Latest news with #AdrianOrr
Scoop
23-05-2025
- Business
- Scoop
25 And Not Done. The RBNZ Has More Work To Do. More Cuts Are Required.
Press Release – Kiwi Economics The weakness in the economy is clear and demands more attention and less restriction. With all the risks offshore, think Trumpian tariffs, and the pain still felt onshore, theres a good argument to be made for taking policy into stimulatory territory … Next week's decision, with updated forecasts, is important. There's no doubt that the Kiwi economy needs support. There's no doubt the RBNZ should be aiming to stimulate, not restrict, the economy. It's just an argument around how much support is needed. The RBNZ has signalled a 25bp cut to 3.25% next week. If it was up to us, we would deliver a 50bp cut to 3%, a level broadly considered neutral, not even stimulatory. But it's not just about the cut, it's also about the trajectory. And we're focussed on their next move(s). They're saying just one more move (25bps) to 3.0% after next week. We're saying get to 2.5%. We're stubborn, and we're hoping they're flexible. They had to be very flexible last year. The weakness in the economy is clear and demands more attention and less restriction. With all the risks offshore, think Trumpian tariffs, and the pain still felt onshore, there's a good argument to be made for taking policy into stimulatory territory asap. Next week's decision, with updated forecasts, sets the scene for the next 3 months, at least from the RBNZ's perspective. Adrian Orr has left the RBNZ and Christian Hawkesby is in charge. Next week's decision is a chance to differentiate from the Orr era. The economic developments since the RBNZ's last MPS have deteriorated here, and especially offshore. The justification of a more 'go for growth' focussed RBNZ has strengthened. Hawkesby (hopefully Dovesby) could easily deliver a 50bp move next week and signal another 50bps to 2.5% to come. That would set policy about right for a recovery. And it's not mucking around with 25bps moves, delaying the inevitable. A more decisive RBNZ would be viewed positively across the road (Terrace), given the difficulty the Government had in balancing yesterday's budget. 2026 will be just as hard. If, however, Hawkesby decides to play the nightwatchman, then we may just get a 25bp cut and little else. That's precisely what we don't need. And we'd argue it would show an RBNZ out of touch with our economic reality. We highly recommend watching our latest podcast where we speak to Urgent Couriers's Managing Director Steve Bonnici. Urgent Couriers feel the ups and downs of the economic cycle before most. When asked about the current cycle and monetary policy actions of the RBNZ, Steve said: 'I'm frustrated (by the RBNZ's actions)…The lack of understanding of what Kiwi businesses were going through out there. The time for easing was the beginning of 2024, not the end of 2024… we're a bellwether… we've had more clients go into receivership or liquidation in the last 12 months than in any of the other cycles (back to the 1980s)'. That's what we're hearing for the vast majority of Kiwi businesses. There are three scenarios for next week: The first scenario, is lifeless. The RBNZ delivers a 25bp cut and leaves the OCR track at 3.1% or slightly below at 3.0%. This would not go down well. Wholesale market traders would drop bonds, pushing interest rates higher. The pivotal 2-year swap (interest) rate would rise from around 3.15% now to 3.25% (about 10bps). Mortgage rates would barely move… if anything, it might see a reduction in discounting. The second scenario, is what we think they will do. A 25bp cut accompanied by a lower OCR track to 2.8% (or close to). Currently, most economists sit between a low of 2.5% (Kiwibank) and a high of 3%. This scenario will push most economist forecasts below 3% to a 2.5-2.75% range. The wholesale rate markets imply a terminal rate of 2.85-2.9%. We should see a (very) slight reduction in rates, supporting current mortgage rates. The variable and 6 month rates would move lower, but the 1 year and beyond wouldn't move much at all. That's not what we need either. The third scenario, is 'go for growth', generate greenshoots. A Doveish Hawkesby should put a 50bp move on the table, and an OCR track to 2.5%. The shock without Orr would see wholesale rates poleaxed. The 2-year swap rate would immediately test 3% (down from 3.15%), and ultimately fall towards 2.75%. All mortgage rates are likely to be lowered, as needed. A slightly watered-down version could be a 25bp cut and a much more dovish track to 2.5% The RBNZ's current trajectory is unlikely, in our view. Get to neutral, and get the economy moving. Ultimately, it's better to act swiftly and decisively to get lower rates feeding through faster. More meaningful cuts are required here and now.
Scoop
23-05-2025
- Business
- Scoop
25 And Not Done. The RBNZ Has More Work To Do. More Cuts Are Required.
Next week's decision, with updated forecasts, is important. There's no doubt that the Kiwi economy needs support. There's no doubt the RBNZ should be aiming to stimulate, not restrict, the economy. It's just an argument around how much support is needed. The RBNZ has signalled a 25bp cut to 3.25% next week. If it was up to us, we would deliver a 50bp cut to 3%, a level broadly considered neutral, not even stimulatory. But it's not just about the cut, it's also about the trajectory. And we're focussed on their next move(s). They're saying just one more move (25bps) to 3.0% after next week. We're saying get to 2.5%. We're stubborn, and we're hoping they're flexible. They had to be very flexible last year. The weakness in the economy is clear and demands more attention and less restriction. With all the risks offshore, think Trumpian tariffs, and the pain still felt onshore, there's a good argument to be made for taking policy into stimulatory territory asap. Next week's decision, with updated forecasts, sets the scene for the next 3 months, at least from the RBNZ's perspective. Adrian Orr has left the RBNZ and Christian Hawkesby is in charge. Next week's decision is a chance to differentiate from the Orr era. The economic developments since the RBNZ's last MPS have deteriorated here, and especially offshore. The justification of a more 'go for growth' focussed RBNZ has strengthened. Hawkesby (hopefully Dovesby) could easily deliver a 50bp move next week and signal another 50bps to 2.5% to come. That would set policy about right for a recovery. And it's not mucking around with 25bps moves, delaying the inevitable. A more decisive RBNZ would be viewed positively across the road (Terrace), given the difficulty the Government had in balancing yesterday's budget. 2026 will be just as hard. If, however, Hawkesby decides to play the nightwatchman, then we may just get a 25bp cut and little else. That's precisely what we don't need. And we'd argue it would show an RBNZ out of touch with our economic reality. We highly recommend watching our latest podcast where we speak to Urgent Couriers's Managing Director Steve Bonnici. Urgent Couriers feel the ups and downs of the economic cycle before most. When asked about the current cycle and monetary policy actions of the RBNZ, Steve said: "I'm frustrated (by the RBNZ's actions)...The lack of understanding of what Kiwi businesses were going through out there. The time for easing was the beginning of 2024, not the end of 2024... we're a bellwether... we've had more clients go into receivership or liquidation in the last 12 months than in any of the other cycles (back to the 1980s)". That's what we're hearing for the vast majority of Kiwi businesses. There are three scenarios for next week: The first scenario, is lifeless. The RBNZ delivers a 25bp cut and leaves the OCR track at 3.1% or slightly below at 3.0%. This would not go down well. Wholesale market traders would drop bonds, pushing interest rates higher. The pivotal 2-year swap (interest) rate would rise from around 3.15% now to 3.25% (about 10bps). Mortgage rates would barely move… if anything, it might see a reduction in discounting. The second scenario, is what we think they will do. A 25bp cut accompanied by a lower OCR track to 2.8% (or close to). Currently, most economists sit between a low of 2.5% (Kiwibank) and a high of 3%. This scenario will push most economist forecasts below 3% to a 2.5-2.75% range. The wholesale rate markets imply a terminal rate of 2.85-2.9%. We should see a (very) slight reduction in rates, supporting current mortgage rates. The variable and 6 month rates would move lower, but the 1 year and beyond wouldn't move much at all. That's not what we need either. The third scenario, is 'go for growth', generate greenshoots. A Doveish Hawkesby should put a 50bp move on the table, and an OCR track to 2.5%. The shock without Orr would see wholesale rates poleaxed. The 2-year swap rate would immediately test 3% (down from 3.15%), and ultimately fall towards 2.75%. All mortgage rates are likely to be lowered, as needed. A slightly watered-down version could be a 25bp cut and a much more dovish track to 2.5% The RBNZ's current trajectory is unlikely, in our view. Get to neutral, and get the economy moving. Ultimately, it's better to act swiftly and decisively to get lower rates feeding through faster. More meaningful cuts are required here and now.
RNZ News
08-05-2025
- Business
- RNZ News
Reserve Bank governor 'can't recall' all details from Willis meeting before Orr departure
Reserve Bank (RBNZ) governor Christian Hawkesby. Photo: RNZ / Dom Thomas The Reserve Bank (RBNZ) governor Christian Hawkesby can't remember all the details of a meeting with the Finance Minister in the days leading up to the departure of former governor Adrian Orr. The previous governor, along with Hawkesby - who was then deputy - and board chair Neil Quigley, met Nicola Willis on 24 February, nine days before Orr's sudden departure. At Thursday's Finance and Expenditure Committee meeting, Hawkesby said the controversial bank capital requirements were discussed at the meeting - at the request of Willis. He noted it was "not unusual" for government ministers to request briefings. The new details have emerged just as the RBNZ launches a review into bank capital requirements, which has drawn criticism from banks for being too onerous. Finance Minister Nicola Willis. Photo: Reece Baker When pressed by Labour's finance spokesperson Barbara Edmonds on whether Willis personally asked for a review into capital settings, Hawkesby was vague. "I can't recall all the details of the meeting and it's not something that I sort of generally get into," Hawkesby said. "The decision to do a capital review was the Reserve Bank's - it was our decision." On Wednesday, during a press conference after the release of the RBNZ's latest Financial Stability Report, Hawkesby said the central bank was not committed to any one outcome from the review. The RBNZ released the terms of reference of its review, which would draw on the Commerce Commission's banking report, which in part blamed the capital requirements for limiting competition. At the time, the central bank rejected the Commission's view, which were defended by former governor Orr. Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Bloomberg
08-05-2025
- Business
- Bloomberg
Willis Queried RBNZ Rates, Meeting Frequency Before Orr Quit
New Zealand Minister of Finance Nicola Willis asked the central bank to explain why it planned to keep interest rates at a restrictive level in the week prior to the sudden resignation of Governor Adrian Orr, documents obtained under the Official Information Act show. Willis also sought advice from the Treasury Department on the frequency of Monetary Policy Committee meetings, the documents show.
Bloomberg
07-05-2025
- Business
- Bloomberg
NZ's Willis Sought Meeting on Bank Capital Before Orr Quit RBNZ
New Zealand Finance Minister Nicola Willis sought a meeting with former Reserve Bank Governor Adrian Orr to discuss bank capital requirements in the weeks prior to his sudden resignation, documents released under the Official Information Act show. Willis also sought advice on her powers to direct the central bank on prudential policy, according to the documents released Wednesday in Wellington.
