12 Jun 2015

Reserve Bank gives economy a rev-up

9:26 am on 12 June 2015

The Reserve Bank has given the economy a pep-up, cutting the official cash rate and indicating another is on the way.

Reserve Bank of New Zealand

Reserve Bank of New Zealand Photo: RNZ / Alexander Robertson

Yesterday the central bank cut rates for the time in more than four years, from 3.5 percent to 3.25 percent, due to weakening dairy prices and low inflation.

Its governor Graeme Wheeler said while lower rates may bolster Auckland's already overheated housing market, the slowing economy needed a pick up to get inflation back to its mid-point of 2 percent.

"We felt that demand growth was likely to be slowing over that period particularly given the change in dairy prices and also the rise in petrol prices and that if we delayed we ran the risk that further down the track we'd have to be more aggressive."

Graeme Wheeler said they believe net migration may start to level off and decline.

Get the new RNZ app

for ad-free news and current affairs