An article on the Mainstream Media last weekend here suggests that the Reserve Bank will keep cutting the Official Cash Rate until it goes below zero — yes, you heard right.
“Odds are rising that some kind of significant economic hit will occur before the OCR is back to anything approaching historical norms,” ANZ strategist Sandeep Parekh wrote in a note from June, laying out the “unconventional” options the Reserve Bank could use next.
“These included cutting the benchmark official cash rate (OCR) to below zero, as well as buying government loans, council debt and even packages of mortgages, a tactic commonly known as printing money.”
The article states that Interest rates are at all time lows and are headed lower. The OCR is now down to 1.5% and is widely expected to be cut again in August. By the end of the year it could be under 1%.
At present the official inflation rate is 1.5%, but everyone knows that real inflation for several things — particularly KCDC rates — is well up on that. Retired people who rely on interest from savings to supplement the government pension will have to start dipping into those savings.
There are obvious consequences — one which we don’t want to see is the resurgence of the Dodgy Finance Company offering bigger interest on ultra risky deposits with them. Another, perhaps more positive, may be people chasing equity investments in new productive enterprises; providing capital gain if not dividends. Another consequence may be more elderly seeking part or full time jobs to get by.