Reserve Bank Governor Adrian Orr during his OCR press conference in Wellington. 14 August, 2024. New Zealand Herald photograph by Mark Mitchell
The Official Cash Rate has been cut to 4.75%, which is being touted as welcome news for households all over New Zealand.
It’s the lowest the OCR has been in 18 months.
While plenty of people are popping the champagne over this announcement, is this latest cut masking some of the other economic issues?
Herald Business-editor-at-large Liam Dann told The Front Page it is good news that the cost of borrowing is on its way down.
“This means people who have debt will be paying less money out to service that debt, so they’ll have more money to spend.
“It’s not insubstantial. If you’re talking about 50 basis points or half a per cent of say a $500,000 mortgage, that’s $2500 a year, almost $50 a week. And a lot of people have bigger mortgages than that.
“If you’re lucky enough or you can afford to not adjust your payments, leave it there and you’re paying off your mortgage faster, then you’ll be better off in the long run.
Retail NZ is hoping the recent cut will bring some extra Christmas cheer.
“Coming at the beginning of Q4, this will be welcome news for retailers as they prepare to enter the period that is traditionally the busiest time of year for retail sales. Strong pre-Christmas sales are critical to retailers meeting their annual sales targets,” chief executive Carolyn Young said.
Dann suspects Young is right - particularly if we see another 50 basis point cut by the silly season.
“That will feel quite a substantial boost,” he said, “but, It’s not quite clear how much confidence is going to be boosted by this. It seems very upbeat at the moment.
“But, we have to remember the Reserve Bank was warning it was doing this. It’s comfortable doing this because inflation is falling and they know the economy is in a slow patch. They can see business stress rising. They can see unemployment rising and they see that continuing well into next year. So, if you’re worried about losing your job, you’re probably less likely to spend.”
The latest unemployment figures are due out in early November.
Listen to the full episode to hear more about how New Zealand’s economy is faring and what the OCR means for people without a mortgage.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.
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