The Reserve Bank looks set to ease controls on bank finances to allow them to keep lending to businesses and households through the Covid-19 shutdown and recovery.
Reserve Bank governor Adrian Orr. Photo: RNZ / Dom Thomas
The central bank has slashed its benchmark interest rate, and is pumping money into the economy and financial markets.
Reserve Bank governor Adrian Orr told Morning Report the bank was also looking at easing credit limits on the retail banks to ensure they can use more money during the crisis.
"The real challenge is to make sure the banks bank the people - business, households.
"I'm confident there will be more announcements today."
Orr said retail banks were strong but the Reserve Bank needed to make sure that if they were freezing mortgages they were not putting themselves in danger.
It was working with them on the use of bank capital.
"You don't want to imperil the bank itself but at the same time you want the bank to use their capital that they have saved for tough times - and these are tough times.
The central bank was also working with the Minister of Finance, Treasury and the banks on some type of business finance guarantee.
"That is a risk-sharing between the Crown balance sheet and the banks themselves."
The government's low debt level ensured it could it can support the economy, he said.
The central bank said yesterday it would buy back up to $30 billion of government bonds to give further support to the economy. The bond-buying programme will start on Wednesday with a buyback of $250m with another $250m sought on Friday.
Last week it announced measures including term loans to banks, agreement with the US Federal Reserve for access to up to $US30 billion, and intervening in markets to maintain stability.
Orr said the measures taken so far were aimed at backing banks and ensuring they supported businesses and households.
He said the central bank also wanted low interest rates and credit available.
"The government bond market is a very important part of the whole financial structure. It is in a sense the lowest risk form of borrowing, and backed by the Crown balance sheet.
"We want to make sure the interest rates remain very low."
Orr said the Bank had plenty of ammunition left to help support the economy.
Other measures that might be used included buying company bonds, local government debt, or moves in foreign exchange markets.
"We're well away from having to do anything like that at present."
See all RNZ coverage of Covid-19
Yesterday the government announced more help for businesses, lifting the $150,000 cap on the wage subsidy scheme for firms affected by the Covid-19 pandemic.
Council of Trade Unions president Richard Wagstaff said a 12-week period for the scheme was optimistic as it looked like work would be affected for much longer.
"Obviously this is has been thrown together at a very quick pace, and we applaud that, but we think something that extends beyond that period."
He was looking for more comprehensive measures to ensure jobs were being held for people, such as furloughing workers as some other countries were doing.
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