MNI INTERVIEW: RBNZ Wants Quicker Policy Transmission-Dep Gov

--RBNZ Hawkesby Wants Retail Lending, Deposit Rates To Fall

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of New Zealand is concerned its monetary

easing is not flowing through to lower borrowing rates for the real economy,

Assistant Governor Christian Hawkesby told MNI on Tuesday.

     "For us to generate the amount of monetary stimulus we need to see the full

effect of our policies and we will need to see interest rates fall," Hawkesby

said in an interview.

     "A key judgement in moving the Official Cash Rate (OCR) will be to what

extent will that be passed through to lower deposit and mortgage rates," he

said, noting there had been limited success to date in lower wholesale rates

getting through to households and businesses.

     While rates in Australia and NZ are both at 0.25%, the Commonwealth Bank of

Australia's standard variable mortgage rate is at 3.85%, while CBA's New Zealand

subsidiary, ASB, charges 4.45%. CBA offers a one-year fixed deposit at 0.9%,

compared to 2.0% from ASB for the same product.

     Hawkesby said the RBNZ is optimistic retail rates will fall as the economy

re-opens.

     "Once the economy comes out of lockdown and becomes more normal I think we

are going to see more competition to lend, and that will put downward pressure

on those lending rates," said Hawkesby.

     "Then we might see some of our actions pass through and we really do need

to see that happen."

     --NEGATIVE RATES

     In its quarterly Monetary Policy Statement, the RBNZ on May 13 kept rates

on hold at 0.25% while almost doubling its bond buying program to NZD60 billion.

The bank recently wrote to all commercial banks asking them to have systems in

place to deal with a negative OCR by the end of the year.

     This did not mean that negative rates were a certainty, Hawkesby said,

rather that they were an option the RBNZ could consider, along with further bond

buying, and the financial system needed to be prepared.

     "Banks need to be ready for different contingencies and if one of those is

that wholesale rates go negative, systems need to cope with that if it becomes

necessary," he said.

     The option to purchase bonds directly from the government has been floated

and not ruled out by RBNZ Governor Adrian Orr, but Hawkesby said this was not

discussed at last week's meeting of the Monetary Policy Committee.

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

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

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