The Reserve Bank of New Zealand (RBNZ) highlighted that the effects of recent interest rate cuts on the local economy have been slower than anticipated amid growing concerns over tariffs affecting business and consumer confidence.

On Thursday, Governor Christian Hawkesby informed a parliamentary committee that increased tariffs and trade barriers have contributed to a negative demand shock globally.

The RBNZ recently reduced its policy rate by 25 basis points to a three-year low of 3.00% marking a total reduction of 250 basis points since August 2024 aimed at stimulating economic growth.

Hawkesby acknowledged that the response to these rate cuts has been more gradual than expected, partially due to uncertainities following US President Donald Trump’s announcements in April, dubbed “Liberation Day”.

He noted his prolonged uncertainity has adversely affected business and consumer confidence in New Zealand, even as the country remains largely insulated from the worst case scenarios.

The US has implemented a 15% tariff on imports from New Zealand, higher than the initially indicated 10% but still less severe than those imposed by other trading partners.

Hawkesby stated that while this will impact various New Zealand industries, the broader concern is the dampening of global demand for goods and services.

Looking ahead, the RBNZ is optimistic about a recovery, stating “”There is a light at the end of the tunnel”.

Hawkesby indicated that the central bank expects to see economic growth pick up during the second half of the year, with the second quarter likely marking the point of the economic cycle.