Forest owners disappointed over OCR hold 

Source: ONE News

The NZ Forest Owners Association is disappointed that the Reserve Bank made no change to the official cash rate.

Reserve Bank governor on Thursday announced that the central bank would keep the OCR at 2.5% set in April.

Bollard made reference to external forces, rather than the OCR, having a greater influence over the rising Kiwi dollar and longer term lending rates.

However, NZ Forest Owners Association says unacceptably high bank interest rates are putting owners of small to medium-sized forests under increasing financial pressure.

Association president Peter Berg also says a 6% margin between the official cash rate and commercial lending rates is "unacceptable" and has urged banks to pass on cuts to business and farming customers.

He says a cut to the OCR would have put pressure on the trading banks to reduce their lending rates and also discouraged speculation in the Kiwi dollar.

"A stronger dollar at a time of weak global growth risks delaying or even reversing the prospects of an export-led recovery. The only consolation is that he has not ruled out modest reductions in the OCR in coming months," he says.

Berg says with the Kiwi dollar at its current level of around 62 cents, harvesting is only viable for owners of larger forests in areas where the industry is well-established.

"But for smaller to medium growers, especially those with plantations in newer or less accessible areas, harvesting is at best a marginal exercise and many are voting with their feet. They are leaving their trees in the ground," he says.

Some analysts say a cut to the OCR would have done little to push the Kiwi down, saying it is at the mercy of offshore investors.

Like the Australian dollar, the Kiwi is seen as being highly geared to global economic recovery and is riding a resurgence in market optimism.

It is also relative to the decline of the US dollar that reached a 2009 at the start of the month.