NZ Treasury Not Keen on QE
By Alex Ross, NZ Corporate FX Dealer, Western Union | Posted: Tuesday August 13, 2019
PM Ardern well aware of their role in providing economic stimulus.
Some comments from the New Zealand Treasury yesterday underlined how preparations for a Zero Interest Rate policy are becoming a local reality. They stated that should unconventional measures be required they would much prefer negative interest rates to quantitative easing, the act of effectively increasing paper money supply. Shortly thereafter PM Jacinda Ardern underlined the government’s commitment to providing economic stimulus, perhaps in response to Governor Orr’s subtle remarks last week suggesting that he couldn’t do all the heavy lifting on his own. Ardern pointed out they had put aside $10B for capital spending and increased their operating allowance to $3.8B to help keep the economy moving.
The dual statements initially provided support to Kiwi pairs yesterday, particularly NZD/AUD which is one pair that opens higher today. For what it’s worth we agree with Governor Orr. If the government doesn’t open its chequebook now then there is a very decent chance he might have to slash rates lower. And when money is so cheap it makes every bit of sense right now to borrow heavily for the future and rapidly improve our ailing infrastructure, which will go a long way to assisting with the much vaunted productivity increases everyone is after.