VIEW: Westpac write "this is a necessary.......>

RBNZ: VIEW: Westpac write "this is a necessary move, and one that we predicted

would happen in short order. The response to the Covid-19 outbreak has escalated

further in recent days, pointing to an even more severe impact on economic

activity. On top of this, dysfunction in the bond market has actually seen a

rise in longer-term interest rates since the RBNZ's 75bp OCR cut last Monday,

hindering its passthrough to retail interest rates. A $30bn program represents

about half of the government bonds that are currently available in the market

(excluding inflation-linked bonds). But issuance will be ramping up

significantly to fund the $12bn support package that the Government announced

last week, and it's likely that government spending will have to be expanded

further. We think that the RBNZ will end up holding about a third of bonds on

issue after 12 months. At around 10% of annual GDP, the program is similar in

size to the quantitative easing programs that other countries announced during

the Global Financial Crisis, which were effective in bringing longer-term

interest rates down. This does not change our forecast of a 3.1% decline in GDP.

Rather, it was a necessary step to prevent an even worse outcome."