Interest rates would only just begin flowing into the economy as people began to refix their mortgages, she added.
Finance Minister Nicola Willis says early data shows growth returned in the September quarter. Photo / Mark Mitchell
As Economic Growth Minister, Willis said it was “easy to say that I’m the problem” and reiterated that inflation and a spike in interest rates had “strangled the economy” over the past three years.
She simultaneously announced changes to Government procurement policy – coined a “procurement for growth policy” – that would simplify the rules and give businesses a stronger chance to obtain all or parts of state contracts, collectively worth more than $50 billion a year.
She acknowledged that this could drive up government costs, but said the flow-on effects would have a greater benefit for businesses and workers.
“In some cases, international firms will still win contracts, but they’ll be more likely to win those contracts in future if they’re using a Kiwi subcontractor, or they’re demonstrating that they’re doing training for Kiwi workers, hiring New Zealanders in jobs that might not otherwise exist.”
Squirrel chief executive Peter Cunningham told Bridge that, for mortgage holders, a subsequent fall in term deposit rates was more important than yesterday’s OCR cut. He argued that the Reserve Bank should make a similar cut in November to get the economy “out of this funk”.
Monetary policy settings had only just moved from contractionary to stimulatory after the Reserve Bank’s decision, he said, noting that the economy had been in recession “for the best part of two years”.
He forecasted a further reduction of 10 to 25 basis points before the end of the year, putting the one-year mortgage rate at about 4.25%, “unless the Reserve Bank is bold and does another 0.5, which is what I’ve been advocating for a while”.
“And then we should not be talking about mortgage rates. They should just sit there and we should get on with bloody growing this economy and getting cheerful for summer.”
Sign up to The Daily H, a free newsletter curated by our editors and delivered straight to your inbox every weekday.