(Bloomberg) — New Zealand’s central bank is not bluffing when it says it may resort to negative interest rates, Assistant Governor Christian Hawkesby said.

“It’s not a game of bluff,” Hawkesby told a Citigroup (NYSE:) conference in Sydney via video link on Wednesday. He was responding to a suggestion that the Reserve Bank is only using the threat of negative rates to exert downward pressure on the dollar and has no intention of actually using them.

The RBNZ has said it may cut its cash rate into negative territory early next year to stoke inflation as the coronavirus pandemic drives up unemployment. Its counterpart in Australia has been far more circumspect on the use of negative rates, saying it is “extraordinarily unlikely” to use them.

Hawkesby said he’d noticed that skepticism toward negative rates is “particularly strong in Australia,” and possibly stems from “a desire not to be seen as a basket case.”

“The biggest challenge about having a negative policy rate is the communication challenge,” he said. “How to explain it to the general public, how to explain it as a policy, how to win the argument, how to retain hearts and minds that you’re doing the right thing for the right reasons.”

He said Sweden’s Riksbank was a good example of a central bank that had used negative rates effectively to lift inflation and then managed to exit the policy.

New Zealand Eyes Sweden as Roadmap for Negative Interest Rates

In assessing the alternative policy tools it could use, the RBNZ was guided by principles such as their effectiveness, efficiency, impact on financial stability and implications for its balance sheet, he said.

“The combination of the economic outlook and those principles will determine what actions we take,” he said. “I think all central banks are going through that process” and “trying to do the right thing for their economies.”

The RBNZ is still “very much in the mindset of ‘have we provided enough stimulus, and if we need to provide more what is the best way to do that?’” Hawkesby said. “That is what has motivated our work around active preparation of a package of further tools.”

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