Latest / Best of Business / Perspective with Heather du Plessis-Allan: Here's why holding the OCR in place was the right move

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Perspective with Heather du Plessis-Allan: Here's why holding the OCR in place was the right move · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
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• 0:16
  Speaker 2: It is fair to say the overwhelming reaction to the
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  Speaker 2: Reserve Bank's decision to hold the OCR today was surprise
• 0:22
  Speaker 2: and in some cases shock. Everyone thought that the Reserve
• 0:25
  Speaker 2: Bank would raise the OCR today. ASB says it was 95%
• 0:29
  Speaker 2: priced in. Even economists who thought that the OCR should
• 0:32
  Speaker 2: be held so that it didn't kill the nascent recovery
• 0:35
  Speaker 2: were on record as saying that they thought the Reserve
• 0:37
  Speaker 2: Bank would still do it anyway and would do the
• 0:39
  Speaker 2: wrong thing and hike it. And yet it didn't. It
• 0:41
  Speaker 2: held the official cash rate. Now, let me tell you
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  Speaker 2: why that was the right thing to do. Yes, inflation
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  Speaker 2: is at 3.7%, which is very much outside the acceptable
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  Speaker 2: band and far too high. And yes, it is probably
• 0:52
  Speaker 2: going to go even higher and shoot up to 4.4%
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  Speaker 2: in the next inflation data dump for this quarter. But
• 0:58
  Speaker 2: the economic recovery is still too fragile to handle a hike.
• 1:02
  Speaker 2: I was in the Coromandel for the long weekend, bumped
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  Speaker 2: into one of the local business owners on the main street.
• 1:08
  Speaker 2: got to talking about how things were going for his business,
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  Speaker 2: he said this past winter has been the quietest his
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  Speaker 2: business has ever seen. And that's despite the GDP growth
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  Speaker 2: that we are experiencing as a country right now. And
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  Speaker 2: that's because that growth is not everywhere. It is in
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  Speaker 2: the provinces where they make their money off exporting food.
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  Speaker 2: But in places like Auckland and in places like Coromandel
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  Speaker 2: that rely on Aucklanders to spend the money they don't have,
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  Speaker 2: It is still tough going. Now, what's more, the Reserve
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  Speaker 2: Bank is not only worried about what's going on domestically,
• 1:38
  Speaker 2: but it's also worried about what could happen globally. They're
• 1:41
  Speaker 2: worried that the AI bubble might burst. There might be
• 1:43
  Speaker 2: a war that disrupts things, a spike in fuel prices
• 1:46
  Speaker 2: beyond what they are right now. The bonds situation goes badly.
• 1:49
  Speaker 2: Any one of those things causes a sudden downturn. And
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  Speaker 2: then we are going to be desperate in this country
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  Speaker 2: for every little bit of domestic growth that we can
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  Speaker 2: cling on to. So the Reserve Bank is pausing. It's
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  Speaker 2: just pausing. It's got a couple of hikes under its belt.
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  Speaker 2: It's just pausing to see how that goes down for
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  Speaker 2: the next six weeks and whether the economy can take
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  Speaker 2: another hike. Now, can I, at the risk of becoming
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  Speaker 2: a broken record, just say once again how refreshing it
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  Speaker 2: is to have a serious, uncomplicated, calm governor in charge
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  Speaker 2: who instills confidence in her decisions, even when those decisions
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  Speaker 2: cause surprise or shock. Case in point today.
• 2:25
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