New Zealand’s Reserve Bank is starting its version of quantitative easing to buy up to $NZ30 billion of Government bonds and try and inject more cash into the banks and the economy generally.
In a statement issued early Monday the central bank said the purchases would start right away.
The move will inject money into the economy via the banks and other holders of bonds and lower the currency to help exporters.
New Zealand Finance Minister Grant Robertson gave the Reserve Bank a letter of indemnity which allows it to buy up a large amount of New Zealand Government bonds on the secondary market over the next 12 months.
The move, known as “large scale asset purchases” (LSAPs) has been widely used by central banks around the world in recent years, including in the United Kingdom, Eurozone, the United States, Sweden, and Japan.
The decision was an independent one for the central bank but because the Reserve Bank is part of the NZ Crown’s balance sheet, an indemnity must be signed by the Minister of Finance.
“The programme aims to provide further support to the economy, build confidence, and keep interest rates on government bonds low,” a RBNZ statement read.
The action comes after the reduction of New Zealand’s official cash rate to just 0.25% a week ago, the lowest in its history.
Last week, Mr. Robertson unveiled a $NZ12.1 billion ($A11.9 billion) economic stimulus package aimed at securing jobs.
