VIEW: ASB "now expect a further 50bp in........>

RBNZ: VIEW: ASB "now expect a further 50bp in total of OCR cuts, 25bp in Nov &

now 25bp in Feb, taking the OCR to a fresh record low of 0.5%. A November cut

looks all but assured, though there is likely to be debate amongst some people

over whether the RBNZ will cut by another 50bp then. After the decidedly mixed

response to the 50bp OCR cut, we expect the RBNZ will revert to smaller 25bp

steps. Rather than reassure that the cavalry is on the way, the 50bp seems to

have caused some disquiet. Hence, 'only' 25bp seems prudent - barring a run of

extremely poor news. Given monetary policy is likely to get uncomfortably close

to the point that unconventional measures need to be primed, it is also time for

the Government to seriously consider some quality stimulus measures. There is

plenty of debt headroom and extremely low financing costs to take advantage of.

Low business confidence predates the recent escalation of global risks, and the

export sector has been one of the stronger parts of the economy. A Government

charm offensive with businesses and the rural community wouldn't hurt, along

with policies aimed at incentivising investment and employment. Interest rate

cuts alone won't win hearts and minds, though they will help."