Pumping life back into the economy
Reserve Bank would stamp on almost every spark of economic life, lest it start off an inflationary forest fire. These days by contrast, inflation has to be cajoled into life or imported from abroad – via more costly imports, thanks to a (hopefully) deflated Kiwi dollar. Instead, our currency stubbornly went up after last week’s rate cut, not down.
Beforehand, the big Australian banks had signalled that they wouldn’t necessarily be passing on the interest rate cuts to their customers. True, the tiny 25 point reduction made by the Reserve Bank would hardly make all the difference between survival and a dairy farm mortgagee sale.
Still, the Aussie banks’ lack of
‘‘Last week, the RB’s Wheeler was once again sawing away ineffectually at interest rates, in an effort to ignite a spark of inflation in the wet, dead wood of New Zealand’s productive economy.’’
compassion was startling, given the huge profits they’re raking off from their New Zealand operations. (Currently, the ASB alone is looking at annual profits of nearly a billion dollars.) In the end, only a small amount of solace to Kiwi borrowers and lenders was forthcoming in the wake of the latest interest rate cut, mainly as a public relations gesture.
Curiously, the government chose to be a mere bystander to all of this. Like a 90s slacker, Finance Minister Bill English made it crystal clear that whether the Aussie banks passed on the full benefits of the interest rate cuts to their Kiwi customers – or chose instead to undermine the Reserve Bank’s attempts to stimulate our productive economy – it was cool by him.
Entirely a matter for the Aussie banks to decide.