New Zealand Labour Party

OCR cut piles pressure on Government

Today’s OCR cut must be backed by Government action on housing and economic growth, says Labour’s Finance spokesperson Grant Robertson.

“Reserve Bank Governor Graeme Wheeler’s monetary policy statement underlines the limits of Bill English’s economic management. He says growth is being propped up by ‘strong inward migration, construction activity, tourism, and accommodative monetary policy’.

“That isn’t a recipe for sustainable long-term productive growth. Bill English needs to get serious about supporting the productive export sector.

“With the dollar surging immediately after the OCR announcement it’s clear that monetary policy is having limited positive impact for exporters. The Government cannot outsource managing the economy to the Reserve Bank, it needs to take concrete steps to ensure hard-pressed exporters can compete internationally.

“Bill English needs to take responsibility for the decision by some trading banks to pass on only a fraction of the cut. This is another example of government failure leaving someone else to dictate public policy. The Government has failed to fix the housing crisis in terms of either supply or demand, and some banks have decided to take matters into their own hands.

“National needs to stop sitting on its hands over housing. Today’s announcement won’t build anymore houses but will be another shot in the arm for speculators. It’s essential that National takes on Labour’s comprehensive housing plan to build 100,000 affordable homes, crack down on speculators and close loopholes like negative gearing.

“The immediate lift in the exchange rate following today’s announcement, and the indications from trading banks that they will be passing on only a fraction of the cut, raises further questions about the limitations of monetary policy.

“More and more traditional approaches seem to be broken. There is an urgent need to review monetary policy, including the Policy Targets Agreement which is now effectively being ignored by the Reserve Bank, given the heroic assumptions that underpin their attempt to meet it in ‘the long term’.

“What’s clear today is National’s plan to delegate housing and economic management to the Reserve Bank simply won’t work. It’s time for Bill English to step up or step out and let a government with a comprehensive plan for housing and the economy take over,” says Grant Robertson.