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Green Party claims 'misguided'

It’s more than just the low official cash rate keeping the dollar high, says ANZ chief economist Cameron Bagrie.

Wednesday, January 30th 2013, 4:24PM

by Susan Edmunds

The Green Party has called for theOfficial Cash Rate to be cut tomorrow to take the pressure off the exchange rate and protect export jobs.

Co-leader Russel Norman said: “With inflation running below expectations and the New Zealand dollar now trading at near-record levels, Graeme Wheeler must act to protect jobs in our export and manufacturing sectors by cutting the OCR.”

He said the OCR announcement should balance the relative problems facing the whole economy, not just look at inflation.

But a poll of economists found that none expect the OCR to be cut. All 13 said the next move would be up.

And Bagrie said it was misguided to say that the OCR was keeping the currency low. He pointed to the Australian situation, where the Reserve Bank had been cutting rates for some time but the dollar was still very high.

He said there were other factors at play, including the weakness of the US dollar and diversification away from US assets.

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The OCR ain't going anywhere

The new Reserve Bank governor, Graeme Wheeler, predicts that the official cash rate won't by going anywhere until 2014.

This is clear from the 90-day bank bill forecast graph in the December Monetary Policy Statement. It shows clearly how over the past year forecast increases kept getting pushed down each quarter.

A year ago the bank was predicting the 90-day bill rate would be up at 4.00% by March 2014. That forecast was wound back to 3.3% in March, 3.2% three months later and is now down at 2.8%.

The good news for borrowers is that, asssuming things pan out as forecast, then home loan rates aren't likely to be going up any time soon either.

Rates flatlining

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