

Featured Promotions

Sponsored Content