Treasury publishes crisis playbook - favours Official Cash Rate cuts over Government spending and money printing

Lower interest rates are the answer to supporting the economy in a time of crisis, according to Treasury. But if New Zealand were hit by a natural disaster or more severe trade war, for example, once interest rates were already near rock bottom, the Government should step in with support packages, rather than turn to the Reserve Bank of New Zealand (RBNZ) to print money. Treasury shared this view in its draft three-yearly Long-Term Insights Briefing released on Thursday.

It said the Official Cash Rate (OCR) was the “most reliable” tool that could be used to lessen economy-wide ups and downs. “Fiscal policy [government initiatives] should be used sparingly,” Secretary to the Treasury Iain Rennie said..