Brian Fallow: Governor's job appears done

The main message of today's monetary policy statement is that Reserve Bank governor Alan Bollard believes he has done pretty much all he can for us at this stage.

In terms of retail interest rates, rather than cut the official cash rate again he has had another go at moral suasion, or jawboning, saying the banks could have and should have passed on more of his most recent cuts.

But the bank also makes the point that much of the benefit of what it has already done has yet to flow through to people whose fixed-rate mortgages come up for repricing over the coming year.

That may be worth about 1 percentage point off the average mortgage rate people are paying.

On the dollar it was a case of "what can I do?" beyond saying that its recent strength was unhelpful and unsustainable.

Another rate cut is unlikely to have made much difference to the currency. The last one didn't.

And Bollard pointed to the fact that the Canadian dollar - another commodity currency - has also climbed even though the Canadian policy rate is low.

Direct intervention in the foreign exchange market would not have any effect in the medium term, he said.

Bollard said it was possible international financial markets had in effect concluded that the US economy needed to recover first and that the rest of us would have to stand in line, waiting our turn.

If that is the case there isn't much he can do about it.

The bank's forecasts make grim reading for the 60 per cent of the economy which depends on household spending.

The outlook there is very weak, although less so than Treasury's, as households face rising unemployment, little wage growth and the ongoing need to reduce debt.

On house prices the bank now believes that most of the correction has occurred, though they may still have 2 or 3 per cent further to fall. But it does not expect a strong rebound.