“A general comment from dissenters to a reduction of this magnitude is that such large reductions are generally reserved for extreme circumstances.

“It’s not too difficult to argue that we’re in those circumstances now,” Smith said.

He said the RBNZ must no longer be concerned with preserving jobs, but must avoid unnecessary volatility in output, employment and interest rates and the exchange rate.

Inflation has fallen back into the RBNZ’s 1 to 3% target range and could exceed the desired midpoint by 2% and reach the bottom of the target range.

“It is therefore not difficult to argue that we should be at, or below, the RBNZ’s ‘neutral’ rate – which neither stimulates nor constrains growth – of 3.8%…right now.

“The case for a 75 basis point cut in the official cash rate looks legitimate indeed.”

Terrible economy – flashing red lights

“Our economic data is dire and the RBNZ should probably hit the panic button.

“The economy is in recession and unemployment is rising,” Smith said.

He cited weakness in monthly measures of the manufacturing and services sectors.

“Key parts of the Kiwi economy appear to be stuck in a rut, which therefore increases the need for extraordinary measures.”

Smith doubled down on domestic risks, warning of “flashing red lights” overseas.

“The growth outlook for China, our largest customer, remains uncertain … which poses downside risks to real New Zealand export growth as well as export and import prices,” he said.

Smith’s call for a jumbo-sized OCR cut hasn’t been completely dismissed by economists and financial sector watchers, but it’s certainly a minority view.

BNZ head of research Stephen Toplis, an early supporter of rate cuts at the start of the year, believed drastic measures were not needed and would not be used.

“Given that the RBNZ has already cut the cash rate by 25 basis points more than it assumed… and given that a further 50 basis point cut is likely to be delivered later this month, we see no reason to support anything more.” said Toplis.

ASB senior economist Mark Smith agreed. He said the obstacles to big rate cuts are high and depend on the economic numbers and the balance of risks.

“We expect the RBNZ to return to a more measured pace of OCR easing in 2025, with an OCR endpoint of 3.25% reached by the end of 2025.”

But Greg Smith said there was another imperative – the gap between the final meeting in 2024 and next year’s first meeting in February.

“It’s almost three months where quite a lot can happen to our growth profile, and not necessarily in a good way.”

The anecdotal evidence they received from companies, large and small, pointed to companies that were struggling, some on the brink of failure.

“A bigger rate cut this side of Christmas could make all the difference,” Smith said.

He wondered if “the much-needed real jumbo cut (will) be avoided altogether?”

“To salvage an admission that the New Zealand economy is lagging behind many others and that rates have been pushed too high too quickly and kept there for too long?

“Time will tell.”