The stakes are high for many businesses, and there is growing pressure for the Bank to act decisively. Calls are intensifying for a substantial 50 basis point cut rather than another cautious move.
At the heart of this push lies frustration among business leaders who argue that monetary easing should have begun months ago. The founder of Urgent Couriers, Steve Bonnici, reflects a common sentiment: He believes businesses are bearing the brunt of delays, with insolvencies climbing steeply over the past year. He sees his business as a bellwether for the wider economy, signalling distress long before it becomes visible in national statistics.
While the government’s new ‘Investment Boost’ initiative offers optimism, many experts agree its economic impact will be limited. With Treasury now forecasting gross government debt to balloon by $73 billion by 2029, the ability to rely on fiscal stimulus is severely limited. Debt servicing costs are set to rise by $3.6 billion over the next four years, further narrowing the scope for government action.
This leaves monetary policy as one of the few remaining levers to stimulate growth. Yet, current OCR projections suggest a slow and steady approach, with rate reductions expected to unfold cautiously. Many, including Kiwibank’s chief economist, argue this isn’t enough. They suggest a bold 50-point cut is required to kickstart economic recovery and rebuild business confidence.
The central bank’s April decision has only heightened uncertainty. New Governor Christian Hawkesby has the chance to redefine the Reserve Bank’s direction. There’s hope in some quarters that his approach will shift towards a more aggressive growth-focused stance.
Globally, bond markets are flashing warning signs. Yields are rising as investors demand greater returns, reflecting a riskier economic outlook. New Zealand’s 10-year government bond yield sits at 4.6 per cent, despite Treasury forecasts suggesting a softening to 4.3 per cent.
The sentiment among SMEs is increasingly pessimistic. Business owners are concerned that the Reserve Bank is out of sync with economic realities on the ground. Incremental 25 basis point cuts fail to deliver the psychological or financial relief many businesses urgently need.
As Wednesday’s OCR decision looms, the message from business is clear: delay no longer. The time for half-measures has passed. For the sake of business survival and economic momentum, the Reserve Bank must act swiftly and decisively.
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