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Key expects RBA to cut rate

Move could push kiwi beyond parity with Australian. PLUS: The PM's shifting opinion on an Anzac dollar.

Tue, 07 Apr 2015

UPDATE: If the Reserve Bank of Australia plans to cut its official cash rate, it's not doing it today. The RBA held at a record low 2.25%.

The kiwi fell almost one cent against the Australian dollar to 98.32 cents from 99.13 just a moment before the announcement.

EARLIER: Prime Minister John Key is picking the Reserve Bank of Australia will lower its official cash rate later today. The RBA is due to make an announcement at 4pm NZ time.

"In all probability their interest rates are going to go lower," Mr Key said on The Paul Henry Show this morning.

Economists say if the RBA does lower rates, the move is likely to push the Australian dollar down against the kiwi.

The NZ dollar has been heading for parity with the Australian dollar. The prime minister says that's a good thing.

"We got to 99.70 overnight. In a lot of ways that’s a point of celebration because it shows our Australian economy is doing well," Mr Key says.

Parity is a double-edged sword for exporters, they often have an imported component, he says.

But overall, "It’s a sign of confidence in New Zealand. We were in Australia in the weekend and The Australian ran a big story about how well New Zealand’s doing and how a whole lot of Australians have come over from New Zealand or New Zealanders have returned from Australia." (Read New Zealand rides high with strong dollar, booming economy).

Mr Key, who is also tourism minister, said Australians account for roughly 50% of visits to New Zealand but he did not think transtasman tourism would be affected by parity.

Anzac dollar
Looming parity has re-opened debate on the merits of an Anzac dollar.

When he first came to power, the PM favoured a single transtasman currency.

But at a recent speech at Auckland University, he said Greece's financial crisis had changed his mind.

If Greece had its own currency instead of the euro, “People would flood into Greece on holiday. People would buy Greek products and the country would be alright. But they don’t have that flexibility,” he said.

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Key expects RBA to cut rate
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