Long term rates need to also come down

Long-term interest rates face relatively more pull from overseas rates, particularly US ones – and that pull has held those rates up to an extent, Nick Tuffley, ASB chief economist says.

The RBNZ noted that investment decisions are influenced by rates across the yield curve, not just short-term ones.

Project horizons and any preference for locking in funding costs mean long-term term rates, such as 5- or 10-year terms, can commonly get used for benchmarking when making decisions.

Tuffley, says with that in mind, the stickiness of longer-term rates could be curbing businesses from making decisions, as businesses may not yet view the interest rates relevant for their business as being low enough yet.