Reserve Bank boss Adrian Orr on coronavirus impact for economy

Reserve Bank governor Adrian Orr said New Zealand was in the "best possible" position to respond to the impending economic downturn. Photo / Mark Mitchell

The Reserve Bank Governor Adrian Orr told Newstalk ZB's Mike Hosking the central bank had been preparing to have to put "unusual" actions into practice in response to coronavirus.

Yesterday the Reserve Bank cut the Official Cash Rate to a record low 0.25 per cent in light of the pandemic.

He said they had made it very clear that they would keep the OCR the same for at least 12 months to generate certainty.

"We don't want to have a negative interest rate and we've made that clear to the banks as well. Some banks are just not operationally ready but we've got other tools that we think are more effective if we needed to have further easing at some point."

He said the real challenge would be using other tools rather than just the interest rate tool.

Orr acknowledged this had come as a "shock" to some - including banks.

On today's expected economic announcement from the Government, to help Kiwis during this time, he said: "It will be both targeted and it will be very broad-based. It's quite a complex combination, which is very impressive given the short time period.

"I'm not giving anything away publicly there in the sense that targeted around health ... wage subsidies, working with industries. It's very comprehensive package and I'll leave it there for the [Finance] Minister to unveil."

Asked how he felt about the situation - on a scale of 1 to 10, the latter being "freaking out" - Orr rated himself as being on a six.

"I would be six because the systems are working, it's a tough time, empathy for everyone involved - but far from a 10," he said.

The Government is preparing for its biggest day of the crisis so far, with plans to unveil a multi-billion-dollar rescue plan to save jobs and businesses.

In a surprise move yesterday, the central bank cut New Zealand's OCR to 0.25 per cent - an all-time low – that will be in place for the next 12 months.

The move was designed to free up Kiwis' spending and stimulate the economy.

All the major banks reduced their interest rates after today's announcement.

Orr urged all New Zealanders to talk to their banks – "this is the time to over-communicate".

The Bank governor told reporters that these were "unusual" times for the New Zealand economy.

Reserve Bank deputy governor Geoff Bascand said officials expected coronavirus to have a "severe impact" on the economy.

"This is going to spill through to some more unemployment and business failures."