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.

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