Photo: RNZ
Finance Minister Nicola Willis says the economy is forecast to grow much faster next year and she will move any policy lever she can to assist.
The Reserve Bank has cut its benchmark official cash rate by 50 basis points to a two-year low of 4.25 percent - prompting main banks to pass the cut on to some borrowers.
It says the second consecutive large reduction was justified by lower inflation and the weak economy.
It also signalled another similar sized cut was likely early in 2025.
Willis said it was a meaningful move for those with mortgages who would have more money in their pockets.
Someone with a $500,000 mortgage could be paying $180 less a fortnight under the cuts that have happened since her government took power.
"Of course we're going to celebrate that."
She said while she was concerned for those losing their jobs, forecasts were now for fewer people to become unemployed than previously feared.
Next year the economy was expected to grow much faster than previously and the government would be pushing "every policy lever" to make it expand more.
Asked about some economists' criticisms that the government was further damaging the economy with its cost cutting, she responded the government had moved money to where it could make the most difference for Kiwis.
"We are actually spending more across the economy as a whole but we are directing that to frontline services unashamedly."
She had rejected austerity within weeks of taking on her job and would not be moving in that direction.
She was awaiting the latest Treasury half-year forecasts on 15 December before deciding on committing to the surplus targets announced in the last Budget.
Photo: RNZ / Samuel Rillstone
There was a massive gap in what the country was earning and what it was spending and the government was taking a "moderate course of repairing that over time".
"I am concerned that if we take rash moves chasing a surplus that would require significant implications for New Zealand households."
Treasury had been revising its "overly hopeful" forecasts on its underlying productivity assumptions, Willis said.
She rejected claims from some economists that her government could not take credit for falling inflation, thanks to its cost cutting.
She said the alternative was a Labour government that had "a big spending inflationary fiscal management approach".
Plenty of economists would argue that fuelled inflation, Willis said.
Economist Robert McCulloch who spoke to Morning Report yesterday is among those who has said it was the wage subsidy during the pandemic which was why Labour spent so much and National had supported it at the time.
Willis responded that the Reserve Bank kept interest rates too low too long and and printed too much money which she had criticised while on the finance and expenditure select committee.
"There was too much cash swimming around our economy for too long."
McCulloch has also criticised the government for doing nothing on encouraging more competition in the banking and supermarket sectors.
Willis hit back, saying she had competition in the banking sector on her radar and would be issuing a new financial policy remit for the Reserve Bank making sure it would even things up in the sector.
She was pondering moves to beef up Kiwibank so it could better compete against the major players and she was also following the parliamentary scrutiny of the major banks at the the select committee.
"I am poised and ready to take the action necessary."
Hopes rise of solid Christmas for retailers
The retail industry hopes lower interest rates will make New Zealanders more willing to spend money on Christmas presents.
Retail NZ chief executive Carolyn Young said the OCR drop won't have an impact on the price of retail goods, but she hopes it will give people more confidence in their job security, rent or mortgages.
"That's going to be critical to people thinking what they might spend for Christmas."
She hoped it might mean consumers take advantage of Black Friday specials this weekend.
Young said a lack of consumer confidence has made the last few years difficult for retailers.
"What it signals to business and consumers is that there is light at the end of the tunnel - we've just got to get there."
Take the plunge now
First Home Buyers Club spokesperson Lesley Harris said the OCR drop was good news for first home buyers.
While they might be worried about locking in a mortgage rate in case they fell further, her advice was if a buyer had funding and found something they liked they should go ahead.
Houses could now be seen to be more affordable, however, there was a concern that prices would soon start rising again, Harris said.
"For us, at the moment we'll take the win ...I don't think there's going to be drastic change in terms of things [house prices] springing back overnight."
Home ownership was a long-term investment so now was as good a time as any to make a purchase.
