KEY POINTS:
The drop in the official cash rate was welcomed by the farming community, although some questioned whether cuts were being passed on.
Federated Farmers economic spokesman Philip York said Reserve Bank Governor Alan Bollard deserved high praise for a record cut.
"The Reserve Bank has listened to farmer concerns that the commodity outlook is ugly in the short term," York said.
The cut would provide needed stimulus with the spectre of drought returning this summer, he said.
Federated Farmers supported Bollard in his call for financial institutions to pass on most of the 3.25 per cent cut since July, York said.
"Businesses are simply not seeing the [official cash rate] reflected in their overdraft interest rates."
Horticulture New Zealand president Andrew Fenton said growers would be pleased to see the rate reduce "but obviously the pressure is now on the banks to urgently pass on this reduction to consumers and all businesses".
National Bank economist Kevin Wilson said the rate cut could impact the cost of on-farm debt and working capital for food processing and service companies.
The market had priced in a fairly high expectation of a drop and lending rates had moved to a degree already to reflect that, Wilson said.
Fixed rates had been reduced, while floating rates had been adjusted some time ago, he said.
