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RBA rate cut 'shows need for monetary policy reform'

Contributor:
Fuseworks Media
Fuseworks Media

The need for the Government to adopt a less ideological monetary policy has only increased with the Reserve Bank of Australia's decision to reduce its official cash rate, Green Party Co-leader Russel Norman said today.

The Reserve Bank of Australia has cut its OCR from 4.25% to 3.75%. The New Zealand Reserve Bank chose to leave its OCR unchanged last week, citing concerns about rising house prices.

"The Reserve Bank's one-tool toolkit is plainly inadequate for the economic reality we live in", said Dr Norman

"Currently, the Reserve Bank faces a dilemma. If it cuts interest rates, it risks another housing bubble. Instead, it has done nothing, which causes a high exchange rate, hurting exporters and domestic producers.

"Despite record prices overseas for our exports, the high exchange rate caused by the high OCR is preventing New Zealand from cashing in and the country is running a growing current account deficit.

"The Reserve Bank needs a broader mandate and a wider range of tools, such as regulating loan to value ratios, to enable it to prevent housing bubbles while not punishing the trading sector.

"Kiwi exporters need a government that will act in their interests, not sit on its hands.

"The rest of the world is moving towards more sophisticated monetary policy, while National remains devoted to a failed ideology.

"The Greens have outlined a range of possible tools the Reserve Bank could use. A debate on which tools are best suited for New Zealand's needs is urgently required but, first, the Government needs to acknowledge there's a problem", said Dr Norman.

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