Political & Economic week ahead: OCR cut imminent

Economically it is a busy week: the Reserve Bank is to release its latest monetary policy statement on Thursday morning and a further official cash rate cut is as near a definite as you will get in today's economy.

The big question is how far the central bank's economics team is revising its forecasts downward from the 3% average annual increase in GDP it was anticipating three months ago; and how many more rate cuts there will be this year. The OCR is currently at 3.0%.

Elsewhere this week: two lots of manufacturing data are out, with Statistics NZ's figures for the June quarter being released tomorrow and the performance of manufacturing index (PMI) out on Friday. This is monthly and is a global benchmark indicator for the industry: while it has come off recent highs it is still running strong.

Politically? Refugees, flags, and the economy.  The government got caught politically and morally flatfooted over the past week on the issue of Syrian refugees. The issue blew up out of seemingly nowhere and caught a public mood of concern and a feeling New Zealand had to pitch in and do more than a paltry 750 refugees a year.

Self-identity and “Kiwi-ness,” if one can use such a term, seem to be driving much of the sentiment. So, in a different way, is the debate about the new flag, which is generating a protest all of its olwn. The “red peak” option has quickly become the protest flag: Is it going to be any more than that?

And, underlying all this, is the economic debate. A Treasury report, written three months ago, warned the dairy downturn could further postpone the government’s plan of returning to a budget surplus by next year.

Reports of the report itself seem overblown: It was only a scenario, and the Treasury runs these all the time.

It is, though, a scenario that is looking a little more likely than it was when the last formal economic forecasts were done by the Treasury, back at the end of April.

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