A tale of two Reserve Banks and why NZ needs to suffer more
Source: Freepik
Central banks are not renowned for engineering soft landings.
While they do usually aim for soft landings, in fact, they mostly achieve the opposite.
They tend to tighten too much and hold interest rates high for far too long and send their economies into recession.
What's notable about New Zealand's current recession – the economy has shrunk in four of the last five quarters – is that our central bank governor Adrian Orr said explicitly that he wanted to engineer a recession, not a soft landing.
The Reserve Bank of Australia's cash rate sits at 4.35% and only reached that height in November last year from 4.1% previously.
Australia's Consumer Price Index (CPI) rose 1% in the March quarter and had risen 0.6% in the December 2023 quarter – the annual rate had peaked at 7.8 per cent in December 2022 .
The Reserve Bank of New Zealand's official cash rate (OCR) has stood at 5.5% since May last year and has been higher than RBA's current cash rate since February 2023.