John Key is disasterous for exporters.

" I think he did the right thing personally," Key said

Hilarious - as if to say of course the RBNZ has complete indepence to do what it wants.

spineless politician dosn't have the back bone to do what is right, some pain is needed to fix the underlying problems, if RBNZ was really independant why did Joihn know the outcome before it was anounced

No the truth is Ian, commentators and Dr Bollard probably both know the same thing, rate hikes will come before July, but Bollard does not want it pre-empted. But that's what market have to try to do, it can only make money through anticipation - the losers are always the public who blindly accept what they're told until too late. How does the story go...5% make things happen, 20% anticipate what will happen, and 75% end up saying "what the hell just happened?"

I have a query about the relationship between the New Zealand dollar and OCR, with the Australian dollar and OCR. I understand that the NZD and AUD are both largely commodity based currencies. The australian economy is being drivin by the high demand from minerals by China, and to a certian extent, India. The resut of this as I understand it is that their economy has not been affected as much by the global economic crisis. This means that to control inflation their reserve bank has saw fit to raise their OCR by 25 bp (and will probebly do so again before the end of the year). Obviously this means their currency is more attractive to overseas investors, and so the AUD goes up. New Zealand, on the other hand is in a different position. Housing prices may be overheated, but many dairy farmers out there havve borrowed heavily against the equity in their property in order to do conversions, and the high NZD is already effecting them. Am I right in suggesting that if Bollard raises the OCR, this will have the effect of both raising the NZD, increasing interest rates and cooling down the NZ property market. This would mean that dairy farmers now have less equity, lower income and higher interest rates to pay. ??? On the other hand, if Bollard does not raise the OCR, the NZD will diverge further and further away from the AUD. Have I got this right? it seems obvious then that the AUD will climb to over $1.30 NZ, posibly even more? Surely this would end talks about merging the currency. If anyone has any idea about this would welcome your comments.

@Roy,
You appear to have described the currencies scenario pretty well. But, what I understand is that the Aussie dollar went up due to their economic recovery and their increase of their official rates. But, I couldn't not understand why Kiwi dollar is following closely with the movement of Aussie dollar.

One of the reasons that Kiwi dollar went up so high was possibly due to the loans from overseas. If we borrow huge from overseas, then, there is a need to have the overseas currencies covert to local currencies ie. that is like using the overseas currencies to buy Kiwi dollar. If that happens, don't you think that Kiwi dollar will escalate? Am I correct?

Hence, if everybody keeps taking huge housing loans to buy properties, then that could also push up Kiwi dollar if the loans were from overseas. Is that logical? Please correct me if I am wrong. Any comments from anyone?

The Treasury has been honest in pointing to the cliff edge. Key and English are determined to look the other way. The only certainty is that YOU WILL PAY for the bloody mess created by 9 years of idiocy from Labour and however long the current fools remain in charge. You will also pay dearly for any silly little property game you have been up to, because the market is shite and will get worse. Immigration will not save the property ponzi scheme and neither will Bollard's effort to flood cheap easy to get credit into the market. People have had enough. The message to save is hitting like a Wellington southerly blast. As if that were not enough, the fiscal bomb is set to gut your income for the next 40 years. The young will bugger off overseas. Tourism by Beijing's Party members might be the only growth story, along with yet more bloated pay for senior state serpents. The Kiwi is likely to rise with the rates but in the long term slide all the way back down. No, that is bad news not good news.

Great article in the Listener about this very topic:

http://www.listener.co.nz/issue/3622/features/14137/house_of_pain.html

@veedub,

Perhaps, this issue on the escalating Kiwi dollar is too sensitive that not many would like to face the facts.

Would anyone comment on the relationship between "growing overseas debts and the rising Kiwi dollar" ?

Take a look at these;

http://www.interest.co.nz/ratesblog/index.php/2009/10/30/pm-key-says-rbn...

http://www.interest.co.nz/ratesblog/index.php/2009/10/30/pm-key-says-rbn...

The strength of the Kiwi is due to many attributes. However, we can't deny that our excessive overseas borrowing is not one of the factors. Although, there are extraneous factors that internally is hard for us to address/control, our consumption behaviour and loans are something we might want to reassess/reposition. Maybe, to clean our own backyard is something to ponder with rather than looking at something too far from our sight.

The national govt places great faith in Cabinet thinking. Oxymoron for sure. Three years in power is not enough to cement in place the fat pensions and perks for life. Best to buy another 3 and six if possible. Leave the crap for future fools to leave for others too. It's known as governing for guaranteed political payoff but national failure.

We kiwi's have attitude,defy the odd's.Crisis is looming.