RBNZ says working with banks in ChCh to ensure plenty of cash and is watching markets, but doesn't comment on OCR

The Reserve Bank has issued a statement saying it is working with banks to ensure cash is available in Christchurch and is monitoring financial markets, although it noted New Zealand had well established emergency procedures and insurance arrangements.

However, the bank made no comment about interest rates, despite speculation over the last 12 hours that it might announce an emergency cut in the Official Cash Rate.

Prime Minister John Key said he had seen comments in the media about the possibility of an emergency interest rate cut but couldn’t comment on that.

“In the end it’s for the Reserve Bank Governor, I guess he’ll go away and assess that,” Key told media in Wellington this morning.

Meanwhile, ratings agency Moody's said the quake would have no immediate impact on the New Zealand government's Aaa credit rating, saying NZ govt debt levels were well below the median for Aaa rated countries. See its full release below.

See the Reserve Bank's statement below:

The Reserve Bank said today it is working closely with authorities and financial institutions to ensure financial services are available to people and businesses in Christchurch following the damaging earthquakes yesterday.

Reserve Bank Governor Alan Bollard extended sympathy to the people of Christchurch affected by the disaster.

“We can only imagine how difficult this is with the loss of lives, homes and buildings, the injuries and dislocation for people in Christchurch.  The Reserve Bank is working hard to assist the recovery as fast as possible in terms of access to financial services, and ensuring markets remain stable,” Dr Bollard said.

The Reserve Bank is coordinating its assistance in the recovery efforts with the Government’s National Crisis Management Centre in Wellington. 

“We are also working with affected banks and cash-in-transit companies to ensure the availability of cash in Christchurch.  The Reserve Bank is ready and able to supply any cash required by banks.  We have ample cash reserves and will issue cash to banks on any day required during this emergency situation.”

The Bank understands that some ATMs are operational.  It is working closely with banks through issues of accessibility, electricity and telecommunications to ensure cash is available.

Dr Bollard said the Bank is monitoring financial markets, noting that New Zealand has well-established emergency procedures and insurance protocols.

“We have also been informed by banks that they are reinstating the loan assistance policies that were put in place after the September 2010 earthquake, and that the four major banks have each donated $1 million to support the immediate and long-term recovery.”

No problems have been reported with the national payments and settlement systems that the Bank operates (ESAS and NZClear)

Here is the statement from Moody's:

Sydney, February 23, 2011 -- Moody's Investors Service says that it currently sees no reason to reconsider its Aaa rating of the New Zealand government following Tuesday's tragic earthquake in the city of Christchurch, and even though it is very likely to result in another one-time rise in government debt.The 6.3-magnitude quake mainly damaged the central business district of the city, while the extent of the death toll is still being assessed, and scores remain trapped in the rubble. Tuesday's quake follows a large tremor in September and various aftershocks since.

"Moody's notes that the rise in government debt resulting from last September's earthquake -- and which will come to about 1% of GDP – has meant that the peak level of debt projected for the mid-part of this decade is correspondingly higher," says Steven Hess, a Moody's Vice President and Senior Credit Officer.

"However, we also note that, even with this higher projected level of debt, New Zealand government debt levels are well below the median for Aaa-rated governments globally," says Hess.

Current indications are that Tuesday's earthquake will have a larger effect on government borrowing than the one in September, and therefore debt ratios will deteriorate further, but will remain in line with Aaa-rated peers.

That said, New Zealand's ability to support higher government debt is perhaps somewhat lower than in other countries, given the country's relative lack of economic diversity and reliance on external funding.

But, even with these qualifications, its debt metrics will not become incompatible with the country's rating level.

Nonetheless, we will await a fuller assessment of the long-term effects on government finances. Measures to deal with such effects, and the future for debt trajectory in general, may be discussed in the government budget to be presented in May.

(Updates with comment from Moody's, PM John Key)