The Reserve Bank has embarked on a global financial crisis-era quantitate easing programme, designed to help support the economy as it grapples with Covid-19.

It will pump an extra $30 billion into the economy by buying Government-backed bonds, held by investors and retail banks across the country.

This is an unconventional monetary policy tool used by central banks, including the US Federal Reserve, in the 2008/09 financial crisis.

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It is also referred to as quantitative easing – it has never been done before in New Zealand.

This morning, the central bank announced it would begin what is called a large scale asset purchasing programme (LSAP) in which it will buy Government bonds.

The move comes just a week after the Reserve Bank lowered the official cash rate (OCR) by 0.75 per cent to just 0.25 per cent.

"This is part of our strategy to mobilise all arms of New Zealand's economic infrastructure in our fight against the Covid-19 virus," Finance Minister Grant Robertson said.

It's a move, Robertson said, that would support the economy by reducing longer-term interest rates.

He said it would lead to lower costs for businesses and mortgage holders, and a lower currency to help New Zealand exporters.

"We are all uniting together – the Government, the Reserve Bank, private businesses and the retail banks – to cushion the impact on New Zealand from this global pandemic."

The Reserve Bank will buy $30 million of Government bonds over the next 12 months.

In a statement this morning, the Reserve Bank noted that the severity of the impacts on the New Zealand economy has increased.

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"The negative economic implications of the coronavirus outbreak have continued to intensify."

The central bank's move will be welcomed by economists, who have been calling for the Reserve Bank to implement a quantitative easing programme.

"A move to large-scale asset purchases [quantitative easing] is needed very urgently," ANZ chief economist Sharon Zollner said last week.

Duncan Bridgeman talks to Tamsyn Parker about the reserve bank slashing interest rates.

"It needs to be large given how dysfunctional markets are at present."

Robertson noted that the quantitative easing programme was a decision made by the Reserve Bank.

But, because the Reserve Bank is part of the Crown's balance sheet, it is necessary for an indemnity to be signed by the Minister of Finance.

The move does not affect core Crown net debt, or the Government's operating balance other than reducing finance costs for the Government's borrowing programme, Robertson said.