This morning’s hold of the Official Cash Rate (OCR) at 2.5 percent, following last month’s 50 basis point cut, sends a powerful pre-Budget message to the Government.
“The OCR hold casts next month’s Budget into sharp relief,” says Philip York, Federated Farmers economics spokesperson.
“Exporters, particularly, agricultural exporters, are doing their bit with increasingly bright returns for meat and fibre exports and Fonterra exporting a record 229,000 tonnes in March alone. We’re focused on getting our balance sheets back in order and it’s about time that Government does the same.
“The challenge to Government is to back the Reserve Bank by reigning in its spending. Fiscal policy and stimulus to play second fiddle to monetary policy as we desperately need a roadmap back to Budget surpluses after seeing Government borrowing $496 every second.
“Business organisations, Federated Farmers and even the OECD, all see the need for urgent structural reform. The Budget must start delivering on this and there needs to be a bipartisanship on the solution, otherwise, we risk slipping back to the 1970s.
“While we disagree with some elements in the OECD’s Economic Survey released yesterday, it is clear from reading it that fiscal policy is a sea-anchor on the New Zealand economy.
“As noted by the OECD, part of the structural problem is poor quality regulation that comes from a Government that has grown too large for our economy.
“Federated Farmers eagerly awaits the first reading of the Regulatory Standards Bill as well as the introduction of the Spending Cap (Peoples’ Veto) Bill, which could start the much needed process of regulatory unbundling.
“We need discipline and we need solutions and we need them all in next month’s Budget,” Mr York concluded.