Mike Hosking: Cash rate chop shows this Government has strangled the life out of a 'rock star' economy

Reserve Bank governor Adrian Orr has slashed 50 points and hopes for the best.

COMMENT: There is no mistaking what Adrian Orr did yesterday, cutting the official cash rate 50 points, is outside what most were expecting. A one per cent cash rate, we have never been here.

The Reserve Bank governor has cut to stimulate the economy, it's a blunt instrument, but this country is as flat as a pancake, the great days are over.

And we are in the middle of a brewing storm that has been brought about by things we can't change, like a trade war, uncertainty in Europe, tourists who don't want to fly, an obsession with climate change that is slowing growth. But we also have a Government that has managed to strangle the life out of what's left of a 'rock star' economy.

Through a series of policies, announcements, and intentions, business has gone into hibernation. Job adds are down, hiring is down, intention to invest is down. On the services side we are snapping the wallets shut. There isn't a poll, survey, or outlook out there that points to prosperity, buoyancy, optimism, or growth.

So armed with that, Adrian Orr has slashed 50 points and hopes for the best.

So do we respond? Do you borrow? You feel like borrowing? What about business? Do you think an extension, a modification, or an expansion is a good idea? The risk for business is if they borrow, is there a customer to purchase whatever is made from the expansion?

Is there a person to be hired? Can you afford to hire? What if you're in an industry with the new government fair pay rules where you are told what you're paying by the unions? What if you are one of those companies that valued the 90-day trial that's now gone?

From the petrol taxes, to the attack on oil in Taranaki, to the Emissions Trading Scheme for farmers, to the Zero Carbon Bill, to the polytechs being upended against their will and the apprentice programmes that go with it, this is not a Government for the business sector. And the numbers and attitude tell the story.

So it's a two-fold hit, offshore as well as onshore.

Domestically, do we pay our mortgages back faster and reduce our debt? Does money at four per cent entice you when its been four and a half for ages? A lot of this is about attitude.

What Orr is doing is an incentive, it's a sale if you like a sale on money and access to it. He's cajoling us to get into it, to spark things back to life.

His problem is, if this doesn't work, what next? How low does he go? And if we get there, then what? An election year with a recession? Remember the other player in terms of stimulus is the government, but they've spent all the money. What do they do? Borrow?

And that's where the politics comes in - governments are elected on good economic performance. I am waiting with bated breath to hear them try and talk themselves out of this.