A common interest?

On the 27th of January 2009, the Reserve Bank of New Zealand (RBNZ) lowered its official cash rate (OCR) to a 6 year low by 1.5% to a record low of 3.5% from 5%.
The New Zealand dollar ($NZ) dropped from US$ 53.03 to US$51.90 immediately following the decision.
Analysts & experts had been accepting/tipping a 1% cut, but how did they get to this figure?
On the 26th of January 2009 the following New Zealand (NZ) Wholesale Interest Rates were as follows.

4.61 % 30 Day Bank Bill
4.33 % 60 Day Bank Bill
4.14 % 90 Day Bank Bill

3.33% 1 year Government Bond
3.43% 2 year Government Bond
3.71% 5 year Government Bond
4.25% 10 year Government Bond

As you can see the 30, 60 & 90 day bank bills are indicating growth/inflation for the NZ economy to fall but on a lighter side the 1, 2, 5 & 10 indicate growth/inflation will increase between 1 to 10 years time. Remember the OCR was 5% above ALL wholesale interest rates.
The RBNZ objective is to ease monetary policy to increase the ability of the banks credit to expand gross domestic product (GDP) .
Thus the RBNZ would have wanted the OCR below the 4.14% 90 Day Bank Bill.

On February the 3rd 2009, the Reserve bank of Australia (RBA) will reduce its OCR.
On the 30th of January 2009 the Domestic Rate for dealer bills was:

3.41% 90 day
3.11% 180 day

3.35% 5 year bond
4.1% 10 year bond

Currently the RBA cash rate is 4.25% as with wholesale interest rates of NZ, thus there is a very high chance as seen with the NZRB we will see the cash rate move below the 3.11% 180 day bill to increase/stimulate GDP. That is a different of 1.14% so you could view a RBA OCR at 3%, a decrease of 1.25%, which is a very reasonable assumption.
With the fall in the RBA OCR we should see bond prices increase but with that yields falling, share prices should increase as investors move to higher risk and better returns away from bonds, and the Australian dollar should fall. That’s what the economic text books will tell you. With international banks retreating from the Australian market, local banks tightening credit standards and property and equity investors on the side lines waiting for a green flag to drop to start investing again.

Some may say going by the book may not be the way to go in this climate of nerves, but l would rather the book than flipping a coin or tips from a friend.