RBNZ Defers Implementation of New Capital Framework

17 Mars, 2020, 02:53 | Auteur: Auguste Feret
  • RBNZ policy announcement

New Zealand's central bank slashed interest rates to nearly zero Monday as Prime Minister Jacinda Ardern warned the coronavirus could have a worse economic impact than the global financial crisis.

But he said the move was also meant to show that the RBNZ was not at this point contemplating negative interest rates, even as the policy options for central banks dwindle globally.

He said the Government has been working closely with the Reserve Bank in a co-ordinated response to the economic impacts caused by Covid-19.

"The Bank has a number of operational tools at its disposal to support liquidity and market functioning in New Zealand".

Now it's the New Zealand government's turn.

He warned the first nine months of 2020 could see New Zealand's economy endure "one of the sharpest drops in living memory" and there was little the central bank could do about it.

RBNZ Governor Adrian Orr told a media conference the virus was expected to have a severe effect on New Zealand's people and economy over the coming year.

The Reserve Bank has delayed the introduction of new capital rules for the banking sector in the wake of the coronavirus outbreak.

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New Zealand has just eight confirmed coronavirus cases and no fatalities, for a population of almost five million.

RBNZ interest rate comparison

"This is going to spill through to some more unemployment and business failures".

However, it is recognized that New Zealand's financial system remains sound and its major financial institutions are well capitalized and liquid, said the RBNZ.

Economist Shamubeel Eaqub said he was not surprised that fixed home loan rates had not yet been cut.

Westpac Bank has announced it will pass on the full interest rate cut to customers.

The government on Monday barred events of more than 500 people and restrictions kicked in forcing all global arrivals to self isolate in a bid to slow the virus' spread.

In a statement released soon after the Reserve Bank's move, Finance Minister Grant Robertson said the OCR cut was "a welcome support to the economy".

The Government is preparing for its biggest day of the crisis so far, with plans to unveil a multi-billion-dollar rescue plan to save jobs and businesses.

New Zealand bond yields have never been lower than they are now - meaning it is very cheap for the Government to borrow money.

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