(28 February 2013 – New Zealand) The New Zealand Government is aiming to reduce the interest rate premium Kiwis pay on loans, as it enters the final stage in its reforms of the capital markets.While borrowing rates are the lowest in decades, the gap between the Reserve Bank of New Zealand (RBNZ)’s Official Cash Rate (currently a historic low of 2.5 percent), and the actual borrowing rates available to New Zealand households and businesses (the average floating mortgage rate is 5.87 percent), is higher than in a number of major economies.
A new report sets a goal of reducing the real interest rate premium on New Zealand debt, compared with the United States and Australia, Finance Minister Bill English and Economic Development Minister Steven Joyce said on Wednesday.
‘Several aspects of the New Zealand economy may contribute to our interest rate premium, such as our small capital markets, high indebtedness, exchange rate volatility and low saving relative to investment,’ they said in a joint statement.
‘The actions in this report will improve the functioning of New Zealand’s financial system and provide more stable macroeconomic conditions.”
‘This will help New Zealand businesses by reducing their cost of capital compared to offshore competitors.’