RBNZ expands QE program

The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee has agreed to significantly expand the Large Scale Asset Purchase (LSAP) program potential to $60 billion from $33 billion:

The Monetary Policy Committee has agreed to significantly expand the Large Scale Asset Purchase (LSAP) programme potential to $60 billion, up from the previous $33 billion limit. The LSAP programme includes NZ Government Bonds, Local Government Funding Agency Bonds and, now, NZ Government Inflation-Indexed Bonds.

The global economic disruption caused by the COVID-19 pandemic is expected to persist and lead to lower economic growth, employment, and inflation both in New Zealand and abroad. Even if New Zealand successfully contains the spread of disease locally, reduced world activity will mean lower demand for many of New Zealand’s exports.

The Monetary Policy Committee is committed to achieving its employment and inflation objectives. The main support for the economy in this environment is appropriately being provided through increased fiscal spending. However, monetary policy will continue to provide significant support through keeping interest rates low for the foreseeable future.

The balance of economic risks remains to the downside. The expansion to the LSAP programme aims to continue to reduce the cost of borrowing quickly and sharply. This is preferable to delivering a smaller amount of stimulus now, only to risk later realising more should have been done.

We expect to see retail interest rates decline further as lower wholesale borrowing costs are passed through to retail customers. It remains in the best long-term interests of the banking sector to promptly maximise the effectiveness of our LSAP programme.

The Official Cash Rate (OCR) is being held at 0.25 percent in accordance with the guidance issued on 16 March. The Monetary Policy Committee is prepared to use additional monetary policy tools if and when needed, including reducing the OCR further, adding other types of assets to the LSAP programme, and providing fixed term loans to banks. The Committee’s decisions are guided by the Reserve Bank’s mandate and our decision making principles on the use of alternative monetary policy instruments.

Expect further QE expansions as New Zealand’s economy struggles to crawl out of the gutter.

Leith van Onselen


  1. “Expect further QE expansions as New Zealand’s economy struggles to crawl out of the gutter.”
    On the contrary!
    QE, or whatever wonderful names one gives it, are actually helping us crawl into said gutter….along with everyone else.
    What we need is a complete restructure of our economy, not phantom money being thrown at it as life support.

    • DingwallMEMBER

      Yep …. though that complete restructure (like Australia needs) is dependent on a full-clown crisis……. as long as housing and immigration are seen as the saviours the crisis keeps being kept at bay.

      • Goldstandard1MEMBER

        you mean “kicked down the road” for a bigger problem to be solved/popped in the future. This one is probably the big one though. There have printed to the moon and things are still dire.

      • mikef179MEMBER

        That’s OK, we have ScoMo the Clown in charge, so the full-clown crisis is a given.

    • So we can all see from the last crisis QE at best does jack for the real economy and QE times 1000 will likely have the same effect.
      The question I think is of interest is whether the central banks really believe it does?
      Surely they have to know.
      Time to end central bank independence?

      • Jumping jack flash

        I’d be surprised if they don’t know how useless it is, but printing up free money and giving it to the bank to sell as debt is the current solution.

        Fairly soon that won’t be enough to stimulate debt growth and the next step is a UBI or wage subsidies.

        In fact QE is a remarkably stupid solution at this stage of the game and it relies on people still having capacity for debt. At the end of the day the QE just makes the debt able to be sold cheaper than if banks were relying on the manipulated interest rates exclusively.
        I’d be surprised if the QE will do anything in this current environment except maybe prevent interest rates from rising!

        The main reason QE doesn’t work is because of the amount of debt that is required now, and the archaic standards the banks insist on that prevent people from obtaining it.

      • DominicMEMBER

        It props up asset prices and that’s all that matters – if you thought they were doing it for you, you’re deluded.

  2. Jumping jack flash

    60 billion! Pfft!

    60 billion is something they’d find in the lounge.

    They need to think bigger. Much bigger.

    How much mortgage debt they got in total over there? How much interest do they need to pay on it every year?
    They should start with those figures and base all their decisions regarding stimulus and QE around those numbers.