more rises<\/a> before the end of the year, Dunne said it was no surprise that Finance Minister Nicola Willis had gone on the front foot, saying it was a vote of confidence in the economy and its growth.<\/p>\n\u201cShe\u2019s got to sell that message now. She can’t afford any sort of sense that we’re going back to where we were in the early 2020s when the bank was raising interest rates and people were struggling, so it’s going to be a finely balanced thing,\u201d he said.<\/p>\n
There was a \u201crelaxed air\u201d that the Beehive conveyed on Wednesday, Dunne said, but \u201cthey\u2019ll be quite concerned behind the scenes about what the impact of this might be, and they\u2019ll be looking for early polling data, I would suspect, on just how people are receiving this.\u201d<\/p>\n
The Government\u2019s message at the moment has been that New Zealand had \u201cturned the corner\u201d and while there was conflict in the Middle East, things were \u201cback on track,\u201d he said.<\/p>\n
\u201cThat could be a good narrative going into the election but if that gets derailed or if people feel \u2026 that’s not quite right, it could really bounce back on them very badly.\u201d<\/p>\n
\u201cThey’ll be keen to assert the independence of the bank \u2026 But they’ll be watching this very closely over the next few weeks, just to see how the public have taken it,\u201d he said.<\/p>\n
Opposition parties would be watching this from the other side of the coin, Dunne said. \u201cIs this going to be advantageous to us? And if it is, how do we capitalise on that?\u201d<\/p>\n
\u2018You wouldn\u2019t rule out an October pause\u2019<\/p>\n
The next OCR Monetary Policy Statement will be on September 2. A review is also set for October 28, a week before election day but also when advance voting has already started.<\/p>\n
Following the OCR hike, BNZ head of research Stephen Toplis said \u201cwe feel that a further 25-point increase in September is very close to a done deal\u201d and that there needed to be follow-through in at least one of the October and December meetings.<\/p>\n
\u201cThe central bank shouldn\u2019t take the General Election into consideration in making its decision but you wouldn\u2019t rule out an October pause.\u201d<\/p>\n
Toplis said: \u201cMany months ago, when we thought that the central bank would not be raising interest rates until later this year \u2026 because we thought the first rate increase would be September, October\u2026We did pass comment that we didn’t think that they would want to start a tightening cycle weeks before an election, because they would get heavily embroiled in the political process.\u201d<\/p>\n
\u201cIt would become politicised.\u201d<\/p>\n
This time, it could be quite different, Toplis said.<\/p>\n
If by the time of the September announcement, the RBNZ had delivered two rate hikes and indicated they needed to carry on, \u201cthen I think everybody would have got their heads around that, and it would be completely depoliticised anyway,\u201d he said.<\/p>\n
\u201cFrom our perspective, it\u2019s no big deal at all. All we\u2019re saying is that we think interest rates should rise at consecutive meetings, but if the Reserve Bank chose to have a wee pause around election time, we wouldn\u2019t find that at all upsetting.\u201d<\/p>\n
Wider decision-making at RBNZ<\/p>\n
Dunne said that previous decisions on the OCR were the responsibility of the Governor alone, and the Governor of the day took the blame or the credit, but with a Monetary Policy Committee, people get a sense of where the lines are drawn.<\/p>\n
\u201cIt\u2019s a little harder to blame the Governor for everything,\u201d he said, and because of that wider involvement in OCR decisions, that may mean\u00a0the chances of big upheavals are less than they were previously.<\/p>\n
While people understood the RBNZ was independent and made its own decisions, they also will feel that the Government has some sort of involvement, he said.<\/p>\n
\u201cTherefore, if the bank puts rates up, that\u2019s obviously a sign that the Government is not doing as well as it should and if things are as good as they say they are, why haven\u2019t they stopped? This will be that sort of feeling that occurs.\u201d<\/p>\n
Election on a knife-edge<\/p>\n
Not everyone followed the RBNZ\u2019s decisions, Massey University politics professor Richard Shaw said. \u201cAs far as New Zealanders are concerned, it\u2019s all the government. I think that would be the dominant position.\u201d<\/p>\n
\u201cMost voters are not going to be going into the pros and cons of central bank independence or whether or not there should be a dual mandate \u2026 It\u2019s all really \u2018who\u2019s doing this to me, it\u2019s the government, and I feel worse\u2019. Or in the case of savers, \u2018I feel better\u2019.\u201d<\/p>\n
If the RBNZ held the OCR in October, he said that would be \u201creally handy\u201d for Willis. \u201cThat’ll be the one to look for, I reckon.\u201d<\/p>\n
\u201cThis is going to be a serious knife-edge election \u2026 There will be enough people who haven’t made up their mind going into the early voting period and election day itself to mean that there’s no way the election will have been decided, and we can’t tell, of course, until after the event what factors influence it, but it would be pretty hard to say sensibly that the decision that’s announced on October 28 will have no impact on voting behaviour, because it will.\u201d<\/p>\n
\u201cIt’ll have some impact. It’s just really hard to pull it out of everything else,\u201d Shaw said.<\/p>\n
Victoria University of Wellington senior lecturer Tom Jamieson said it was well-established that people evaluate the performance of the incumbent government based on the state of the economy at the time of the election.<\/p>\n
\u201cIf you’re feeling like things are going pretty well and you’re inclined to also think that it’s the government that’s responsible for that situation, then you’re likely to reward them. On the other hand \u2026 if you perceive things are going worse for you than they were three years ago, then that might play a role.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"While the choice to hike the Official Cash Rate (OCR) can be justified economically, how these decisions are…\n","protected":false},"author":2,"featured_media":791673,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24],"tags":[49,48,314,66],"class_list":["post-791672","post","type-post","status-publish","format-standard","has-post-thumbnail","category-physics","tag-ca","tag-canada","tag-physics","tag-science"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/791672","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=791672"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/791672\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/791673"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=791672"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=791672"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=791672"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}