The Reserve Bank (RBNZ) has raised the Official Cash Rate (OCR) by 50 basis points to 4.75% in its first interest rate review of 2023.
It followed the record, 75 bps, increase the RBNZ made at its last review in November 2022 and it means the OCR has been hiked by a whopping 450 basis points since first being raised, by just 25 points, from its record low emergency setting as of October 2021. The speed of the rise in the OCR, with 350 bps of hiking last year alone, is unprecedented.
The RBNZ's Monetary Policy Committee (MPC) had deliberated between raising the OCR by 75 basis points and 50 points before deciding the latter.
The extensive damage caused by Cyclone Gabrielle and other recent weather events including the Auckland storm threw an extra curve ball ahead of the latest decision.
RBNZ Governor Adrian Orr said these events have had a devastating effect on the lives of many New Zealanders.
"It is too early to accurately assess the monetary policy implications of these weather events, given that the scale of destruction and economic disruption are only now becoming evident. The timing, size, and the nature of funding the Government’s fiscal response are also yet to be determined.
"The [RBNZ Monetary Policy] Committee’s current assessment is that over coming weeks, prices for some goods are likely to spike and activity will be weaker than previously expected. Export revenues will be negatively impacted. Monetary policy is set with a medium-term focus, and the Committee will look through these short-term output variations and direct price effects. In time, the infrastructure and community rebuild will add to activity and inflationary pressures, especially given existing capacity constraints in the economy," Orr said.
The RBNZ is estimating that the impact of the recent storms will add about 0.3 percentage points to inflation in the March and June 2023 quarters. The RBNZ is therefore forecasting that annual inflation may actually blip up slightly - to 7.3% from 7.2% - in the March quarter before starting to fall.
ANZ chief economist Sharon Zollner and senior strategist David Croy said the only "sensible" approach the RBNZ could take to the impacts of Cyclone Gabrielle was “wait and see”.
"In practice, that had to mean staying the course with a 50bp hike, not a pause," they said.
"That’s because expectations of the future OCR are actually more important for monetary conditions than the actual decision on the day (only a bit over 10% of mortgage debt in New Zealand is floating). Had the RBNZ blinked today, it would have risked losing control of the narrative on the future path for the OCR, potentially seeing the swaps curve and mortgage rates drop sharply."
In contrast Kiwibank's economists described the RBNZ's assessment as "much more hawkish" than they expected.
"The RBNZ hiked by 50bps, as we expected, but their overtly hawkish tone was unchanged. We expected a softening in tone. Although we had forecast a 50bp hike today, we had openly recommended a pause. And we expected to see a lowering of the OCR track. We had made the argument for a pause at today’s meeting given the devastating impact of cyclone Gabrielle. The RBNZ had paused in August 2021 as the country went into lockdown. We thought it wise to pause again. It was not to be," Kiwibank's economists said.
'Labour and other resources in the economy are already scarce'
In its new Monetary Policy Statement (MPS) issued in conjunction with the latest review, the RBNZ has done a special break-out article attempting to summarise some of the likely impacts of the cyclone damage.
"These storms have occurred at a time when labour and other resources in the economy are already scarce," the RBNZ says.
"Existing capacity constraints may mean these storms are more inflationary than previous natural disasters and it may take longer for recovery work to take place.
"The best contribution monetary policy can make is to free up resources by slowing demand elsewhere in the economy with higher interest rates. This will also limit further increases in the cost of living over the medium term.
"...All else being equal, these severe storms will keep CPI inflation high for longer and may lead to a longer period with inflation above 7%. Monetary policy will look through the direct effects of these events on near-term inflation, as they are likely to be temporary.
"The largest risk of higher near-term inflation to the medium-term outlook – and therefore to monetary policy – comes from inflation expectations remaining elevated for longer than otherwise," the RBNZ says.
The size of the latest rise to the OCR was largely anticipated by economists and the marketplace. Therefore arguably the more closely watched part of this latest announcement is the new forecasts made by the RBNZ in the accompanying Monetary Policy Statement (MPS).
The RBNZ's previous projections made at the last OCR review in November 2022 had the OCR peaking at 5.5% by the middle of this year. This is largely unchanged in the latest statement, but the peak, while still 5.5% is now forecast to occur later - in December this year. There's no significant change either in when the RBNZ forecasts that inflation will get back into its targeted 1% to 3% range. This is still picked to occur in the September quarter next year.
Tweak to recession forecast
In November the RBNZ also forecast a recession to start this year - and candidly admitted it was seeking to engineer one. In the November forecasts it picked four consecutive quarters of negative GDP growth starting from June this year. It has slightly tweaked that forecast in its latest MPS and now sees just three consecutive quarters of negative growth, but still starting from June 2023.
"While estimates are highly uncertain, our central projection incorporates an assumption that the recovery from these storms will add about 1% to annual GDP, spread over coming years," the RBNZ says.
"It is possible that the recovery will evolve in such a way that the expected contraction in GDP through 2023 will be delayed or reduced, at the margin. Our central projection also assumes a reduction in the productive capacity of the economy."
Recent economic data has been mixed, but the 7.2% (unchanged) annual inflation rate as of the December quarter was better than the RBNZ had expected, while December quarter unemployment, at 3.4% was higher than the RBNZ had forecast. Another more helpful factor for the RBNZ was the central bank's latest Survey of Expectations, which showed a sharp fall (albeit to still as high as 3.3%) in the expectation of inflation in two years' time.
House prices expected to continue falling
House prices have continued to fall, and the RBNZ has again revised somewhat higher its pick of how far the prices will fall. In November it saw the total decline in prices being 20%, now it sees 23%.
"House prices have fallen by 15.2% since the peak in November 2021. House prices are projected to keep falling in 2023, consistent with very low sales volumes in recent months. House prices are assumed to have fallen by around 23% from their peak in 2021 to their trough in mid-2024, before recovering as interest rates decline toward their neutral setting," the RBNZ says.
This is the statement from the Reserve Bank:
The Committee agreed that the OCR still needs to increase, as indicated in the November Statement, to ensure inflation returns to within its target range over the medium term. While there are early signs of price pressure easing, core consumer price inflation remains too high, employment is still beyond its maximum sustainable level, and near-term inflation expectations remain elevated.
Cyclone Gabrielle and other recent severe weather events have had a devastating effect on the lives of many New Zealanders. It is too early to accurately assess the monetary policy implications of these weather events, given that the scale of destruction and economic disruption are only now becoming evident. The timing, size, and the nature of funding the Government’s fiscal response are also yet to be determined.
The Committee’s current assessment is that over coming weeks, prices for some goods are likely to spike and activity will be weaker than previously expected. Export revenues will be negatively impacted. Monetary policy is set with a medium-term focus, and the Committee will look through these short-term output variations and direct price effects. In time, the infrastructure and community rebuild will add to activity and inflationary pressures, especially given existing capacity constraints in the economy.
Internationally, core inflation remains high and inflationary pressures remain broad based. However, the outlook for global economic activity in 2023 remains subdued, which is acting to lower global consumer pricing pressures, as well as demand for New Zealand’s key commodity exports. Continued growth in services exports will provide some export revenue offset.
Domestically, demand remained robust through 2022 underpinned by resilient household spending, construction activity, government spending, and a swift recovery in international tourism as the border reopened. Labour shortages remain a significant constraint on economic activity, contributing to heightened wage inflation. People are moving jobs at an elevated pace, consistent with labour shortages and strong demand.
While there are early signs of demand easing it continues to outpace supply, as reflected in strong domestic inflation. The Committee agreed that monetary conditions need to tighten further, as indicated in the November Statement, so as to be confident there is sufficient restraint on spending to bring inflation back within its 1 to 3% per annum target range. The Committee remains determined to achieve its Monetary Policy Remit.
Summary of Monetary Policy Committee meeting:
The Monetary Policy Committee discussed developments affecting the outlook for inflation and employment in New Zealand. Overall, the economy has developed broadly in line with expectations at the time of the November Statement. Inflation is currently too high and employment is beyond its maximum sustainable level. The Committee agreed it must continue to increase the Official Cash Rate (OCR) to return inflation to target and to fulfil its Remit.
The Committee discussed recent international economic developments and their implications for New Zealand. In many countries, core inflation remains high, reflecting significant broad-based inflationary pressures. The outlook for global economic activity in 2023 remains relatively subdued. A weakening global economy is contributing to weaker demand for New Zealand’s key commodity exports, such as dairy and meat, leading to a lower outlook for New Zealand’s terms of trade. Continued growth in New Zealand’s service exports, in particular tourism, is assumed to provide some offset to this drop in export revenue in the near term. As is an easing of travel and activity restrictions in China over the medium term.
Committee members discussed the effects of Cyclone Gabrielle and other recent severe weather events. These events have had a devastating effect on the lives of many New Zealanders. Economically, they represent a disruption to employment, trade and production, and damage to property. The economic impacts discussed by the Committee included the immediate upward pressure on some prices, the effect that higher CPI inflation could have on longer-term inflation expectations, the ability to resource and supply any increase in demand and investment in affected regions, and the longer-term impact these severe weather events will have on the productive capacity of New Zealand.
While it is too early to estimate the full economic impacts, near-term rebuilding and restocking are likely to lift the level of economic activity, and consumer prices for some goods and services will come under upward pressure given supply chain disruption and product scarcity. Weaker export volumes will impact negatively on export earnings as a result of these extreme weather events. It remains unclear how significant the impact of these events will be on New Zealand’s longer-term productive capacity.
Monetary policy is set with a medium-term focus. Given this, the Committee decided to look through the short-term direct price pressures stemming from these extreme weather events, and focus on the medium-term impacts on inflation and maximum sustainable employment.
At this stage, the Committee agreed that the medium-term impacts of the severe weather events do not materially alter the outlook for monetary policy. However, significant uncertainty remains, and more accurate information on the scale of the events is becoming available by the day. Inflation remains high, employment is above its maximum sustainable level, and ongoing restrictive monetary policy settings are necessary. However, the Committee acknowledged the significant regional impacts that the severe weather events will have across New Zealand, and agreed that the Government’s fiscal policy response would be more effective at addressing these, rather than any monetary policy activity.
The Committee noted that demand in the New Zealand economy remained robust through 2022, despite significant global and domestic challenges. Economic growth has been underpinned by resilient household spending, construction activity, government spending, and a swift recovery in international tourism as the border reopened. High frequency surveys of economic activity suggest domestic demand may be starting to ease. This moderation is in line with expectations outlined at the November Statement. However, demand continues to outpace supply, and this continues to be reflected in high domestic inflation.
The Committee observed that consumer price inflation in New Zealand in the December quarter remained high. Encouragingly, there was a slightly larger-than-forecast slowing in non-tradable inflation. However, CPI inflation, at 7.2 percent in the year to the December 2022 quarter, remains well above the 1 to 3 percent target range set out in the Remit. Measures of persistent or ‘core’ inflation have remained very high, indicating that high inflation remains broad-based. Medium- and longer-term inflation expectations have stabilised recently, but remain elevated. The potential for a persistent continuation of global and domestic supply constraints, greater persistence in core inflation and elevated inflation expectations were seen as upside risks to the economic projections.
The Committee noted that a range of measures indicated that labour shortages continue to be a significant constraint on economic activity, contributing to strong wage inflation. Measures of labour force utilisation are near record levels and firms continue to report severe difficulties finding labour. Private sector employees are also transitioning between jobs at an elevated pace, consistent with significant labour shortages and strong demand in the economy.
The Committee discussed financial conditions noting that increases in both shorter term wholesale and mortgage rates have exceeded longer term maturities. It was also noted that deposit rate increases continue to lag the increases in wholesale and mortgage rates resulting in a further widening of bank margins between lending and deposit rates. The Committee expect deposit rates to increase over the coming year incentivising savings, further dampening inflation and supporting the maintenance of current mortgage rates for a longer period.
The Committee also discussed the functioning of the New Zealand Government bond market, in the context of sales of bonds in the Large Scale Asset Purchase Programme portfolio. Measures of secondary market liquidity were generally in line with historic norms and observed volatility was consistent with trends seen in international interest rate markets.
The Committee considered the economic projections. As in the November Statement, the central projections show a decline in GDP this year. Members noted that this reduction in aggregate demand was necessary to return inflation to target over the forecast period. Members agreed that the exact timing and extent of negative GDP growth was difficult to predict, but historical evidence suggests risks are skewed toward a more concentrated period of contraction. Members also agreed that the sooner supply and demand were better matched in the economy, the lower the overall cost of reducing inflation.
The Committee discussed the resilience of household balance sheets in the context of rising interest rates and the outlook for reduced labour demand. This was seen as a downside risk – with the potential for monetary policy to have larger effects on the economy in an environment of elevated debt levels. However, it was noted that while measures of financial stress have increased marginally, they remain low. The Committee agreed that as debt servicing costs rise, spending decisions for many households will become increasingly constrained. These constraints would be felt most by recent home buyers with a high debt servicing commitment relative to their income.
The Committee agreed that the impact of rising interest rates on households’ spending and saving decisions is an important channel for monetary policy. The Committee also agreed that housing market related activity was a downside risk. Projections incorporate a substantial decline in construction. However, there are significant uncertainties. Feedback from the construction industry points to a significant lack of forward activity. In contrast, rebuilding in the wake of Cyclone Gabrielle will support construction activity.
The Committee agreed that fiscal policy can also act to reduce demand in the economy. The current projection assumes government consumption and investment will fall as a share of the economy in coming years. However, members viewed the risks to inflation pressure from fiscal policy as skewed to the upside, particularly given the ongoing demand for government services in an environment of rising costs of provision. In addition, the economic impact of the Government response to recent severe weather events will depend on the scale of damage, fiscal reprioritisation decisions, timing of activity and how the fiscal costs are funded.
The Committee discussed the extent of additional monetary tightening required to achieve its Remit. Members noted the rapid pace and extent of tightening to date implies monetary policy is now contractionary. The Committee noted the long lags of monetary transmission to the economy means the impact of this tightening is still to be fully seen. Committee members agreed that the OCR needed to reach a level where the Committee could be confident it would reduce actual inflation to within the target range over the forecast horizon. Members agreed that this level of the OCR was broadly consistent with expectations at the time of the November Statement.
The Committee discussed the size of the OCR increase to be delivered at this meeting. Increases of 50 and 75 basis points were considered. The Committee assessed that, while the balance of risks around inflation remain skewed to the upside, the extent of this risk had moderated somewhat since the November Statement. As a result, a 50 basis point move balanced the need to ensure core inflation and inflation expectations fall, against the early signs that demand was beginning to moderate towards the economy’s productive capacity.
On Wednesday 22 February, the Committee reached a consensus to raise the OCR by 50 basis points from 4.25% to 4.75%.
138 Comments
Of neither substance nor consequence and of very little pleasure to say I got it right. Yes no surprise to the great majority. It just means that down the track there is going to need to be another hasty and belated catchup, a rise of 100 pts. The second horse has bolted and is over the hills.
Not quite. The final nail is centred but won’t be hammered home until there is the real panic to rack up the OCR, a 100 pointer will at some stage be necessary. This is just a delaying action and it’s hard not to think there is some political input into it given this government has been a virtual delaying action since day one.
I think it would be fairer to say, 'greedy or desperate'. I have no sympathy for speculators. I have some for FHBs who gave up and accepted insane prices. I'm in that cohort, and I know how hard it's been to hold out and skip between crappy rentals forever while prices keep rising -- in an environment where they have been already been ridiculous for many years and show no sign of moderating.
Yes Huttman, it is pain for everybody, mortgage or not. Many businesses will struggle as the discretionary cash dries up, as will those in the building industry and those downstream of this sector. They can't all go and work and supply Napier.
The 'safest' are those in Govt and essential services. The 'nice to have' sector will be throttled.
Greedy? Some may be overstretched as they withdrew personal funds to help them through COVID etc. Yes, a few speculators will be hurting but one would assume that those with real debt are doing their best to get ahead. Any way those of us who are not over stretched because we either benefited or purchased at the right time, had better be understanding of those who are struggling. Kicking a dog when it is down helps no one.
This whole 'engineering recession' move is orchestrated by the US. Like the earlier Low interest regime for 7 years or so was orchestrated by them to come out of the recession, following GFC, etc. It is too political for a small country like NZ to resist and act independently.
Another gem today from Prof Robert McCulloch ... in 2011 the RB cut the OCR by 50 bp in response to the Chch earthquakes & the ripple on effect to the whole economy ...
In 2023 the RB raises the OCR 50 bp whilst noting the negative impact of Cyclone Gabrielle on the nation's economy ...
... was Bollard right , or was Orr ? ... they can't both have nailed it correctly , surely ...
A persistently high employment figure is creating excess demand along with it. The brutal truth is, Interest rates will only trend down once unemployment rises and demand for goods and services softens. It all goes hand in hand. The cyclone has prolonged the pain. This is just beginning.
I agree, but a lot of workers and businesses have benefited only because of the excessive monetary easing. Not saying it was their fault, but this lolly scramble was never going to last forever.
For example, it is better if those thousands of young Kiwis who left education or training for the allure of higher-than-usual wages in unskilled jobs return to school.
People are moving jobs at an elevated pace, consistent with labour shortages and strong demand - Most of this is not organic and just a result of more money in circulation.
Agree too. Boosting the minimum wage isn't helpful either as it support lack of skill. Lack of education is shocking in some of the young people I have been dealing with - they appear to be Bl 00 dy stupid with the lights out because they haven't learned to think. I suspect some are a lost cause.
Get more immigrants into the country, they are smart and work hard.
Yep predicted last year, full force of the financial pain won't hit until close to the election time. By then we will also have the people going from shock to anger from the cyclones and floods and the realisation that it won't be months to get houses, property etc replaced, but years and years, and the mismanagement from Wellington, and the slowness of insurance companies, as well as media news around it will add to this. Chirpy's bounce will only be short term, the train is still heading towards us full on.
The man won't even admit to the real death toll and level of looting present. Stories coming from folk on the ground up in HawkesBay, if everyone hasn;t already clicked to just how under the-govt-thumb the mainstream media is, this is irrefutable and horrific. I pray for the families who have lost everything there that chippy doesn;t kick the can down the road to the election he is likely to lose. NZers deserve better than politicising of devastating natural disasters
To ignore specific and emphatic advice from his department that private details of a NZ citizen are not for publication, suggests to me, firstly an ambition beyond egotistical, secondly a flawed personality and thirdly a middle finger to the responsibilities and dignity of a government minister, let alone a prime minister.
Do you think the reserve bank could cause such economic and social discord, knowingly destroying THAT many lives? You are a fool. A 50% decline including inflation over a 5 year period possibly. But all the dreamers salivating at mass financial destruction and drama would be well advised to remember there are actual people behind the numbers.
The housing market was a huge bubble pumped up by FOMO and low emergency rates and years of money printing the narrative has now turned and price’s can and will fall, people did not complain when house prices were climbing out of reach for average wage earners this crash had to happen to give hope to young couples who would like to own a property someday.
If we get hit by a major recession, and if inflation is partially resistant to OCR rises due to the lost productivity of the accelerating de-globalisation and the war, then I don't see what the RB can do about a collapsing property market? Dropping the OCR and kicking off inflation like the 70s and 80s?
There is no way we will see a 50% decrease. Essentially you are suggesting the median house price will drop to $500K the same level it was at in 2013. Interesting to note the average salary in 2013 was $36K for men (women were <$25K). Today the average salary is just under $60K.
In addition at current rents a 50% drop in house prices would equate to a 6% pa return on investment without any capital gain. Simply no mathematical logic to your claim.
A whole generation? Are you referring to the more or less TWO years of recent home buyers from March 2020 to the end of 2021 (when the writing was on the wall)?
Considering kids have been growing up in households with monetary stress over not being able to afford a house for many years and since this seemed set to remain the status quo, I find your comment pretty rich.
Not brainwashed either. They is him, them, the reserve bank, the ones you are applauding for killing housing with interest rates, can also do the same but in the other direction and when they do, you lot will say exactly the same thing. One trick ponies the lot of you. Get some independent thought in ya!
Some area’s already down 20% plus from top and rates are only starting to hit investors and people who fixed one year ago, this is only the start of crash. The house price crash is accelerating faster than in recent history, not much RBNZ or government can do just have follow narrative of larger central banks around the world or NZD will become worthless and inflation will become hyper inflation.
“The RBNZ's previous projections made at the last OCR review in November 2023 had the OCR peaking at 5.5% by the middle of this year. This is largely unchanged in the latest statement, but the peak, while still 5.5% is now forecast to occur later - in December this year.”
So only 75bps left to rise for the year and over how many meetings? Seeing they were considering a 50 or 75 rise this time what will April bring. 25 or 50? Then what? A pause through the year for possibly another 25 mid year and another in December? Quite a change from the last 12 months or so considering the data we’ve been getting hasn’t changed much for the better.
The gathering storm, political that is, is now well in from the horizon and the next nine months will be a thrashing for this government regardless of their new leadership and the lacklustre display of Luxon and co. It is not going to be a warm and cozy winter for large parts of the nation.
Briscoes have a longstanding following, used to work there for 6 years on and off through college and uni. 2008 they jacked all prices by 15% then started 60% off sales and made bumper bucks. Nobody seemed to notice, they all rished in. Rod Duke is a shrewed but astute businessman, also helps to have a wife who speaks fluent mandarin who helped him with wholesae purchasing in China in the early days.
I worked inwards goods at Briscoes late 90s, and got to see the invoices from suppliers. At 60% off, they were still making almost 300% markup (not to be confused with margin/profits, which comes after costs such as as staff and premises).
I often wondered about how the NZ suppliers felt when they came into the store and saw the prices Briscoes were asking for their product - then realised they probably didn't care because Briscoes had access to the market, whereas they didn't otherwise, so got to benefit - even if Briscoes was taking most of the product's value.
What was that I heard in the background as this news dropped? Oh, that's right. The familiar sound of the Starter's Gun - "And they're off! 4.99% takes an early lead, followed by 4.75%....."
The RBNZ is likely to regret this missed opportunity to stamp its control on the economy.
The idea they can just “look through” temporary inflation is more feasible when you are still close to (or within) the target band for inflation. If the inflationary impacts of the cyclone occur while inflation has been well outside the target band for some time, it risks inflation expectations becoming entrenched, wage price spirals etc.
The RBNZs earlier inaction, that allowed inflation get out of hand, will make the impacts of the cyclone far more difficult to deal with
If your deposit is getting 4.5% in the bank and the houses in your area have dropped 20% plus 7% inflation since Nov 2021. Then your money in a term deposit has lost 7% - (4.5 - tax) ~ -4% whereas the houses have dropped -27%, so if you are waiting at the moment you are winning :)
The RBNZ needs to somehow consider other or additional measures to control inflation other than just Monetary policy. The pain falls disproportionately on generally younger families that are trying to provide for their families by having a mortgage. Have they aid to much for their houses? Probably Yes, but that is likely a problem of loose monetary policy to induce inflation.
The likely scenario is the RBNZ keeps increasing rates, while Luxton gives out tax cuts. Maybe put up taxes for both young and old so we can rely less on Monetary policy.
Average Kiwi makes a good point. If there is surplus spending power sloshing around as a result of the covid handouts, that is where we should be looking to retrieve it.
I would start with a 1 month amnesty for anyone who took advantage of the "high trust model" to pick the taxpayers pocket. 1 month to come clean and arrange to pay it back. Then after the amnesty ends, ruthlessly investigate and penalize as would happen in fraudulent GST returns. Borrow Putin's idea of putting such people on tv in a cage with the other looters.
Of course I am silly suggesting this because the worst offenders will be the same people giving large donations to the political parties so being held to account never happens. Carry on kicking the poor FHB who listened to "low interest rates are the new normal".
Financial markets are ruthless.
If you've got your opponent on the canvas, letting them up again after they've tapped you on the leg in a gentlemanly fashion and said "I give up" won't be the end of it. They'll get up, shake themself off and come back at you for all they are worth.
Didn't we all learn the hard way that you get your opponent down; stick your foot on their throat and leave it their until some time after they have died. And even then, remove your foot slowly - just in case!
"The best contribution monetary policy can make is to free up resources by slowing demand elsewhere in the economy with higher interest rates.
So I hope everyone here understands what that means for the Housing market .......
Does Orr really believe you can use a sledge hammer like the OCR, as a scalpel to redirect labour pools. Labour has a choice, if it needs to move from auckland, then Brisbane or Melbourne may well look more attractive then Hawkes Bay etc.
I think they are dreaming.
Absurd.
The US government made a political decision to remove direct house prices from CPI.
NZ then did the same.
All this does is exaggerate the asset bubble and collapse.
We are now driving up interest rates, crashing the economy and house prices due to excessive interest rate rises to get inflation, without direct house prices, back to 1-3%.
House prices would have never gone as high as they did had direct house prices remained in the CPI.
Houses are the biggest consumer good.
Simply absurd policy.
But the U.S. does include owners equivalent rent in the CPI. So if your house goes up from 800k to 1 million in a year that 0.25% increase is not counted as CPI inflation.
But the equivalent rent on that house at 800k value was 36k per year and the rent on the same house valued at 1 million 1 year later was 42k per year.
The extra 6k or 16% increase would contribute to the CPI calculation.
I believe the banks have already baked this rise into their rates, so we should not be expecting any news from them, especially considering the significantly lower secret rates they are offering to get new customers.
If you're in a position to be re-fixing this year, consider changing banks when you do. Could get yourself a cashback bonus or special low rate. Then take that to your current provider and tell them to do better, à la Bunnings 15%.
I'm sure that is the case. Why else make the minister for the cyclone recovery the same person who controls the finances. I wonder if they see their reputation of having a laissez faire attitude with other peoples' money as a possible bonus in this situation i.e. will the NZ public think that big-spending Labour is more likely to spend on weather-proof infrastructure than National, which may give them the edge in the next election?
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