Andrew Dickens: The Reserve Bank and the Government need to work in tandem

For a while now I’ve been thinking that the Reserve bank and the Government are working at cross purposes for the country. 

Yesterday the Reserve Bank kept the OCR at the same rate it’s at. The reason: increasing inflation and little or no growth in GDP.

Now the Government has an agenda of growth, growth, growth. 

So reduced interest rates could help stimulate the economy that has some very flat spots in between primary produce and tourism. 

But the Reserve Bank's purview is inflation, and low interest rates fire on consumerism and inflation. So, the rate isn't lowered.

It's fair to say the Reserve Bank won’t do what the Government would like it to do. 

Meanwhile, the Government pulls back on all government spending, including stuff that fires on an economy, like construction, public builds, roading, and more. 

If you want proof: Government accounts in the 11 months to the end of May for investing and operational activities was $3 billion less than forecast and $6.4 billion less than the same 11 months a year ago. 

So, the money isn’t stirring. 

And as the interest rates have fallen, we’re not using the cheaper cash to spend. Our farmers and our businesses and households are choosing to pay back debt instead. 

The Government wants private capital to invest in this country, but the cash isn’t cheap, and the investments aren’t coming, and as I said before why would anyone want to invest in this country when even the government is keeping it's wallet shut?

So welcome to year three of recession with no change in sight unless the policies of the Reserve Bank and the Government work in tandem.

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Episode Transcript

Speaker 1 (00:00):
The OCR thing yesterday. For a while now, I've been
thinking that the Reserve Bank and the government are working
at cross purposes for the country. So yesterday the RB
kept the OCR at the same rate it's at the
reason increasing inflation and little or no growth in GDP. Now,
of course, the government has an agenda of growth, growth, growth,
so reduced interest rates could help stimulate the economy to

(00:22):
bring some growth, growth, growth, an economy that has some
very flat spots in between primary produce and tourism. But
the Reserve banks perview is inflation and low interest rates
fires on consumerism, fires on inflation, so they haven't lowered
the rate. It's fair to say the RB will not
do what the government would like it to do. But

(00:44):
meanwhile the government pulls back on all government spending, including
stuff that fires on an economy like construction and public
builds and roading and more. And if you want proof
about this claim, government accounts in the eleven months to
the end of May for investing and operational activities was
three billion less than forecasts, three billion less than they

(01:04):
said they would spend, and it's six point four billion
less than the same eleven months a year ago. So
this is money that isn't stirring in the pot that
is the New Zealand economy. And as the interest rates
have fallen, we're not using the cheaper cash to spend.
Our farmers and our businesses and our households are choosing
to pay back debt instead. The government wants private capital

(01:27):
to invest in this country, but cash ain't cheap and
the investments aren't coming in. As I said before, why
would anyone want to invest in this country when even
the government is keeping its wallet shut. So welcome to
year three of recession with no change in sight unless
the policies of the Reserve Bank and the government start

(01:47):
working in tandem. For more from Early edition with Ryan Bridge,
listen live to News Talk Set B from five am weekdays,
or follow the podcast on iHeartRadio