Last night I spoke with Kiwibank Chief Economist Jarrod Kerr last night after the RBNZ’s 50 basis point cut in the OCR. He says the cash rate may need to go under 2% to get the economy going again. Here’s his full note on the decision.

We talked about:

* How interest rates need to be below neutral to encourage growth.

* The housing market’s stagnation was concerning for overall economic health.

* Whether communication from the Reserve Bank has led to confusion among businesses. Jarrod says it has.

* A new governor at the Reserve Bank may bring better leadership.

* The housing market is expected to recover slowly over the next few years.

* Investors are waiting for mortgage rates to align with rental yields.

* Whether Debt to income controls are currently a major constraint on the housing market. Jarrod says not.

* Wholesale rates have fallen, indicating a positive market reaction.

* The depreciation of the Kiwi dollar may boost tourism and exports.

Chapters

00:00Reserve Bank’s Decision on Cash Rate

02:57Impact of Interest Rate Cuts on the Economy

06:07Housing Market Dynamics and Economic Growth

08:52Market Reactions and Future Projections

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Ka kite ano

Bernard

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