Banks get message on lower rates, says Orr
would be “fully engaging” with the authority’s consultation process.
Meridian’s shares rose 1 percent to $4.99. Contact shares rose 1.4 percent to $6.33 and Genesis shares rose 0.5 percent to $3.02.
The complaint was kicked off by Haast Energy Trading, which also had the backing of renewable retailer Ecotricity, Flick Electric, Oji Fibre Solutions, Pulse Energy and Vocus.
They complained in December that South Island power prices should have been much lower, given the level of flooding in the lower South Island in November and December and the volume that Meridian and Contact were spilling from their dams.
Usually when dams are
spilling, the value of the stored water falls close to zero. That often results in much lower spot electricity prices and sometimes stark differences in prices between regions and islands.
While the authority investigated trading from November 10 to January 16, it believes the UTS only existed from December 3 to 18. Power prices subsequently fell as demand dropped with the start of summer holidays.
Complicating factors were gas shortages and preparations North Island generators were taking to store water for a major upgrade of the HVDC link starting in January. Hydro generators also have resource consent obligations to comply with during such major flood events.
— Businessdesk
Banks are getting the message and passing on lower interest rates to customers, says Reserve Bank Governor Adrian Orr.
But he’d like to see them go lower. “We were concerned that we weren’t seeing a significant enough fall in retail interest rates given where wholesale rates have gone,” Orr told the Economy Hub in a video interview.
The Reserve Bank’s efforts to “jawbone” — or talk down the rates — had seen them move significantly, he said.
In the past few weeks two-year fixed rates offered by the major banks had fallen as low as 2.69 per cent.
“We’ve been shouting from the rooftops do not make this a credit crisis. This is not the GFC. Greatest way of creating a credit crunch is by suddenly retrenching,” Orr said.
Thankfully the banks had been listening and the Reserve Bank’s bond-buying (quantitative easing) programme had also been doing its job to flatten the yield curve and keep rates low.
“It is in banks’ best interests to be passing on lower wholesale rates . . . their customers are the future earnings for the banks.”
Keeping interest rates low had been the Reserve Bank’s key goal since the start of the crisis in March.
The official cash rate was slashed to 0.25 in March and the monetary policy committee committed to keeping it there until at least year’s end.
A Quantitative Easing programme giving the Reserve Bank scope to buy up to $60 billion in government bonds was launched to stop market rates rising. It had been working.
Economists have been debating whether that $60b QE limit would be enough. the Reserve Bank had kept its options open but was likely to be in a position to give a clearer indication in August.
Concerns have also been raised about the strength of the kiwi dollar limiting export returns. There is speculation the Reserve Bank may act to bring it down. The higher dollar was a case where New Zealand had been “a victim of its success”, Orr said.
Being one of the few countries to contain the pandemic meant traders were relatively more optimistic about our outlook and that had pushed the Kiwi to about US65C.
“There is very little we can do about it,” Orr said. “Our balance sheet, as large as we like to think it is, gets lost in the wash of global capital.”