Lower interest rates would help following the latest Christchurch earthquake, although the decision whether or not to cut the benchmark Official Cash Rate is up to the Reserve Bank Governor alone to decide, Prime Minister John Key says.
Reserve Bank Governor Alan Bollard is set to make his next rates decision this Thursday, with financial markets pricing in a possible 50 basis point cut in the OCR from 3% currently back to a record low of 2.5%.
The Prime Minister has received criticism for commenting on interest rates ahead of the Reserve Bank's decision, due to legislation that RBNZ decisions are independant.
Speaking on TVNZ's Breakfast show this morning, Key said the OCR decision was a matter for the Reserve Bank Governor alone to decide what happened on Thursday.
"But certainly the markets have factored in a likely cut in the Official Cash Rate and you've got to say lower interest rates would probably help the country, but that ultimately is a matter for the Governor," Key said.
Asked about criticism that the Prime Miniister should not have talked about the upcoming OCR decision, Key said what he had said was just a statement of fact.
"It's a matter for the governor, it's exactly what I said. But, in the end the question was would it be helpful, well, lower interest rates help," Key said.
'Tread carefully' - Goff
Meanwhile, Labour party leader Phil Goff said there were two people in the country that had to be very careful not to look like they were instructing the Reserve Bank Governor what he should be doing.
"One is the Minister of Finance and one is the Prime Minister," Goff said to reporters at a Monday afternoon media conference.
"Yes, it’s fine to make a general comment that lower interest rates would be good at a time when the country looks to be going back into recession – one of only two countries in the developed world to be doing so. But a Prime Minister and Minister of Finance have to be careful that they do not look like they're directly or indirectly telling the Reserve Bank Governor what he should be doing,” he said.
“It could be interpreted as such, and that was the danger of his [Key's] comment.”
(Updates with video of reaction from Labour's Goff)