Dr Bollard DO NOT cut the Official Cash Rate

A much better outcome would be for the OCR to be scrapped entirely and how about this, let the market decide what interest rates should be. Now there is a novel and much more logical idea!!

Well said 20 Nov 2008 19:42 - sosadsnz. Enjoy watching your neighborhood trying to buy a home in your area with a 20% deposit or refinance there home loans and find now they can only borrow 80% of the rateable value. As from today National Bank ANZ Bank have moved in that direction !!!! AIEEEEEEEEEEE !!!!! Morgagee sales coming to your area very soon. AH ! but then we will be able to buy cheap houses by coughing up 20% deposit for our student debt ridden from excessive fees children and then furnish those houses with our hard earned dollars with high cost imported luxuries due to our useless low NZ$. New Zealand the way John Key wants it !!! I think not !

TraderF in pleading for Mr Bollard not to cut the OCR further, argues that overseas lenders need a large margin between offshore and NZ interest rates to attract their investment. Such argument is flawed, in that it seeks the easy trader's road of BUYING investment, as opposed to SELLING New Zealand and the Kiwi $ as a sound investment risk based upon the usual fundamentals of economic risk assessment. While Buyer and Seller demand determines daily movement in the cost of perceived risk, International Rating agencies should be relied upon to provide the underlying review of economic fundamentals and the rating used by the market to establish differentiation in price between sovereign risk, not the traders. Perhaps Trader F, unlike a great many Kiwis, is probably not a homeowner with a mortgage or even a business proprietor, importer or exporter with an bank overdraft of term loan facility. The alternative to lower cost of funds is to cut overheads and that start's with job cuts. Trader F probably works for the sector that will see the first and most aggressive in job cuts as without free credit markets there is no money in circulation to trade let alone support consumer spend. Welcome to the real world! While caution and care should always lead Governor Bollard's decision making process, it is vitally important that NZ should not become isolated from acting alongside other Central Bank emergency measures, such as a lower OCR, in countering deep global recession or even depression. The OCR has now been employed for well over a decade as the most gentle of Keynesian measures of intervention in a free market. Its original intention was to constrain hyper-inflation while its present use is to minimise negative economic growth or collapse. Other measures like TAF tenders, Bail Outs and Bank Guarantees are new intervention tools that should be of greater concern to Trader F than a lower OCR. In passing indebtedness up the food chain, these measures are in danger of lowering Sovereign risk to the level of Bank risk. In so doing they are capable of creating a permanent rift in the previously accepted tiers of prime to sub prime to non prime risk, in hope that temporary stability will see economic normality and investor confidence return within two years. The only problem with such an initiative, is that if it doesn't work and the capitalism model for economic stability fails, just who will Governments borrow from to meet national debt repayments? The IMF or the World Bank perhaps, but just how deep are their reserves given that they do not actually generate profits from trade through which reserves can be created. They are solely dependant on the financial support of member nations? In addition and probably of greater concern for the free-world, is just what loan conditions would be applied by a World Reserve Bank authority and how might they dictate a 'new world order' designed to control previously independent nations? For the present, the dropping of the OCR a further .75% before Christmas and possibly a further 1% during 2009 is a lot more palatable than any other responsible fiscal alternatives presently available, so should he deem it necessary to drop the OCR, I say 'GO FOR IT MR BOLLARD!'