NZ announces $30 billion bonds buyback
New Zealand has begun quantitative easing in an effort to provide stimulus in its coronavirus-struck economy.
On the same day that Prime Minister Jacinda Ardern declared an imminent nationwide lockdown, the Reserve Bank (RBNZ) announced it would begin a government bonds buying program, capped at $NZ30 billion ($A29.5 billion) over the next 12 months.
"The program aims to provide further support to the economy, build confidence, and keep interest rates on government bonds low," a RBNZ statement read.
The central bank will buy bonds owned by investors equivalent of up to a tenth of New Zealand's annual GDP.
In doing so, the RBNZ frees up cash for those investors - including retail banks - to spend in other areas, with a flow-on effect that should see those retail banks lower their personal and business lending rates.
The action comes after the reduction of New Zealand's official cash rate to just 0.25 per cent, the lowest in its history, and has full government support.
Finance Minister Grant Robertson signed a memorandum of understanding and letter of indemnity with the Reserve Bank to green-light the bonds buying.
"This is part of our strategy to mobilise all arms of New Zealand's economic infrastructure in our fight against the COVID-19 virus," Mr Robertson said.
"We are all uniting together - the Government, the Reserve Bank, private businesses and the retail banks - to cushion the impact on New Zealand from this global pandemic."
On Monday, New Zealand shares plunged dramatically, with the NZX 50 Index dropping 10 per cent.
Mr Robertson also announced a top-up to the government's a $NZ12.1 billion ($A11.9 billion) economic stimulus package announced last Tuesday.
A cap has been removed on handouts to businesses designed to help employers retain staff through the economic crisis.
That means the government is borrowing cash to give to employers to give to staff, ensuring half of the country's workforce stays in work.
It will cost approximately $NZ9.3 billion, up from the previously budgeted $NZ5.1 billion, over the next three months.
"The $9.3 billion is an estimate, not a cap or a floor. This means the support will be there to meet the demand. We are doing what it takes to put support in place for workers and businesses," Mr Robertson said.
Industry group Business NZ has called on the government to come forward with further measures as soon as possible.
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