OUTCOME OF LAST WEEKS RESERVE BANK ANNOUNCEMENT:
AUGUST OCR HIKE PREDICTION AND REDUCED ECONOMIC STIMULUS
What we know…
The Reserve Bank has just announced that the official cash rate will remain at 0.25%. This can be seen as the wholesale rate that the banks can borrow from the Reserve Bank at, essentially the lower the number the lower our interest rates and vice versa.
However, the big news from last week’s Press release is the Reserve Bank is going to reduce their economic stimulus by winding up its Large-Scale Asset Purchase Programme (LSAP) this is also referred to as “Money Printing” or the US equivalent “Quantitative Easing”. This programme aimed to reduce borrowing costs by injecting money into the economy and further reducing interest rates. You can find out more about the programme here.
So what does this mean for us? It’s likely to increase interest rates and slow down inflation, which most of us will be feeling in our businesses. It’s also likely to slow down economic growth as well. Now, this isn’t all bad news “Money Printing” is a stimulus. It’s there to kick start the economy back into shape and is a bad thing if it’s used too much, a bit like coffee. Just because the Reserve Bank economic stimulus is easing up, it doesn’t mean our economy won’t have good economic growth, and doesn’t mean interest rates will go sky-high. It just means that the “Money Printing” driver will stop, and the natural growth can continue. The move was considered very aggressive, as our dollar had a big spike after the announcement was made.
What are the economists predicting?
With the easing of the stimulus, this aggressive change of tack from the Reserve Bank suggests they overshot and they appear to be holding back to keep their inflation and employment objectives in place.
Both ASB and ANZ economists forecast a rise in the OCR from August, meaning higher interest rates.
So, the big question is, is this the turning point? Do we need to fix interest rates today? That’s a question nobody knows the answer to. However, interest rates are still low, and yes, they can go lower, but there is the additional risk that rates might keep going up. So, if you would some advice on your situation, please give us a call on 03 374 9393.
SICK LEAVE CHANGES – HOW TO:
From this Saturday, the 24th of July 2021 sick leave entitlements will increase from 5 to 10 days per year.
Employees will receive their increase in sick days after reaching six months of employment or on their next entitlement anniversary date. This doesn’t mean employees are entitled to another five days on 24 July 2021 (unless this is their anniversary date). For Example: If your employee started on 29 July 2020, they would reach their first sick leave anniversary after six months of employment which would be 29 January 2021. Their anniversary entitlement happens yearly after this, so they will not receive ten days sick leave until 29 January 2022. (unless you were already giving your employee ten days before the change)
What you need to do:
• The person looking after your payroll must keep track of everyone’s entitlement anniversary to make sure the sick days are updated correctly going forward.
• Some payroll systems will automatically update this change for you, but some require a manual adjustment. You can view instructions for most of the payroll providers here:
Employees who already receive 10 or more sick days will not be affected by the change and the maximum days an employee can be entitled to will remain at 20 days.