- North Shore Times (New Zealand)
- 25 Jul 2024
- KEVIN O’LEARY
OPINION: The Official Cash Rate (OCR) announcement this month, when the Reserve Bank of New Zealand decided once again to maintain the OCR at 5.5%, has been a cause for optimism.
This is because while the long-standing financial pressures that many businesses and households have been enduring are here to stay for a while longer, there was a softening of the economic narrative from the Reserve Bank, offering some economists renewed hope for an earlier-thanpredicted downward move in interest rates. Before this announcement the bank’s narrative had been described as “bullish” and it was generally accepted that any significant lowering of interest rates was likely to occur in mid to late next year because the current restrictive monetary policy needed to remain in place for a “sustained period”.
However, in the bank’s latest commentary it noted that “policy needs to remain restrictive, but the extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures”.
This statement may not appear to be significant to you or me,but it has certainly piqued the interest of many economists, with some predicting that there may be a reduction in the OCR next month, which could signal a reduction in interest rates in November.
Because of the ongoing and seemingly endless economic gloom, any such predictions are just that: predictions. Nothing can be assured, but at least it appears that we’re heading in the right direction and there is some hope among the pessimism.
Any optimism could initially be supported by the latest food price index, which has seen a decrease of 0.3% in the 12 months to June and while this may not be a large reduction, it’s the first annual decrease in almost six years.
Sadly though, any celebrations need also to be tempered by the fact that the fall is driven by a large decrease in the price of fruit and vegetables (16.1%) and meat poultry and fish (1.4%), whereas all other broad food groups have risen in price this year, as has the cost of takeaways and dining out.
Add to this the fact that in June food prices still increased by 1% compared to May, petrol prices have increased by 11.6% during the past year and rents are still on the rise, then it’s clear that there’s still a long, hard road ahead.
However, the Consumer Price Index indicates our level of annual inflation fell to 3.3% in the June quarter, which is another positive sign that, albeit slowly, we are heading in the right economic direction.
Please continue to support our local businesses by shopping local and making use of locally available goods and services.
