Reserve bank governor Adrian Orr (Dom Thomas, Radio NZ)

The Bulletin: Why the OCR cut is big news

Good morning, and welcome to The Bulletin. In today’s edition: Why the OCR cut is a big deal, significant non-compliance on Waikato dairy farms revealed, and major changes to Misuse of Drugs Act passed.

The Reserve Bank has cut the OCR further than expected, bringing it down to 1.00% rather than the 1.25% that was predicted. The NZ Herald reports it “stunned” financial markets, and it is being seen as a front-footing of further rate cuts that would have been likely anyway. The OCR almost never gets cut by half a point, and when it does there is typically some crisis to be faced, as it is a move designed to get economic activity cranking up again.

To get a sense of the importance of this, this story from international wire service Reuters has significant gravitas. Their story reads as it would were it a different country, which is often a good mental exercise to help understand news about your own country. Or read about it in Bloomberg, which brings it into the sweep of global affairs and notes that other central banks around the world are also cutting heavily, in an attempt to stimulate economies, and mitigate the effects of the China-US trade war. Both India and Thailand also cut rates by more than expected yesterday, in what was termed a “race to the monetary bottom.” Also in Bloomberg, analyst Daniel Moss said about New Zealand that “shockingly, in a nation that prides itself on standing apart from the world’s ills, countenanced the prospect of negative rates.”

So what will it actually do? Speaking to Checkpoint, economist Shamubeel Eaqub said he was impressed at the initiative being shown by the RBNZ, and said the move would likely help exporters as the dollar will drop. Banks also dropped floating mortgage rates rapidly, with Interest reporting that all big name banks have made moves here.

But really, what people are worried about is that it is a sign of panic, or something that will in fact cause panic. Markets are, after all, fallible and can be rather prone to collective hysteria, and it’s hard not to panic when someone is shouting ‘don’t panic’ at you. Now, politically it should be stressed that politicians have no direct influence over the OCR – that’s solely for the Reserve Bank to determine. However, it certainly has an effect on politics, and what politicians can do, in particular if there is an economic crisis. National’s Paul Goldsmith effectively said the cut was a warning that the economy could stop growing.

It may not be that serious of course, but one thing that is clear is that it will now be much harder to use further rate cuts as a stimulus. If a stimulus was needed that would instead have to come from something more like government spending, and that would become a political issue for the government to navigate. Plenty of drums are beating for some sort of fiscal (rather than monetary policy) stimulus – see for example Bernard Hickey at Newsroom – so over the next nine months or so keep an ear out for noises about huge spending being unleashed in the 2020 Budget.


Significant and continued non-compliance among dairy farmers has been revealed, reports the Waikato Times. 121 of the 936 farms being monitored had evidence of “significant non-compliance,” and overall just over half of the monitored farms were rated as “high-risk.” Just 21% of monitored farms were fully compliant. Andrew McGiven from Fed Farmers said he was disappointed to see non-compliance. 20 prosecutions, and a record number of fines for a year, have been set in motion by the Waikato Regional Council.


Major changes to the Misuse of Drugs Act have passed a third reading, reports The Spinoff. Under the changes, police will be “required to avoid prosecution in cases where a health-based or therapeutic approach would prove more beneficial.” Chlöe Swarbrick, who shepherded the drug reform efforts, said it is “a triumph for compassion and a triumph for common sense”. The bill will also reclassify two synthetic compounds, responsible for a wave of deaths, as Class-A.


Mayoral candidates are lining up for a run against incumbent Lianne Dalziel in Christchurch, reports The Press. Veteran campaigner John Minto is having another crack, promising free public transport if he’s elected. And businessman Darryl Park is going for it, but hasn’t yet announced any policies. However, he is a director of the Canterbury Rugby Football Union, and a potential new stadium for rugby is a hot-button issue for Christchurch, so it stands to reason it’ll come up.


This could be a surprise to those in Auckland who woke up to rain absolutely hosing down this morning. But as Radio NZ reports, there will need to be a lot more rain to get water levels back to normal in storage reservoirs. It’ll take more than a few downpours, after a record dry seven months to start the year. But don’t worry – you can help avert a crisis by getting smart about water use now.


You might have been following the saga going on in Wellington about a mysterious, secret letter sent by associate transport minister Julie Anne Genter. Or rather, it might not have been associate transport minister Julie Anne Genter, but rather a different Julie Anne Genter altogether. Confused? You might very well be, but fortunately political commentator Ben Thomas has come out with a highly useful analysis of it for The Spinoff, which should bring you up to speed. The latest development in the story, from Newshub, is that Genter is continuing to refuse to release said letter, which related to the Let’s Get Wellington Moving funding package, even though an ombudsman’s investigation has been launched.


Pretty much all DHB budgets are blowing out at the moment, and this is a really good case study of why. The Bay of Plenty Times (paywalled) has focused on their DHB’s struggles, with a deficit millions of dollars larger than what had been predicted. But demand is also way up, and the ageing population of the region is part of the reason why, along with increasing costs associated with medical advances. Because of that context, the DHB’s CEO Helen Mason says the blowout shouldn’t be surprising.


There may or may not be a massive storm around the start of next week. The reason for the hedging is because weather forecasters are having a very public disagreement with each other over it, reports the NZ Herald. Philip Duncan at Weatherwatch is at odds with NIWA and Metservice, who say there isn’t yet too much to worry about. I suppose we’ll all just have to wait and see if we get wet on Monday.


The Bulletin is The Spinoff’s acclaimed, free daily curated digest of all the most important stories from around New Zealand delivered directly to your inbox each morning.

Sign up now


An artist’s impression of an artist’s impression of the giant parrot. Image not to scale. (Dr Brian Choo, Flinders University and Tina Tiller)

Right now on The Spinoff: We’ve published a brilliant first person piece by John Sato, the 95 year old who made international headlines by taking four buses to join an anti-racism march in central Auckland after the March 2019 Christchurch mosque attacks. Catherine Woulfe writes about this year’s winners of the Children’s Book awards. Dame Rangimārie Naida Glavish, the so-called ‘kia ora lady’, speaks to Leonie Hayden about ageing and her remarkable journey through life. And I wrote about the giant extinct parrot that was discovered yesterday, and whether we would fear it if it lived today.


A true story about Jack Tame: I was once filling in as the producer on his Saturday morning show on ZB, and the regular producer had set up absolutely everything for me. Of course, I dropped the ball completely, totally ruining an interview pre-record and throwing out the whole schedule of the show. Tame barely blinked, and just smashed the show regardless. Which is all a roundabout way of saying there’s a lot in this profile of him in Metro that rings very true, particularly the stuff around his extreme tidiness and professionalism. Here’s an excerpt:

But it’s not just dinners out and comedy shows he’s seeking — Tame doesn’t want to be introduced as a “TV presenter” any more. He wants to be a journalist. “I’m aware for some people it’s inconceivable that you would choose to leave a show that is relatively high profile such as Breakfast, for a show that’s on at 9.30 on a Monday night. You’re trading relative glamour for 16 minutes with David Parker talking about Belt and Road.”

While he thinks Breakfast has unfairly been categorised as light, unserious entertainment — “there are few jobs in the country where you have the opportunity to interview the Prime Minister regularly,” he says — the opportunity to press the most powerful people in New Zealand to better explain the policies they’re advocating or the decisions they make was an opportunity Tame couldn’t pass up. Especially the year before an election.


I only ever get about half the references in them, but David Squires’ football comics are always worth reading. His latest in the Guardian previews the English Premier League season ahead, and is probably about as worth reading as any serious punditry. Either way, it captures the feeling of arduous slogging that seems to sum up the EPL now – here’s hoping there will at least be some good highlights packages.

Join us and help us hire new
political & climate reporters
Find Out More

And here’s an interesting story in the oval ball code wars. Former Kiwi AFL player Kurt Heatherley, who spent five years with the Hawthorn Hawks in Melbourne, has signed with Auckland to play Mitre-10 Cup Rugby, reports One News. Heatherley was de-listed by the Hawks last year, and is likely to play as an outside back, being good under the high ball.


From our partners: With several high profile government objectives in the spotlight, a single ministry could drive better outcomes across them all. Robyn Holdaway, senior policy advisor at Vector, makes the case for a Ministry for Energy.


That’s it for The Bulletin. If you liked what you read, and know other people who would find it useful, pass on this signup form to them.


This content is brought to you by Vector. If you live in Auckland, they also delivered the power you’re using to read it. And they’re creating a new energy future for all of us, as showcased by the incredible Vector Lights in partnership with Auckland Council.


The Bulletin is The Spinoff’s acclaimed, free daily curated digest of all the most important stories from around New Zealand delivered directly to your inbox each morning.

Sign up now


Related:


The Spinoff is made possible by the generous support of the following organisations.
Please help us by supporting them.