The visible hand in economics

OCR review preview

Posted on: October 18, 2007

The October official cash rate review will be on the 25th October.

The main points that will be driving RBNZ policy are:

  1. Strong economic growth (including revisions) in the June year.
  2. The surprising strength in the export industry, even before the TOT shock has fully eventuated
  3. A weak CPI reading, however many of the shocks driving down the number where one-off and so will be over-looked
  4. Credit market uncertainty and the volatility of the dollar
  5. Weakness in the housing market – Potential weakness in domestic demand

It seems more than likely that the RBNZ will keep rates steady. Any cuts would be irresponsible in the current climate, while a rate rise would seem heavy-handed given weakness in some domestic indicators. The probability of a hike is greater than the probability of a cut, given underlying inflationary pressure.

4 Responses to "OCR review preview"

A question for an informed and learned Economist.

Is there any truth in the often stated claim that. “The public sector can borrow more cheaply than the private sector.”

regards db.

I’m not learned or informed, but I’m pretty sure that the public sector can borrow more cheaply than many in the private sector.

The reason is that the government has a better credit rating, they are a lot less likely to default than a business, or a household, and as a result the risk premium is significantly lower and lenders will be willing to give the government funds at a lower rate.

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