Jun 6, 2008

Reaction To Reserve Bank Statement

James Weir also writes on the reaction to Dr Bollard's utterances yesterday.

Big interest-rate cuts by the end of the year and more next year are the light at the end of the tunnel for businesses facing a dead-slow economy, but exporters are likely to get a big boost from a falling dollar.

Unfortunately for the Government, the tunnel for households is a bit longer and the light at the end of it is a bit harder to see

The real boost for the economy is expected to come from exporters enjoying a lower currency, rather than a rapid turnaround in household spending.
It will be a long slog in the dark for workers and home owners, with unemployment hitting 6 per cent by 2011, no new jobs and slumping house prices, according to latest Reserve Bank forecasts.
Consumer spending growth is expected to stop in its tracks and remain flat for the next couple of years.
The country faces a "major, prolonged economic downturn", Bank of New Zealand economists say.