The governor of the Reserve Bank, Dr Bollard, reduced the official cash rate (OCR) by half a percent from 3% to 2.5% today. For background to the OCR, listen to June 10th 2010 and follow the links.
Most banks immediately dropped the floating mortgage rates to under 6%. They dropped the fixed mortgage rates last week.
The reason for the drop in the OCR is the Christchurch earthquake. The economy was not strong before the earthquake but now New Zealand faces more problems. There is the huge cost of rebuilding Christchurch which could be $15bn or more. In the meantime, so many Christchurch businesses are closed, workers have lost jobs and people are not interested in spending money on fashion or furniture. The kiwi dollar dropped after the earthquake to just under 74c to the US dollar. The increase in the price of food and fuel has not helped the economy either.
However, before the end of this year, the re-building of Christchurch will begin. There will be jobs for builders and other tradesmen. There will be a need for more building materials. Another hopeful sign is that New Zealand farmers are getting good prices for their food – especially milk and meat. Dr Bollard expects that the economy will start to improve from the middle of this year.
Pronunciation and vocabulary:
Note the pronunciation of “economy” with the stress on “con”. The adjective “economic” is stressed on the 3rd syllable: “nom”. You can use it for phrases like “economic growth”. The subject studied at university is “Economics” which is pronounced the same as the adjective but it has an “s” at the end.
The adjective “economical” has the stress on the 3rd syllable also but the meaning is different. It means: doesn’t so cost much e.g. My small car is economical to run. The verb “economise / ize” has a related meaning, make cuts to your spending e.g. You need to economise if you have very little money. |