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Economic weather report: Why the RBNZ should be raising rates

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Uploaded by on Nov 25, 2009

Bernard Hickey delivers an Economic Weather Report on the latest National Bank Business outlook survey of business confidence, which shows businesses expect conditions consistent with GDP growth of 3-4%. The last time New Zealand had growth that strong the Reserve Bank had the Official Cash Rate at over 7%, yet this time it seems determined to keep it at a record low 2.5%. It's time the Reserve Bank looked to start increasing it, despite apparently low inflation right now. At some stage all the fuel from monetary and fiscal stimulus both here and overseas is going to catch fire. The Reserve Bank needs to be applying the protective foam of a rate hike now to ensure the flash fire doesn't burn too hot.
Click here for a full interactive chart on business confidence. http://www.interest.co.nz/charts/gallery1-32.asp

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  • These same business people didn't see the crash coming so their sentiment is almost meaningless in the real world looking forward. The government is about to make big cuts in the upcoming budget. This will certainly dampen growth. We may even see new taxes - perhaps disguised as fees - or reduced public services. Either way, the economy here and in many other countries, looks set for a kicking as the cash runs out on the unsustainable "stimulus".

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  • r u reporting or adding ur 2 cents bernard? cuz its never been usefull!

  • Smoke 'n mirrors

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