KEY POINTS:
Like the coins it issues, the Reserve Bank's economic decisions are always two-sided. If it lifts its base interest rate it means the economy is strong but inflation is threatening.
If it lowers the rate, as it did on Thursday, the economy is weak but inflation is relenting.
A lift in the rate is normally the better news, not least because the effect is more direct.
Higher interest rates do bring down inflation within a year or so, and lower interest rates should stimulate the economy but it is hard to be as certain.
Finance Minister Michael Cullen greeted the Reserve Bank's big 0.5 percentage point cut this week as a sign the recession is over, but the size of the cut can equally be read as a measure of how slow activity has become.
If the recession is now over the figures will not show it until December, too late to help Labour at the election.
Statistically, the recession has yet to begin; we will learn in 10 days, when the measure of activity in the June quarter is reported, whether we have endured six months of negative growth, the official definition.
Almost certainly the worst will be confirmed and that will not help the public mood as the election approaches.
Dr Cullen will be reminding us often that lower interest rates, plus the tax cuts due next month, are cause for optimism.
The National Party's finance spokesman, Bill English, will be saying the bank's decision tells us quite the opposite.
Dr Cullen, pointing to recent business and consumer confidence surveys, says, "People start to feel they can see an end to this."
Mr English, citing the bank's latest forecast, says it is not yet clear the recession has reached the bottom. Who is right? Toss the coin.
It is too early to say whether the recession has reached bottom. Surveys are probably measuring more hope than confidence.
There is no sign on the streets of a pick-up in property or retail sales yet.
But nor are there reports of widespread job losses or impending layoffs.
Wage rises in recent years, a consequence of labour shortages, have enabled households to ride out the recent rapid inflation in oil and food prices, which is now easing.
The domestic economy is in better shape than global markets, which are still unsettled by tremors on Wall St.
Last week's bailout of the United States home mortgage guarantors Freddie Mac and Fannie Mae was an alarming comment on the scale of America's illness, or an encouraging shower of relief, depending on your point of view.
Optimism was dashed somewhat this week by the difficulties of another Wall St investment bank, Lehman Bros.
International uncertainties are said to have loomed larger than the domestic outlook in the Reserve Bank's decision to cut the official cash rate to 7.5 per cent.
The currency took another fall on Thursday and seems unlikely to regain its level of recent years.
A lower exchange rate keeps domestic fuel prices higher than they would otherwise be and raises the prices of imported products generally.
It will not help to restrain inflation which remains outside the 0-3 per cent target zone and is expected to be 4.9 per cent for the year to September.
The fact that the bank is now less concerned about inflation than the economy's immediate health speaks volumes for the state of recession.
It is going to be slow trading for a while yet. Next month's tax cuts may bring an improvement but business is probably not banking on it.
Dr Bollard's big cut was no more than necessary, a measure of the recession's bite.
