MNI INTERVIEW: Easing Not Right Response To Virus Hit: RBNZ

--RBNZ Sees 0.3PP Coronavirus Hit To Growth In Q1: Hawkesby

by Lachlan Colquhoun

     SYDNEY (MNI) - Early February forecasts by the Reserve Bank of New Zealand

point to a 0.3 percentage point hit to GDP growth from the coronavirus epidemic

in Q1, but further monetary easing is not the best policy response, central bank

Deputy Governor Christian Hawkesby told MNI in an interview Wednesday.

     "In recent days we see that markets are placing a high probability that

monetary policy will have to be eased in the face of these developments, but we

are still very much in the world of weighing up the probabilities because the

outlook is so unclear," said Hawkesby.

     "Monetary policy is not the right tool to be using and there are a whole

lot of different ways the broader NZ Government could provide assistance," he

added.

     "We said it would shave 0.3 pp off GDP, but the broad signal is that it

wasn't a factor that monetary policy needed to really take into account,"

Hawkesby said, although he acknowledged that the forecast was made in earlier

this month. "What we are focused on is economic momentum 12 to 18 months ahead,

and this is a transitory thing which is going to work its way through," he

added.

     --SHORT-TERM HIT

     That RBNZ's assessment was based on a short-term disruption of six weeks in

Q1, which would hit tourism, education and exporters such as the seafood

industry, he said.

     Officials from the RBNZ, the Treasury and the Ministry of Business have

worked for the last few weeks assessing the likely impact of the outbreak on the

economy, he said.

     Last week, the Treasury said that the coronavirus outbreak would dampen

annual economic growth to between 2.0% and 2.5% over 2020, down from the 2.7%

annual growth rate seen in Q3 2019.

     Hawkesby said the RBNZ's March meeting would provide the Bank's first

opportunity to have made a "thorough assessment and decide what the implications

are" to the economy of the coronavirus emergency.

     The next update on growth from Statistics NZ for Q4, 2019, will be on March

20, while the next RBNZ interest rate decision is on March 25. NZ's official

cash rate is at 1.0% after two cuts last year totalling 75bps. The RBNZ left

rates on hold in February, satisfied at how monetary policy was being

transmitted through to the economy.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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