So if you get good news, does it matter how the news is delivered?   

When it comes to running the economy, and making decisions about refixing your mortgage, you could argue it does.   

But let’s focus on the surprising, good news yesterday.  For the first time since March 2020, the  Reserve Bank cut the official cash rate by 25 basis points to 5.25%.  The reasoning for the cut is that New Zealand’s annual consumer price inflation is returning to within the Monetary Policy Committee’s 1 to 3% target band – it currently sits at 3.3 - but the indication is it will continue to decrease.    

The Reserve Bank’s released a new forecast rate track that suggests the OCR will fall from here to at least 5% by the end of the year and to at least 4.5% by June next year.  

This morning, Reserve Bank Governor Adrian Orr explained to the Mike Hosking Breakfast why the RBNZ made the decision to lower the OCR...  

“Plenty of time and plenty of information has happened since May, and we've also communicated that as well. You know, we had a July monetary policy statement where we quite clearly showed our level of, growing level of confidence that the monetary policy is working, growing concern that the output is falling quicker than  necessary, and so we moved in August.” 

So, hallelujah. It’s a dose of hope, a ray of sunshine, and the right move, but is it enough of a move to make a difference to you? It depends on your individual circumstances as to whether it makes an impact now – or in a years' time  

The tax cuts have come into play, and OCR is dropping, but we’re also dealing with rising rates, increases in utility bills and hefty insurances bills. So what impact will this news have on your household?   

I am sure that Adrian Orr was excited to finally be announcing a rate cut – but was it communicated well? The news has been overshadowed by frustration and criticism over the way it was delivered.   

Reactions among bank economists were mixed, all agreed the direction of travel for rates is down, and sooner rather than later, and New Zealand’s major banks have moved swiftly in lowering mortgage lending rates, but if you’re a consumer  making decisions about your mortgage, or business loan and had looked to the Reserve Bank to give you an indication of how things were going to progress – you quite rightly might be a little taken aback by this earlier than anticipated move.   

 In February and April, the Reserve Bank reasoned that the OCR would need to remain at a restrictive level for a “sustained period” to ensure inflation returned to the 1-3% target.  

In May, that wording changed – it was slightly softer. “Monetary policy needs to remain restrictive to ensure inflation returns to target within a reasonable timeframe.”  

And in July, things loosened up more with the central bank stating “monetary policy will need to remain restrictive” but that “the extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures”.  

We had been led to believe that we would not see cuts until next year – and I’m not sure this statement has enough detail to make anyone think otherwise.   

This was Adrian Orr defending the communication of the OCR cut to the Mike Hosking Breakfast ... 

“Nothing we do today is going to affect today's inflation, so we're always looking forward. What are we seeing here? We're seeing more spare capacity of the economy taking out some of that inflation pressure and we're seeing global pricing falling and we're seeing business pricing behaviours change dramatically in New Zealand all for the positive, all consistent with one to 3% inflation.” 

The cut is a good move, the RBNZ might have read the economy correctly, but were their intentions clear to you ? Have you been able to read between the lines and make decisions that will allow you to benefit from this cut, and on going cuts over the coming year?   

The news yesterday was a step in the right direction – a new direction, but interpreting RBNZ statements has become a bit of an art. Maybe some pictures would have been helpful after all.