Political & economic week ahead: Is Judith back?
Two burning questions: whether to cut OCR and reinstate Collins to cabinet. Rob Hosking provides in-depth analysis on NBR Radio and on demand on MyNBR Radio.
Click the NBR Radio box for on-demand special feature audio: Burning questions: whether to cut OCR and reinstate Collins to cabinet. In-depth analysis from Rob Hosking
To cut or not to cut? Economically and politically, the week begins with those two questions.
Economically, because Reserve Bank governor Graeme Wheeler is to review the official cash rate this Thursday. The case for a further 25bp cut – which would take the OCR back to 2.5% – is shrinking in the face of a reasonably strongly performing economy, business sentiment surveys that show investment and hiring on the rise, and the non-dairy part of the New Zealand economy performing strongly.
There is also the matter of whether the US Federal Reserve’s anticipated return to hiking interest rates, from next week, will see the New Zealand exchange rate tumble.
If this happens, it will be a de facto easing of monetary conditions, and will also see import costs rise.
The arguments in favour of a cut hang on the historically low inflation – 0.4% in the most recent 12 months, well outside the Reserve Bank’s 1-3% target range.
The other cut question is Prime Minister John Key’s pending cabinet reshuffle: will he cut some of his lesser performing ministers, as well as post Trade Minister Tim Groser to Washington?
Mr Key seems most likely not to repeat previous reshuffles, when he has demoted non-performing ministers. Instead, it looks as though he will simply re-appoint former front bencher Judith Collins to the Corrections portfolio, and keep any flow-on rearrangements to a minimum.
But given her controversial nature, even reappointing Mrs Collins is not without political risk.
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NBR Radio
Mon, 07 Dec 2015
Mon, 07 Dec 2015
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Political & economic week ahead: Is Judith back?
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