RBNZ hold on rate rise the right move

The Reserve Bank’s decision to hold the Official Cash Rate at 0.25 per cent is the right one given the economic uncertainty New Zealand now faces as a result of the new Covid-19 lockdown, says National’s Shadow Treasurer Andrew Bayly.

“The Bank has done the right thing, having clearly recognised that it would be a mistake to put further pressure on the economy while we deal with the lockdown.

“That said, there are still strong signals that rapid rate rises are on the horizon, which means the Government must work with the Bank, rather than against it, to manage this prudently.

“In the meantime, wage subsidies and critical infrastructure delivery will be essential, and we will support the Government in delivering these initiatives.

“We remain concerned that the Government has run down the Covid Response and Recovery Fund which was supposed to be put aside for an outbreak.

“There was $50 billion in this rainy-day fund, but the Government has run it down to around $5 billion by spending it on anything but Covid-related spending.

“The most important thing right now is keeping New Zealanders safe and, from an economic perspective, that means judicious decision-making.

“It’s right that the Government supports businesses that are now required to shut-up shop but, just as the Reserve Bank takes steps to reduce uncertainty and cool an overheating economy, the Government must also step up by ensuring it spending is focussed on what matters.

“With inflation and labour shortages now the chief concerns, it is clear the Government needs to cut the waste and target spending where it is needed.”