By Bernard Hickey
The Reserve Bank of New Zealand did nothing today, as expected. See our full report here on the RBNZ's decision to leave the OCR on hold and turn a blind eye to the currency's rise.
It did nothing to stop New Zealand’s slide in relative poverty.
It did nothing to turn around New Zealand’s woeful export performance of the last decade.
It did nothing to improve New Zealand’s savings rate because it left the Official Cash Rate at 2.5%.
It did nothing to turn around our current account deficit, which it forecast would rise to 5% over the next couple of years.
It did nothing to break the New Zealand economy’s addiction to foreign debt and asset sales.
It did nothing to correct the over-valuation of New Zealand’s house prices, which it estimated was still as much as 10%.
It did nothing to control inflationary expectations, which it admitted were at the top of its forecast band of 1-3%.
It did nothing because it thinks underlying inflation is under control and that the recent increase in inflation expectations will be shortlived.
It did nothing to stop the New Zealand dollar’s rise through record highs against the US dollar in recent days, even though it admitted this was constraining the rebalancing of the economy towards production and away from consumption.
It did nothing because it says the Trade Weighted Index is lower now at around 70 than it was in mid 2007 when it last intervened to push it lower. It was around 75 then because the New Zealand dollar was stronger against the Australian dollar.
It did nothing because it believes the much higher number of people with floating mortgages gives it more leverage when it does increase the Official Cash Rate gradually over the next two years.
It did nothing today because it believes the economy will recover with the current level of stimulus.
It did nothing because it is letting the high currency do some of its dirty work of keeping inflation under control.
It said nothing about the government running a budget deficit of 8.3% this year, which it knows is keeping New Zealand’s savings rate low and pushing up the currency.
The Reserve Bank did nothing today even though it knows inaction on its part and the government’s part will mean our gross national income per capita will keep sliding.
It’s time someone did something.
To refresh the memories of those who may have missed why I think we're borrowing and selling our way into poverty, see my article here from April 4 showing how the foreign interest and profit drain has made us poorer since 2003 despite higher GDP.