Fred99:Geektastic:Fred99: Old saying - "buy on the rumour - sell on the news".
Future expected shifts in the OCR are mainly already reflected in the present exchange rate.
The OCR isn't supposed to be adjusted to control the exchange rate - only to adjust for inflation. But of course that's what happens anyway, as well as actual adjustments, there's "talking down" the rate - to which the markets respond immediately.
The last two quarters, CPI inflation in NZ was 0.1 and 0.3% - lowest since the 1940s.
Lowering the OCR rate is supposed to get us spending - stimulating the economy. Of course we all know where most that extra spending would go - into a non-productive bubble, and worse, using money borrowed offshore.
The other thing is that we are competing with (amongst others) places like the USA and EU. Their businesses are borrowing at close to 0% OCR which gives them an advantage. Also, at least in the case of the USA, fuel is so much cheaper than NZ that the cost of manufacturing and shipping is a fraction of ours.
Cutting our fuel costs by 50% would do at least as much for the economy than tinkering with the OCR I suspect.
Oh - it's worse than that. The US and EU also subsidise the crap out of production of the very commodities which are our primary exports, and will not change that in a TPP - or other deal.
I'm of the opinion that if commodities don't recover very soon, then NZ is going to need direct government intervention/stimulus - or we're heading for a possible "depression" creating event (negative inflation and negative GDP growth). I feel that's why government is reluctant to address the housing bubble - as at least while the bubble continues to expand, then it's countering negative sentiment.
Less so to some extent. For example, the EU milk quota system has recently been abandoned, flooding all their surplus product onto the world market and...increased supply has driven down prices.
However this should have been predicted by the agribusiness consultants in NZ ages ago and prepared for, just as they should be preparing for the increase in supply when 1 billion Chinese people work out how to produce their own milk and sell the surplus rather than buying ours....