WELLINGTON, Aug 22 (Reuters) – The decline in confidence among New Zealand businesses due to global economic instability is expected to ease over time, according to Paul Conway, chief economist at the Reserve Bank of New Zealand (RBNZ). Speaking on Friday, Conway suggested that firms will gradually adjust to an environment marked by unpredictable policy shifts and external shocks. n nHe emphasized that while uncertainty remains a persistent feature of the current economic landscape, companies cannot indefinitely delay decisions waiting for clarity. “I fully expect uncertainty to persist into the future but to some extent, we get used to it,” Conway said in an interview. “We can’t just wait and see what happens forever.” n nThe central bank’s recent decision to reduce the official cash rate by 25 basis points to 3.0%, with signals of additional reductions ahead, is intended to motivate firms to move forward despite volatile conditions. The RBNZ cited weakened consumer and business sentiment during its latest meeting, noting that hesitation in spending poses a risk to economic growth. Governor Christian Hawkesby acknowledged that the impact of global unpredictability has been more pronounced than initially anticipated. n nOne contributing factor has been the United States’ imposition of a 15% tariff on imports from New Zealand—higher than the originally expected 10%, though less severe than measures applied to other nations. Conway noted that fluctuating trade policies amplify uncertainty, effectively compounding the initial impact of tariffs. “Those types of factors are … causing businesses to be a little more reticent, households to be a little more reticent and that’s perfectly rational,” he explained. n nThe monetary policy committee’s decision to cut rates by 25 bps was not unanimous. Two of the six members supported a larger 50 bps reduction. One board member expressed strong preference for maintaining the rate at 3.25%, citing signs of improvement in high-frequency economic data and inflation nearing the upper bound of the target range. Conway noted that this member feared inflation could evolve into a more entrenched issue if action was too aggressive. n n— news from Reuters
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NZ business will get used to global uncertainty, RBNZ economist says
WELLINGTON, Aug 22 (Reuters) – The hit to New Zealand confidence caused by global uncertainty will fade as businesses get used to a time of heightened economic policy unpredictability, the chief economist at the country’s central bank said on Friday. n nPaul Conway, chief economist at the Reserve Bank of New Zealand, said the confidence shock will pass and business will “just get on with it.” n nSign up here. n n”I fully expect uncertainty to persist into the future but to some extent, we get used to it,” Conway told Reuters in an interview. “We can ‘t sort of wait and see what ‘s going to happen…forever,” he said. n nHe added the central bank’s decision to cut the cash rate by 25 bps this week to 3.0% and flag further cuts was encouraging businesses to get on with it. n nAt its decision on Wednesday, the central bank highlighted weakness in both consumer and business confidence and the impact that this was having on spending as being one factor of concern for the economy. Governor Christian Hawkesby has said the impact of this uncertainty had been greater than the bank thought. n nThe U.S. has placed a 15% tariff on goods being imported from New Zealand, which was worse than the 10% initially signalled but not as bad as many other trading partners. n nConway said the changes to tariff rates were creating uncertainty and that is like “another shock on top of the tariff in the first place.” n n“Those types of factors are … causing businesses to be a little more reticent, households to be a little more reticent and that ‘s perfectly rational,” he said. n nThe central bank decision to cut by 25 bps was not unanimous with two of the six board members voting to cut by 50 bps. n nConway said one member was “particularly keen” on a hold but ultimately the committee decided only to vote on cutting. n nHe said the member thought a hold at 3.25% might be a good idea as high frequency indicators were showing some improvement and inflation is nearing the top of the target range. n nThe member was concerned it “could sort of morph into more persistent inflation pressure,” he said. n nReporting by Lucy Craymer in Wellington; Editing by Lincoln Feast.