In perhaps the "famous last words" category, Dr Bollard pronounced that "We believe the recession has ended and we will have positive but low growth for the next four quarters."
He then jawboned trading banks to "share the pain" and pass on the interest rate cut to their household and business customers and to keep advancing loans in tight conditions.
Banks responded by passing on some of the rate cut but not the full 150 points.
Trading bank economists think the worst is not yet over and that a 100 basis points cut in the OCR is possible at the next review in late January.
The major export markets for New Zealand are now contracting at a faster rate than previously estimated and the drop off in demand is likely to make the Reserve Bank's pronouncement that there is no longer a recession in New Zealand a mockery.
Should things get worse, Dr Bollard says the Reserve Bank has "a lot of ammunition in this box" to cut interest rates.
A pity the Bank didn't look around hard enough in that box for a tool (other than ammo) to squeeze the speculative bubble out of the New Zealand housing market a couple of years back. At the time it seemed the Reserve Bank was standing around saying it's all very terrible but we can't think of anything we can do about it.
More of the same inertia was exhibited in the recent deposit insurance policy fiasco when New Zealand got backed into a scheme because Australia had announced back in mid year it was going to pass legislation instituting its own scheme.
Did no one at No. 2 The Terrace think then that New Zealand would likely have to act to stem a tide of deposits following workers across the Tasman? Or that global financial meltdown would precipitate the conditions where New Zealand would be compelled in an open economy environment to match competitively overseas deposit insurance schemes?
Ideology rather than clear thinking still seems to guide policy in Wellington. And it's not just limited to the Reserve Bank.
So with apologies to Blam Blam Blam, 80s Kiwi rock band: There Is No Depression in New Zealand, Dr Bollard...
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