National and Labour today welcomed the Reserve Bank decision to slash the official interest rates an unprecedented 1 percentage point to 6.5 percent.
However, National leader John Key said more needed to be done and a proposed wholesale guarantee scheme should be advanced more quickly.
Finance Minister Michael Cullen said the drop should flow into decreases in bank retail interest rates, which would benefit businesses and mortgage-holders.
"That will help both business and homeowners because it will obviously look to reductions at the retail end, and that's good for them."
Prime Minister Helen Clark said that the decrease was what the market expected.
It was possible interest rates drop further; "there is clearly a downward bias".
In general the world was going into a slowdown and with oil prices dropping inflationary pressure from oil would reduce.
Mr Key said a decision on a wholesale bank deposit scheme needed to be made "to ensure the benefits of lower interest rates flow through to Kiwi mortgage-holders and small businesses.
"Confidence and a clear sense of direction within the finance sector will be crucially important to our economy in the weeks and months ahead."
Mr Key said the key to an effective wholesale bank guarantee was pricing.
"Our view is that it should not be a free ride for the banks, so that they are encouraged to move away from it when it is no longer required."
He said tax cuts would help provide stimulus.
United Future leader Peter Dunne said the reduction would help families.
New Zealand First leader Winston Peters said the cut should have been half a point bigger.
"The fact remains that the Reserve Bank had the chance to be bold and act earlier with a more substantial cut but it failed to act. Ordinary Kiwis will suffer for that failure."
He hoped the full effect would be passed onto homeowners already struggling a with a distressing loss of home equity.
Green Party co-leader Jeanette Fitzsimons said inflation could not be controlled by manipulating interest rates.
"We have entered a new era where resources limits are the main driver of inflation."
The price of oil, rising food prices and other intensive goods and services were the main causes.
Inflation would rise further when the cost of greenhouse gases were included.
Dependence on oil and other scarce resources needed to be reduced, she said.
Progressive leader Jim Anderton said the positive reaction to the cut showed the Reserve Bank Act should be amended to have other foci than inflation.
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