Episode description
Episode description
The OCR goes up to bring inflation down. So now that the OCR is falling, what does it mean for inflation - and what does that mean for New Zealanders?
OCR Cut: Cheaper loans, slimmer savings returns for Kiwis. What the cut means for you.
Business pages and headlines are constantly littered with three simple letters, abbreviations for financial terms - O.C.R, C.P.I, G.S.T, L.V.R and G.D.P, to name just a few.
But what do they stand for, and what do they mean?
Do they leave readers and listeners with another three-letter abbreviation - W.T.F?
"I think it is quite common that people think they are meant to know what these things mean, and they have an idea, but if they were asked to explain it, they might have a bit of a blank," says RNZ Money Correspondent Susan Edmunds.
On today's episode of The Detail, Edmunds helps fill in those blanks, with a beginner's guide to understanding the economy - what changes mean, why numbers go up and down and who makes the decisions. The focus: the OCR.
First, she defines those common three-letter terms: OCR - official cash rate; CPI - consumer price index; GST - goods and services tax; LVR - loan to value ratio; and GDP - gross domestic product.
This month, the OCR was cut by 50 basis points to 4.75 percent, which will translate to much-needed cash for many indebted businesses and struggling homeowners. But it's not such good news for savers and retirees.
The Reserve Bank uses the six-weekly OCR decision to dial up or down the cost of money, which affects our spending, saving, and investing decisions.
The September quarter CPI release showed annual inflation running at 2.2 percent - its lowest level since March 2021 - and a smidgen weaker than the market consensus.
Falling inflation will help household budgets, and business operating expenses.
Economists believe the cost-of-living crisis is ending slowly. And inflation will ease even further.
Susan Edmunds also believes there is light at the end of the tunnel.
"It's got to get better from here, it can't get any worse," she says.
"Interest rates are coming down, the sun is shining... I think things are generally improving."