Earthquake means OCR to hold till 2012
Christchurch is reeling after a devastating 6.3 magnitude earthquake which means the Official Cash Rate (OCR) is unlikely to rise until 2012, with a possibility it could even be cut.
Tuesday, February 22nd 2011, 6:03PM 
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by Jenha White
BNZ economist Tony Alexander says he thinks the OCR will not be increased until January 2012 because the earthquake will weaken economic activity and confidence in New Zealand.
"Basically a repeat and possibly worse, than what we saw back in September."
He says the main implication with rates not being increased this year is that one may as well stay on the low floating rate.
ASB economist Chris Tennent-Brown says there's an increased chance that the Reserve Bank will cut the OCR, but it is more likely that it will hold the OCR until late 2011 or early 2012.
It's a very major headwind the economy will face this year. We've pushed out our expectation from September to December this year."
He says the data in the last month had already been pushing expectations that way and this adds to the reasons why the Reserve Bank won't be in a hurry to raise rates.
"Over the next few days the Reserve Bank will be trying to assess just what the impact of the earthquake means for the economy as quickly as possible, looking at where the strains are and whether lowering interest rates would be appropriate."
ANZ economist Khoon Goh says the earthquake means the Reserve Bank will hold the OCR at its stimulatory level until the early part of next year - although there is still uncertainty around the extent of damage in Christchurch.
"There's also a slim chance that the Reserve Bank may decide to cut the OCR - we wouldn't rule that out."
J.P Morgan says there is no urgency for the tightening cycle to resume in the wake of today's released inflation numbers, let alone in the aftermath of today's tremor - the second major natural disaster to hit the region in six-months.
The next Monetary Policy Statement meeting is on March, 10.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
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The underlying problem of our countries debt worsens as we sit on our hands. Debt is cycling upwards, house prices in Auckland are increasing or at least very firm in the higher volume areas - being driven not by higher wages, but higher borrowing.
The country needs cash, but it is simply not good business for people to save at the current interest rates after tax and Government current debt including the current account was 62 billion I read. Private debt way higher.
Will the cost of re insurance be significantly higher? I bet it will, so we have that to face as the tragic events unfold.
Part of the answer is to remove tax on NZ resident savings held in NZ - We could always allow the market to set the cost of money.