NZ Herald
  • Home
  • Latest news
  • Herald NOW
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
  • Herald NOW
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Politics
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Herald NOW
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business / Economy

Economy Hub: Making sense of the Reserve Bank's first post election decision

Liam Dann
By Liam Dann
Business Editor at Large·NZ Herald·
9 Nov, 2017 03:13 AM4 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

Acting Reserve Bank Governor Grant Spencer after announcing the Official Cash Rate will remain unchanged at 1.75 per cent. 09 November, 2017. NZHerald photo Mark Mitchell

Acting Reserve Bank Governor Grant Spencer after announcing the Official Cash Rate will remain unchanged at 1.75 per cent. 09 November, 2017. NZHerald photo Mark Mitchell

Reserve Bank governor Grant Spencer has warned against over playing forecast hikes to interest rates, saying the next move could still be down.

The Reserve Bank left rates on hold at 1.75 per cent today, however, it did move its forecast for hikes to June 2019 from September 2019.

It was a subtle shift but the first directional signal we've seen from the Reserve Bank in some time.

But Spencer described it as a marginal move in the context of many moving parts.

"In fact we are still retaining a neutral bias in policy. Even though that track moves up a bit we could just as well see the next policy move down as up," he said.

Advertisement
Advertise with NZME.
Advertisement
Advertise with NZME.

"There is so much risk on the down side as well as up - particularly around inflation pressure."

It would also be wrong to view the shift in rate track solely as a reaction to the prospect of more Government spending, Spencer said.

While there were signs that some government policies could add to inflation there were opposing pressures, such as reduced immigration and curbs on the housing market, which could see a slowdown in private spending.

Advertisement
Advertise with NZME.

In fact the expected slowdown in private spending was likely regardless of which party won the election, he said.

"The net is a slightly high interest rate track but we shouldn't overemphasise that because it is pretty marginal in the context of a lot of moving parts."

NZIER principal economist Christina Leung agreed that it was prudent to retain a neutral view on interest rates given the economy was likely to face changes on both the supply and demand side.

Reduced immigration and reduced consumer spending on lower house prices could put downside pressure on the economy, at the same time as a bigger spending Government created more upside pressure, she said.

Discover more

Companies

Bank's rate outlook boosts kiwi

10 Nov 07:17 AM
Business

Auckland City median house price down 17pc

14 Nov 07:21 PM

"There is a large degree of uncertainty around what the new policies will mean," she said.

All around the world the jury was still out on whether inflation was going to return to normal as economic activity picked up or remain subdued under pressure from new technology and globalisation trends, Spencer said.

So the Reserve Bank was considering both domestic and global uncertainties.
Risks also remained around the housing market and while the Bank was expecting a period of more stable price movement there was still a supply shortage which had to be worked through.

The dollar rose on the release of the Monetary Policy Statement - Spencer's first in the role of acting governor until March next year.

Currency markets had been buoyed by the absence of any comments from the governor about the Kiwi dollar being over valued, NZIER's Leung said.

Spencer confirmed the Reserve Bank was more comfortable with the dollar below US70c and considers that closer to "fair value".

Advertisement
Advertise with NZME.

Although he noted that "fair value" was a relative term and could change depending on the broader state of the New Zealand economy.

Spencer addressed the new Government's review of the Reserve Bank Act saying he was comfortable with the terms of reference, although he noted that the proposed changes would make little or no difference to decision making in the current economic climate.

"Moving to a dual mandate is unlikely to have [an] impact on the way we run monetary policy," Spencer said.

Currently inflation was the Bank's primary objective but was not the sole objective, he said.

"We're not strict inflation targeters, we're flexible inflation targeters," he said. "Which means we do look broadly and try to make sure we're stabilising output, employment and the exchange rate even though inflation might be going outside the band."

A dual mandate might mean the approach became even more flexible in allowing greater volatility in inflation to promote more stability in employment, he acknowledged.

Advertisement
Advertise with NZME.

"But in the current situation, given that the labour market is pretty balanced its unlikely that you'd be doing anything much different than what you would right now."

Leung said the changes proposed in the review looked more like "tinkering" than major reform.

Save

    Share this article

Latest from Economy

Premium
Opinion

Sasha Borissenko: Is gig work freedom or friction?

13 Jul 12:01 AM
Premium
Property

'Family endured difficult tenancy': Rental managers fined $9700

12 Jul 09:00 PM
Premium
Property

Auckland retiree faces eviction as ground rent jumps 344%

12 Jul 12:01 AM

From early mornings to easy living

sponsored
Advertisement
Advertise with NZME.

Latest from Economy

Premium
Sasha Borissenko: Is gig work freedom or friction?

Sasha Borissenko: Is gig work freedom or friction?

13 Jul 12:01 AM

OPINION: The Government is already moving to tighten up who an employee is.

Premium
'Family endured difficult tenancy': Rental managers fined $9700

'Family endured difficult tenancy': Rental managers fined $9700

12 Jul 09:00 PM
Premium
Auckland retiree faces eviction as ground rent jumps 344%

Auckland retiree faces eviction as ground rent jumps 344%

12 Jul 12:01 AM
Premium
Fran O'Sullivan: New Zealand must move on from Ardern criticism to get real benefit from Covid inquiry

Fran O'Sullivan: New Zealand must move on from Ardern criticism to get real benefit from Covid inquiry

11 Jul 09:00 PM
Solar bat monitors uncover secrets of Auckland’s night sky
sponsored

Solar bat monitors uncover secrets of Auckland’s night sky

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven Car Guide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP