Rate cut a flicker of light – but that’s all

Opinion: Since the Reserve Bank’s decision last week to cut the Official Cash Rate by 25 basis points, there has been commentary from many sources that the good times are on their way back, and that the Government will reap the political benefit of this in the 2026 election. Early moves by trading banks to cut mortgage interest rates, and the Reserve Bank Governor’s bullish comments that the OCR could be down to about 3 percent, almost half its current rate, by the end of next year fuelled this sentiment.
The Prime Minister’s and the Minister of Finance’s delight at the Reserve Bank announcement was predictable, given other things going on at present. It enabled them to crow that their economic agenda is already paying dividends, notwithstanding that the governor’s statutory autonomy meant the decision to cut the OCR was made without any involvement from the Government. But, in a week when the Waitangi Tribunal released a hostile report on Act’s proposed Treaty of Waitangi Principles Bill, and a controversial decision to disband the service provision role of the Ministry of Disabled People was announced, the OCR announcement was at least a welcome distraction.