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PM Key says RBNZ rate hike “would have been disastrous” for exporters
October 30th, 2009Prime Minister John Key has told reporters in Tokyo that any Reserve Bank decision to hike the Official Cash Rate would have been disastrous for exporters.
“It would have been a disastrous move. I think he did the right thing personally,” Key said, referring to Reserve Bank Governor Alan Bollard’s decision to face down the markets and stick to his pledge of holding the OCR until the second half of 2010.
Tags: Alan Bollard, John Key, OCR, RBNZ
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October 30th, 2009 at 9:57 am
As Rodney Dicken said – the long slow economic laws will take care of the housing market.
NZ OCR doesn’t mean Jack S anyway (AT THE MOMENT) – our dollar is more affected by other influences (AT THE MOMENT)
October 30th, 2009 at 10:34 am
John Key is disasterous for exporters.
October 30th, 2009 at 11:00 am
For the first time I actually think Jonkey is right… perhaps he hasn’t had enough sleep and now is thinking straight…
October 30th, 2009 at 11:06 am
” 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.
October 30th, 2009 at 11:31 am
Go back to sleep John.
October 30th, 2009 at 12:25 pm
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
October 30th, 2009 at 12:51 pm
Reading Rueters last night,(CNBC)all foreign commentators still saying RBNZ will be raising rates early 2010.Its a shame they seem to know more than the good Doctor!
October 30th, 2009 at 3:33 pm
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?”
October 30th, 2009 at 6:28 pm
Yes – what a disaster it would be. It might have been possible to get an after tax return on cash greater than inflation. How awful!!!! And homeowners might have to adjust to NORMAL rates of interest again after enjoying a gift from savers for the past year. Again, how AWFUL. John Key – you are a git.
October 30th, 2009 at 10:00 pm
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.
October 30th, 2009 at 10:01 pm
Who is this John Key fella?
October 30th, 2009 at 10:26 pm
@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?
October 31st, 2009 at 8:59 am
i thought the reserve bank was supposed to be independent of political pressure -HA HA!
at least Key should try to preserve the illusion of independence
a bit like King Canute -interest rates will eventually respond to economic and market pressures
they cannot be held down to current artificially low levels for ever
I thought Key would understand this better than he apparently does
just take the political pressure off and let economic and market forces govern!
October 31st, 2009 at 9:46 am
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.
October 31st, 2009 at 10:06 am
Pages of articles in todays NZ Herald singing the praises of John Key and his mob and polls showing how satisfied we are with the National Government.
How the hell could anyone rate this government highly (and yes I voted for them).
They would have to be one of the least proactive governments NZ has seen since 1950. What is it that makes those surveyed think highly of them – surely thay don’t all ride cycles and still use landlines?
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10606484
October 31st, 2009 at 12:39 pm
Great article in the Listener about this very topic:
http://www.listener.co.nz/issue/3622/features/14137/house_of_pain.html
October 31st, 2009 at 12:51 pm
@veedub,
The article you mentioned in the Listener is something of a message that not many might have read it as compared to property news every now and then. Then, how would the majority of the audience/population understand the problem? The first step is about how to get the message across to the majority and to let the majority know why borrowing huge from overseas could push up the Kiwi dollar too. Do you agree?
But, if you were to ask a home buyer if he/she is concerned about the currency and its consequences when he/she took up a huge housing loan to buy a house….. maybe, you could already guess the answer.
October 31st, 2009 at 1:16 pm
@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-rbnz-rate-hike-would-have-been-disastrous-for-exporters/comment-page-1/#comment-44410
http://www.interest.co.nz/ratesblog/index.php/2009/10/30/pm-key-says-rbnz-rate-hike-would-have-been-disastrous-for-exporters/comment-page-1/#comment-44415
October 31st, 2009 at 3:49 pm
Reading the Listener article tells me English and his advisors haven’t got a clue. To be talking about economic fundamentals in relation to the $’s strength is nonsense. If they don’t understand that its strength is all to do with the US$ weakness and more importantly the casino chips being played by the currency traders then we have a huge problem with the policy advice English gets. The ideas / policy of the 80’s and 90’s have gone past their use by date. The world has changd and Bill’s advisors need to move with it or get a new job , quick.
October 31st, 2009 at 4:07 pm
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.
October 31st, 2009 at 5:11 pm
The problem does not orbit around an individual. The problem is that we (collectively) have been sold and bought the principles of the Washington Consensus and been captured by it. Adherence has become an act of faith, a trajectory of belief if you like. So armed with belief and bolstered by faith both sides of our political spectrum jumped in boots and all.
Sadly when so committed the evidence of failure that manifests itself is ignored – falling productivity and wealth, a declining real economy only invoke the try harder as opposed to the try different response. Further decline just locks in the “just keep trying harder” and “it will be alright” political positioning – who can’t see this from Wellington today.
Eventually we will have to try different, maybe things have to be a whole lot worse before we see a new reaction.
Don’t take my position on this start at http://www.treasury.govt.nz see what many claim are our best and brightest have to say.
Some very, very hard decisions are on the near horizon.
October 31st, 2009 at 5:57 pm
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.
October 31st, 2009 at 8:05 pm
I recall the thinking in Oz from years gone past that one had to ‘hang in there” until 10 years and 1 day before moving on, to get the pro rate long service leave of 3 months minimum.
How long was Sue Bradford in for? I don’t know, but I’d be interested to know. Every (political) principle has its price.
November 1st, 2009 at 9:52 am
We kiwi’s have attitude,defy the odd’s.Crisis is looming.
November 1st, 2009 at 9:58 am
Hey saathi : Not like you guys at the Herald to be so concise . Expatiate your point ? Or are you just here to peddle your moth ridden fetid little rag ?