OCR wind-back highlights need for Reserve Bank governance reform

The Green Party is calling for reform of the Reserve Bank’s governance structure following today’s Official Cash Rate decision which reverses the mistaken OCR rises of 2014. The Reserve Bank Governor has today unwound 75 of the 100 basis points that he increased the OCR by just last year.

“The Reserve Bank made the right decision today to cut the OCR – effectively reversing the mistaken OCR increases in 2014 – but concentrating this power in just one person isn’t the right way to make good decisions,” Green Party finance spokesperson Julie Anne Genter said.

“We’d like to see the Reserve Bank’s decision-making power broadened to more than just one person – decision making by a panel of experts from across the economy would be in line with what happens in other OECD countries.

“Over-forecast inflation has kept interest rates higher than they should have been in recent years, which has cost the economy jobs, according to analysis by the Parliamentary Library.

“According to the Reserve Bank’s own numbers, a one percent rise in the OCR reduces economic output by 0.5 - 1 percent and increases unemployment by 0.5 - 1.2 percent.

“Interest rates have been too high for too long and this has been an artificial drag on our economy.

“A lower OCR will on the whole be good for Kiwi businesses who want to invest to grow jobs, will help boost the manufacturing and export sectors, and help first home buyers trying to get into the housing market.

“The Reserve Bank made the right decision to cut the Official Cash Rate given the lack of leadership from the National Government in the slumping economic environment.

“The risk from a lower OCR is that it’ll add fuel to the Auckland housing market as sales traditionally pick up in spring, which is why the Government needs to introduce a capital gains tax, limit land sales to New Zealand residents, and support more high quality mid-rise residential development near good public transport,” said Ms Genter.