The Reserve Bank of New Zealand have flagged negative rates and ASB, BNZ, ANZ have all forecast April 2021 for the plunge under zero.

KiwiBank, though, say subzero rates would be a mistake.

  • Current economic conditions don't justify it
  • the supply of credit is not an issue
  • and people are likely to save harder with ~0% deposit rates
  • Going negative also depletes the RBNZ's armoury

However, KiwiBank concede negative ratea are a possibility:

  • Packaging a negative OCR with a funding for lending programme makes going negative a viable option
  • The market is already pricing in ~40 [basis points] of cuts by April 2021. But a lot can change in eight months

Kiwi Bank advocate direct lending before opting for negative rates:

  • We believe it would be a far better, and safer, approach to first introduce the bank funding facility, and then assess its success. If retail rates have not been lowered enough, the RBNZ may then consider taking the OCR negative.
  • A two-step approach not only lowers rates, as desired, but also ensures the Reserve Bank’s armoury remains well stocked for when true danger arrives.

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Its useful to consider alternative view points.