VIEW: BNZ write "the chances of New Zealand....>

RBNZ: VIEW: BNZ write "the chances of New Zealand ending up with -ve interest

rates took a big step up today with the release of NZIER's QSBO. Given the

rhetoric in the Aug MPS, we made the point that it was now a matter of looking

for reasons why the RBNZ wouldn't cut its cash rate rather than seeking reasons

why it might do so. Today's findings not only provide no reason for the RBNZ to

pause but, instead, imply accelerated action. Interestingly, markets didn't move

much on today's release. We remain of the view that cutting interest rates

further will do little to deter the angst building up in both the household and

business sectors and perhaps markets see this too. Or, alternatively, they see

the argument for the central bank pausing at some stage to see whether the

stimulus provided will gain traction? Or they are taking the bet that there is

now upside risk to the global environment as well as downside. Nonetheless, they

are still pricing almost two cuts. For us, though, we'd have the balance of risk

weighted to more than two cuts. If we are to take the RBNZ's recent commentary

at face value, then we can only conclude that the 50 basis points of cuts we

have pencilled in (25 bps in Nov and 25bps in Feb) is a bare minimum."