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RBNZ Governor Adrian Orr tells bank bosses to look past their noses, as ANZ NZ chairman plus ASB, BNZ and Westpac CEOs speak out against the possibility of the RBNZ taking the OCR negative

RBNZ Governor Adrian Orr tells bank bosses to look past their noses, as ANZ NZ chairman plus ASB, BNZ and Westpac CEOs speak out against the possibility of the RBNZ taking the OCR negative

By Gareth Vaughan

Conflict between the Reserve Bank (RBNZ) and the country's big four retail banks over the regulator's push towards potentially taking the Official Cash Rate (OCR) negative bubbled to the surface at this week's Institute of Finance Professionals New Zealand (INFINZ) virtual conference.

Firstly a seemingly frustrated RBNZ Governor Adrian Orr spoke out in favour of preparations for the potential move, only to be closely followed by senior representatives of the big four banks all airing their opposition to the concept of negative interest rates.

Having dropped the OCR to a record low of 0.25% in March as the COVID-19 crisis kicked-in, the RBNZ wrote to bank CEOs in May saying it wanted them prepared for negative interest rates by December 1. This came after RBNZ Deputy Governor and General Manager for Financial Stability Geoff Bascand told banks’ computer systems weren’t set up to deal with negative interest rates.

Speaking in the INFINZ conference Orr noted that, before it potentially gets to negative rates, the RBNZ is also looking at implementing a funding for lending programme, offering low-cost, secured, long-term funding for banks. Through this the RBNZ would provide wholesale funding to retail banks that it expects to be passed on to banks' borrowing customers through lower interest rates. Orr noted the funding for lending programme could be done in a "simple or more targeted fashion." 

"At the same time we have asked banks to get ready for the ability to have negative wholesale interest rates, the ability to get ready for negative wholesale interest rates. We're in a wonderful country. Unlike most other countries that had to go there, we are in the position where we have taken time to learn, study, and understand how it fits in with everything else that we need to know," Orr said.

"I've seen some banks already come out and shout from the rooftops 'oh this is really bad' because of some kind of narrow perceived target. We are able to manage, if we need to go there, the tradeoffs for bank profitability along with the lower retail interest rates that we need. So please read before you react and be a responsible financial sector leader not a self interested CEO when you talk about these activities," added Orr.

"We're spending enormous time with the banks, the chief economists, [and] we're now working with the boards to let them understand."

'Think beyond your nose'

When told that feedback from bank executives was that negative interest rates don't appeal, Orr said the executives need to look at themselves.

"Why don't they appeal? Do they not appeal to them because it might impact their bonus? Do they not appeal to them because it might mean they have to do something different? Do they not appeal to them because they don't think they would be effective? What is it? Think beyond your nose. Think about to what purpose because that's what we're doing. That's what we are paid to do. Think about the medium-term. What will work to achieve these [monetary policy] mandates? And we can do it in a way that we think will be highly effective and highly efficient," Orr said.

ASB CEO Vittoria Shortt, BNZ CEO Angela Mentis, Westpac NZ CEO David McLean and ANZ NZ Chairman John Key appeared together on a panel after Orr. All spoke out against negative interest rates. 

"I think it would be counter productive and have a negative effect on sentiment, and that other QE [quantitative easing] tools are probably more effective for the Reserve Bank to use," McLean said.

Mentis agreed.

"I speak to a lot of people offshore in other jurisdictions. And I think that there are other ways around fiscal policy and QE that can be the tools first. And I do worry about us [getting] in there and coming out. Sweden, five years and how did it come out of it? [The] US as well. And I think it's going to be counter productive to what the Reserve Bank is trying to do," Mentis said. 

'It's the nuclear option but I personally wouldn't go there'

Key also weighed in.

"You have to ask yourself what are you trying to achieve? Dropping interest rates is what the Reserve Bank has rightfully done and saying 'I'm at a point where I can't drop interest rates anymore, therefore I've got to go negative.' It hasn't helped Japan. To David's point the sentiment is negative. None of us are going to be paying people to take a mortgage. We're going to probably give even less cash than we are already giving [through] very low amounts to our deposit base, many of whom are retired and older and need the money," Key said.

"You do get to the point where you say 'look, if you really, really needed it you'd go there'... Jay Powell, the Federal Reserve Chairman, has made it pretty clear he's not going negative. I think you're far better doing the things Adrian has done so far and say 'look, like everything in life it's the nuclear option.' But I personally wouldn't go there."

Shortt agreed, noting the RBNZ had flagged the funding for lending programme.

"I think there's quite a few other tools to use first," Shortt said.

Plenty of QE ammunition left

Orr did note the RBNZ has "got plenty of room left on quantitative easing."

 Through its QE programme the RBNZ is buying central and local government bonds with newly issued money on the secondary market. It plans to buy up to $100 billion worth by June 2022. The latest RBNZ figures show thus far, the RBNZ has spent $37.2 billion, including $1.512 billion on local government bonds.

The aim of this policy is to help ensure low retail interest rates, again in order to help meet the RBNZ's inflation and employment targets. The QE programme effectively means the Government is buying back its own debt at a premium from market participants including the big four banks, in a move Treasury forecasts will cost the Government $11.1 billion over three years.

In a research report in June Macquarie analysts looked at the potential impact on major Australian and New Zealand banks if the RBNZ and Reserve Bank of Australia took their cash rates negative. Macquarie said NZ banks had more capacity to reduce term deposit rates to protect margins, and looked at Sweden's experience with negative interest rates, a country with a similar banking market to NZ and Australia.

"Overall, Swedish banks managed negative rates relatively well, as they benefited from lending repricing initiatives, trading-related gains, lower impairment charges and improved balance sheet growth. While their return on equity declined by 3%, from 13% to 10% between 2014-19, part of that reduction was driven by capital accumulation, which has been a global trend. The impact of lower rates can be observed from interest income/gross loans and advances reduction of 5% between 2014 and 2016," Macquarie said.

And last November the RBNZ said the balance of evidence suggested the overall impact of low interest rates on bank profitability was broadly neutral.

Even if it takes the OCR negative, the RBNZ does not expect bank deposit interest rates or home loan interest rates to go negative. The next RBNZ OCR review and Monetary Policy Statement is due on November 11. See negative interest rates 101 here.

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The RBNZ Governor has given the appearance of a compliant member of the current government, without any independence. The U.S. Fed and other central banks have emphasised the big problems with imposing negative interest rates. What is wrong with this guy?


Orr is completely our of control and he should be dismissed immediately before he causes any further long term damage.
He is running around like a headless chicken, imposing reckless policies (like the removal of the LVR restrictions) and then being surprised at the unavoidable consequences! He keeps berating and exhorting the banks, rather than having a good look at the shortsightedness and one-sidedness of his policies, and at their natural outcomes. Totally shambolic.
Moreover, he is ignoring the failures of identical policies in Europe and in Japan, and expecting that the very same policies will have, magically, different outcomes in NZ.
It would be almost funny if it was not so potentially disastrous to the financial soundness of the whole system. The most ridiculous aspect is Orr berating other banks for not looking past their noses, when this is exactly what he is doing.


Orr never has any commentary on how he will get the country out of negative interest rates.
Once a FHB and Investors have geared up and recklessly overpaid for rubbish houses any movement upwards in interest rates will cause them problems and they wont be able to cope.
If negative interest rates were a good idea they would have been around for the last few hundred years.
But they are just dreamed up nonsense and Orr and Hawkesby are so excited to experiment with them.
Orr, Hawkesby and Bascard need to go. Unfortunately Cindy and her team only know how to hug and have no business or real world financial experience between them.


Adrian how about some commentary on what deposit holders are facing for your life saving of the debt fueled?
No discussion on a deposit holder guarantee?
Young people should be protesting in the streets here over what they will face in the future to buy even a rubbish run down house.


The problem is that young people don’t understand what is going on , nobody amongst them talk about RBNZ, the best they will be able to do is to wrongly blame the government and the best the government will do is hugging them

I agree. But it is theGovt that sets the inflation mandate at 1% - 3%, and aiming for a mid-point of 2%

Hi Keith, Absolutely, hence wondering if it's an elaborate experiment (tongue-in-cheekish, elsewhere on this thread), whether government will notice and act or inquire only after the train's reached its signposted destination. Interesting that the Canadians have now adopted a pragmatic, let's carry on with reality now rather than keep kicking the pressurised can until the mega-cluster-you-know-what explodes in the biggest you-know-what-show.


Therein lies the problem. They think they can manipulate inflation. How do they think lowering an input cost (interest) will lead to price increases is beyond me (and clearly all it does is let people borrow more to buy assets not included in the inflation index).

Time this nonsense was called out.

Hi Rip (van Winkel) monetary policy is used by the rbnz and has been empowered to do so since the 1980s, how was your long sleep what are they going to be rioting against? They don’t even know who is mr. Orr . The are being persuaded low rates are good for them

I said protest....not rioting. Protesting is fine but if rioting get the water cannons and tear gas out.....

Brilliant! & the Governor did mention something about having more in the arsenal...
(& if Stats slips tear gas & tanks in the CPI, and we buy through the usual all-of-government procurement process, where outputs masquerade as outcomes, inflation's sorted).

Inverting our current market could we have this in NZ. Its happening in the biggest money printing market in the world:
Chinese homeowners face negative equity shock
As the nation’s property bubble looks set to burst and sellers discount unsellable houses, buyers are preparing for financial hardship

That is going to happen here house prices far to high the question is when it will happen, negative interest rates will just make it bigger and later

I think he's just the meat in the sandwich here and simply has to be seen to be doing something... even if it's just anything.

I also think he's 100% complicit in the transferral of debt to subsequent buyers.

Look. You just don't understand, do you! Orr has told us what we need to know (sarc/off):

"Unlike most other countries that had to go there, we are in the position where we have taken time to learn, study, and understand how it fits in with everything else that we need to know,"

As I suggested yesterday, the RBNZ, All Central banks KNOW that they can't meet their 'mandated' Inflation Target. Orr's 'study' will have told him that. He already knows what he can't do, but doesn't have the courage to do what he should do.
I floated the idea of Fixing the Currency; Interest rates and the Economy at large earlier this week; the RBNZ/Government takes FULL control of the economy in other words. There are all sorts of valid arguments against that, so the obvious alternative is to: "Stand Back from everything". Let the last vestige of manipulation by the RBNZ, the OCR, be scrapped, and let interest rates find their own commercial levels. Fund the Government requirements with Bond Tenders etc by all means. But other than that? Stay out of the market.
All this RBNZ operating with one arm and both legs tied behind its back and expecting it to fight off anything with one injured arm is pointless and doomed to failure.
Negative Interest rates won't achieve anything for the economy when SOMETHING is what we need. And more Monetary Magic isn't it.

They can meet their targets and do more, their problem has been that they've limited themselves to only tools that inflate asset prices but there are alternative ways to generate inflation (e.g. helicopter money) that could easily be used to unwind this credit/asset price bubble.


And what will any New Zealander, educated in the financial norms of the last 40 odd years do with Helicopter Money? Leverage it up and plonk it down on a deposit for an "Investment Property'. Just what's not needed.

Debt to income ratios and rising interest rates to me seem to be the only way out this, but it would require a few years of short term pain (and probably a bunch of debt defaults/restructuring) in order to experience longer term prosperity. We can avoid that for a while doing what we're doing, but I think we're going to experience pain either way. Comes back to that question of whether its better to pull a bandaid off fast or slow? How do you like to experience your pain....upfront and quickly, or long and slowly...I'm more an upfront and quickly kinda person.

You beauty!

Unlikely anyone would make any money on property if interest rates where moving upwards, which is the point of helicopter money.

Helicopter money. Dropped, spent (probably on stuff we import which helps who), poof, gone. Next silly can kick idea please.

Just a reminder, RBNZ had that LVR tool from 2013, he scrap it for now as showing sign of 'protest' - legally RBNZ always wanted DTI in their toolbox, but this has always been rejected by JK/Nat team, so it's done & dusted. Meanwhile, he's kind of hope the Lab will implement some sort of CGT (again this has been torpedoed by Jacinda, she un/intentionally made that statement, won't happen while I'm a PM, and? even during campaign she showing 'one factor only' to address housing issue that is 'supply' - which made Mr. Orr blood boiled silently. So? I said to him with your limited tools? You've got only about 15months until next year to stall this airplane completely, use that tools wisely to do so & make an impact, before the demand for resignation: Increase FLP straight to 150billions, keep out LVR, put OCR to negative 15, announce advanced QEs/LSAP to 300-450billions by mid of 2021 - those just a basic steps to let govt & most kiwi know to take notice about drugs medication on their F.I.R.E rock star economic status - Your helicopter money suggestion, is not much different to the wages subsidy.. it's either being put into Bank saving to buy future inflationary prices of basic staples OR? being pumped back to Banks mortgages payment via rentals etc. - Nice try though, But Mr. Orr shall put this non-sense once and for all the next months or so.

Yes, He should have increased LVR restriction rather than lifted up the restriction.
And, he should have gone negative rate at the last meeting when there were not many disagreed opinions about negative OCR.
Pumping money through QE will directly pour money into Real Estate market no matter what intention is.
It is better to do Negative rate right now in addition to the reintroduction of LVR right away.
Banks would not be too happy about it though.

Those other countries don't have the same quantity of debt (relative to GDP) loaded against their property markets could be one reason. Anything to reduce the load on that might be Orr's thinking - to save us from our own stupidity.


Central bank digital currencies plus deeply negative interest rates will be used to try and stimulate global economies. It won’t work though - the more they pump in the less effective it will be producing a doom loop. This is deflationary!

Would they not be better to put housing back in cpi numbers and not take every single thing that goes up, out


Mr Orr has to ensure that ponzi keeps going or will be a disaster and will be critised. So to protect his ass will have to go to any extreme.


Perhaps Adrian is the one who needs to think beyond his nose and stop this loose policy madness - it's just him kicking the can.

Retail banks don't want NIRP because it would reduce profitability. Can't blame them really.

There will always be winners and losers as a result of the Reserve Banks current approach to controlling inflation. Promoting very rapid asset price inflation (i.e. without reference to CPI) is it's own ill for society but the Reserve Banks argument that has prevailed for two decades has been that they where unwilling to entertain alternative approaches to creating inflation. I suspect the intrinsic conservatism of that institution means that they'd rather fall on their sword than admit that for two decades they pursued policies that where counterproductive and harmful to society. It's a matter of professional pride and damn the consequences.

How on earth posters here are siding with the parasites running the banks is bizarre. Negative rates hit the banks bottom line and help the average homeowner - of course that panel is going to protect their cash cow. If the RBNZ were going further than other CB's I'd have some sympathy for the argument, but they're not so I'm in Orr's corner, he's doing a good job.


Negative rates hurt anyone who doesn't own a home and anyone who has cash savings. Even the average homeowner who only owns a single property doesn't really benefit in that they have to buy and sell in the same market.

Seems like a net negative as far as I'm concerned.


Fair enough, and that's a valid argument. One group of society benefits, while another group is harmed. All caused by an unelected body, unaccountable, that believes it is right. But even that aside, many here are saying that the evidence is mounting (though, like any slow moving train wreck, it can only be confirmed forensically) that the end result looks likely to be very bad for just about everyone. You might like what they're doing for you now, but many people also benefiting today are discomfited by the carnage down the line.


Yip, the problem with creating such a debt mountain/price bubble against a property market is that its going to impact everyone - even if you had the awareness that the behaviour was bad and decided to not participate in it and advocated against it. At least with a stock market crash, for the most part, you can avoid that and it can have minimal impact on you personally. What is going on in our housing market is going to have impacts now for decades one way or another (either large debt burden for future generations, or a significant reset in prices and people getting wiped out financially).

Indeed, and interesting to see the conversation here change. Some who used to proclaim their property investing prowess (and, fair enough, even though it's largely a function of being a tax free zone), yet while they are also the biggest beneficiaries of these policies (at least, for now, on paper) are increasingly concerned about the pending economic/social impact. That says something positive about the human condition, I reckon.

Yes make a lot of money at other peoples expense and then when people realise they're being taken for a ride, pretend you're really nice and caring.

It’s not really decided by an unelected body. The elected central government has instructed the RBNZ to get CPI to 2% and given them interest rates as their only real tool. All the unelected body are doing is making a simple mandated logic decision: if CPI < 2 then lower rates.

Please explain how negative rates hurt the bottom line of a bank.
The bank will ALWAYS add on to any interest rate cost their standard 2 percentage points and maintain the exact same cashflow and margin.
if RBNZ rates went to negative 3% then the bank would advertise mortgage rates of negative 1% and make the same profit.

When you’ve got the big banks who could make a lot of money from negative rates, telling you it’s a bad idea.

Maybe listen.


Maybe Orr can utter a few words of Maori to signal his great virtue as he pounds the future of every young kiwi into dust.

It's very hard to find inflation when you keep looking in the wrong place.

His asset bubble is going to eventually burst it's now so out of control there is no hope of a soft landing. It's not going to be pretty.


Perfectly said. I agree 100%.

I can easily see young kiwis (especially the skilled an entrepreneurial ones) giving us the middle fingers as soon as things normalize in the rest of the world.
And I can't blame them - if I was one of them, I would not hesitate to leave for better opportunities abroad, where I would not be forced into a life of servitude to a mortgage needed to buy an over-inflated property so to further feed the massive NZ housing ponzi.

Where overseas would you that you can buy a cheap house? I’m asking for a friend

Australia's cheap in relation to wages.

Not where you'd want to live or be able to walk a street at night it's not.

Brisbane and South East Queensland have plenty of new developments for way less than NZ.
A$650k is the average. Air con, well insulated and double glazed. Lots have pools.
No trouble walking in the street at night in South East Queensland. Robina is a suburb I know and much better than lots of Auckland in terms of crime. Police arrest people over their when you step out of line.
Median House prices in Robina
2 Beds - 1
3 Beds $584k 21
4 Beds $770k 28
5 Beds $865k 12

Sure, but Robina isn't Brisbane and you're nowhere near walking to a beach. Goldy isn't that appealing to be honest, a bit low rent outside the few nice parts. Don't get me wrong, I agree the cost and quality of construction is streets ahead. I suspect that is the sheer scale of the cookie cutter houses. Everything is standardised and they pump out 1000's of identical, all be it well made, houses.

Your comments are rubbish re 1000's of identical houses. If you buy off the plans you spec and design as you wish. Most new developments have some similarities between houses even in NZ and they have covenants to ensure you maintain your property.
There are many new suburbs and areas being built. Most make Auckland houses selling for $1m or $1.2m look like a ghetto. You can live on a waterway for $1m or $1.2 with a pool.
Robina is about 45 minutes into the CBD of Brisbane so the same or better than a lot of Auckland's commute. There are many options halfway between Brisbane and Gold Coast. There are many heading north out of Brisbane too.
I don't know what the relevance of walking to the beach has. Can most of Auckland walk to the beach? The dumps selling in Auckland at similar money are close to uninhabitable.
Its not appealing to you but if you spend $1m or $1.2m its better than what you get in Auckland for $2m.

Australia has much higher stamp duty, 10%?, for foreign buyers.
Would be worthwhile change to help FHB in NZ.

If you live there you are not a foreign buyer.
Nzers in Australia also are elegible for first home buyer grant
The Queensland First Home Owners' Grant provides first time home buyers an extra bit of help to get into the market sooner. If eligible, you'll get $15,000 towards buying or building your new home. The Queensland grant covers new houses, units, and townhouses – you can even buy off the plan or choose to build yourself.Aug 6, 2020

It's not 45 minutes though is it, it's an 85km journey taking 1hr on a toll road on a clear run and anything up to 1h 45+ in rush hour.

You are comparing central Auckland houses with Robina which is nearly 100km from Brisbane. Pokeno is half the distance to Auckland CBD than Robina to Brisbane and you can buy a similar spec house for NZ$850k. The houses are cookie cutter, everything is standardised.

I have driven it hundreds of times from Robina to Brisbane and back and forward. while on business travel there. Never 1 hr 45. Its a four lane road each way and you can cruise at 110kmh. Also most people dont work in the brisbane CBD. Lots of big businesses are spread out.
I am not just comparing Robina. There are many developments. Palm beach much nicer,+qld+4221/list-1. There are endless developments. Train from Palm beach to Brisbane CBD 60 minutes.
Re repeated Cookie Cutter houses do we build something nicer in new houses in Auckland. I think you a making big calls without knowing what you are talking about. The builds are no different to GJ Gardiner or many others in terms of standard designs that we build in NZ only they are better quality for less money.
As at 1m to 1.2m in Auckland you get a total dump. Where are these central Auckland houses you are talking about for similar money to the Australian houses I was referring to?

I've done that drive many times too OC and always traffic, some shockers over the years. I tend to agree with you that at Aus houses are better value, my points are that you cannot compare Robina to Central Auckland, not the same. You can getter a nice house for $1.2m in Pokeno which is 40km closer to the CBD. Australia is better at building houses pound for pound, no doubt. What's really better though is the infrastructure to get you into town. You can buy and build a decent house for $1.2m 85km from Akl CBD. Just no 4 lane motorway to get you in to the centre.

...and most of Europe, and the US, and many others. Friends overseas constantly amazed at the price of houses, building products, and food in NZ. While we the frogs in the hot water remain oblivious, amidst occasional soothing noises about doing 'something', while successive govts whistling down the road kicking the can.


Its called the Great New Zealand Rip Off.
Over priced cars.
Over priced food and goods.
Over priced houses and some of the poorest quality too.
Over priced building materials.
The current monopiles and duopolies have too much power and vested interest to allow their kingdoms to be broken up and competition in all sectors.


and you can add
over priced insurance
over priced electricity
way over prices petrol
way way overpriced banking

Kamati kamati koura koura

Pump up the bubble and then let it fall to previous levels, win win


Not often I agree with the banks but the arrogance of this man knows no bounds...

With Negative OCR rate, the retail banks systems don't need to do a damn thing
The charge by the RBNZ will be taken out of their settlement account
It's just a cost to the retail banks. They'll simply adjust their retail margins
There are only 20 plus institutions with settlement accounts
That's 20 transaction debits in total daily, can be calculated by an RBNZ clerk
The retail banks are crying wolf

Precisely, Orr vs those 4 running institutions that have done everything from facilitating child sex trafficking through to charging deceased account holders fees for service. Yeah, but Orr's the bad guy.

Even if that were true, it conflates two issues. If the pickpocket who took your wallet looks shocked and runs off shouting there's a guy with a baseball bat behind you about to bash your head in, you'd say "I can't trust you, you terrible thief"?

Do you think I would make that up Pendejo?

That's a first for me, being called "stupid AND contemptible",...well, in Spanish at least.

de nada

btw, irrespective the abuse, as to the veracity of your statements, one is true, the other more of a media construct containing the barest smidgen of truth, at a stretch. But I'm guessing from the immediate resort to name calling behind anonymity that may be of little or no concern.

It can be used as a term of endearment in Latin America.... Kindly let me know which of these is the media construct with the barest smidgen of truth. The former is well documented and some of the basis for such a large fine. If you are going to say this is in Australia, all the NZ CEO's are on the management team of the parent.

Financing child sex trafficking

Charging dead people fees for no service

The former, & the 'well documented' is my point. A shame Westpac didn't take it to trial. I know a bit in this area, & studied the claim itself (beyond salacious headlines) & have published on it. There was a (smallish, but not invisible) chance Westpac could have got off entirely, with Austrac admonished & the court suggesting the Govt might like to consider making AML laws effective rather than virtue signalling. More likely, I reckon, Westpac would still have been fined (likely less than the agreed penalty) & Austrac crushed in cross-examination, and drubbed as much as the bank in the final judgment. But having managed major litigation for a big corporate, I understand why Westpac likely settled, irrespective legal outcome, not least the untold harm by media perceptions engendered by parroting an orchestrated campaign, becoming 'true by repetition'.

That's not what I heard from someone inside, bang to rights and they never once refuted any of the claims. WBC are the most litigious of the 4 and went to trial on BBSW, they would not take the nations largest ever corporate fine, tin the CEO and Chair if there was any chance of defending it.


Speak for yerself kamo kid, if that's your experience fine it's not mine.

Fair call. Deleted.

TK...Pendejo. Term of endearment? Oh you mean like when certain people use the N... word?

I thought you were a banker TK? (jokes...)

We should have a beer, I reckon we'd find plenty of common ground

Absolutely - I'm sure we would.

That's the spirit

There are currently 13 settlement banks in New Zealand out of the 27 banks registered here.

On top of this the RBNZ has been consistently signalling that it might take the benchmark interest rate, the Official Cash Rate into minus territory early next year. (the OCR is currently on 0.25%) And as well, the central bank is soon to introduce a Funding for Lending Programme (FLP) whereby it will directly lend money to banks at an interest rate around the level of the OCR. Link

Wow. Am I missing something here? Is this highwater hubris?

RBNZ accusing banks of bad motives ("Do [negative rates] not appeal to [bankers] because it might impact their bonus?"), while offering bribes ("We are able to manage...the trade-offs for bank profitability along with the lower retail interest rates that we need"), plus gratuitous abuse ("Think beyond your nose") and outright hubris ("That's what we are doing, that's what we are paid to do"). Yet RBNZ even asks THE critical question ("Do [negative rates] not appeal to [banks] because they don't think they would be effective?") then steadfastly ignores that very possibility. Yes, actually, that is exactly what the banks are saying.

They are saying that that tool isn't working, there are better ways to achieve RBNZ goals. Even the Fed is seeing it's not working. And countless commentators. And NZ data. QE/rate cuts worked when rates were high, but lowering already near zero rates blows asset bubbles bigger and increases financial instability without achieving the inflation goal.

This is policy effectiveness and outcomes science 101. There seem only two explanations. RBNZ is not stupid, so that leaves that they intend the result their actions will likely cause. (Or third, RBNZ fighting alone, with Govt letting it cop flak for not doing the real job).

Or maybe it's a glorious experiment. Will government notice before the tipping point and avert danger, or will it conduct an inquiry afterwards to learn why the financial system melted down despite all the clear warnings? Whilst the rest of us plebs use all those freshly printed 2022 "Hyper Stag Orrs" (trillion dollar notes) to keep the generators going. "Well, they got inflation going at least." (To be fair, Govt has best tools to have desired effect, eg direct payments, tax settings, etc most which they've taken off table, so Orr's been told to fight it with one arm tied behind his back).

Heaven help us when bankers, scarcely altruistic types, are warning that this is a really, really bad idea for the financial system, and the country.

Is Orr expecting the banks to take more risk?


Are we starting to see the finger pointing and blame game already?

Usually that happens after it turns to shit. In this case, it looks like its happening during the digestion cycle itself. The stomach says to the rectum; 'did you make this smell or did I?'

That John Key is so vocal about it, he must be able to see something in the forecasts that really doesn't sit well with him (and any vested interest he has).


What's the one truth we know about Sir John Key?

He's very good at getting off just before the ship goes down

Whether that be Lane Walker Rudkin, Elders Finance, Merrill Lynch, the National Party, and even Air New Zealand, they don't just get holed, they eventually sink. And if he's true to form, nastiness is headed our way in a very short space of time.

Absolutely - he could of course be pissed that he massively reduced his exposure to property a few years back and can now see that central bank policies will make him look stupid (that is further rate drops/QE causing property to rise even further).

Maybe. He did recently sell his off-the-plan Sydney condo without taking delivery. But property is one of the stickiest of investments. Acquiring it is dead easy; divesting of it when the market has turned, not so. So perhaps he recognises that and accepts that timing isn't the important bit, it's where the bottom eventually is :)

Yip - was reading the article about it at the time and the reasons he came up with for selling were piss weak - I was thinking, come on Sir John, you can do better than that. Tell us the real reason.

Didn't they also just buy Max a million dollar plus house in Auckland though?

So the average house then - didn't even splash out on something flash for him!

Are we starting to see the finger pointing and blame game already?

Agree 100%

The RBNZ can alter the OCR with a single stroke of a pen
But expects the banks to do all the dirty work
Administration, risk analysis, prepare contracts, assess mortgage insurance and so on
Foreclosures, mortgagee sales etc
Not cheap

This is why I keep thinking, why do we even bother with retail banks at all? Makes me wonder when central banks will get tired of dealing with the whinging from the overpaid retail bankers and just say, you know what, we carry all your risk for you and you take the profits, so lets just get rid of you and we'll do the lending ourselves and control money supply ourselves.

Interesting to see the huge work going into just that possibility, and the messaging positioning it as in our interest. The tin hatters are already freaking, but the fact that much of the official messaging is demonstrably false is cause for concern about what the impact really will be if it comes about.

Perhaps JK has looked at what has happened to the banks in Europe over the last 10 years and can see the same thing on the cards here now in NZ if we go down that same monetary policy path.

Maybe so. And personally I always assume the positive about people until proven otherwise, so assume Orr is genuine. That he believes he's doing the right thing. And my economics degree is dusty, so he may be right. My issue is in political science rather than economics, where riding roughshod over contrary evidence (apparently), and berating others backed by the biggest teams of experts in the country rather than an open, engaging, inquiring mind (again, seemingly), is a classic recipe for policy failure.

Yip I like Orr as a person and this/these issue/s are much greater than one man. I think were witnessing the end of a model of economic thinking that is failing too many people while rewarding others (who arguably don't deserve it - speculating with debt...)

why do we even bother with retail banks at all

Exactly, if the RBNZ backstops them anyway, why not just cut out the middle-man? We could really benefit from keeping the billions they siphon from NZ each year.

The multi $bn profits and 17% roe would suggest otherwise.

All these big bank CEO's are just a bunch of sookie babas, whining all day instead of taking control of their lives and getting ahead.

"The “FU-shaped recovery.” Meaning, people who got bailed out and enriched by [QE] that...inflated the prices of stocks, bonds, housing, etc. are now happy as a lark, and to heck with the rest of the people that are getting crushed." Plus, "there's a housing shortage until suddenly there's a housing glut". Source:

Haha love it - the K shaped, I mean FU shaped, recovery. Best one yet!

“with nearly 7% of all mortgages in forbearance” - the states is like another world isn’t it.

A regulator bucking the "follow the Fed unthinkingly" with "pretend and extend" policymaking:

"Canadian regulator says it will not renew special treatment of deferred loans"
Canada stops treating deferred loans as performing assets.

"The decision to allow the special treatment of deferred loans in March stemmed from the lack of time and information to evaluate each case individually... Now, we’re six months in, and banks... are in a much better position to go back to the loan-by-loan assessment that would be normal in these circumstances and have a lot more information from borrowers.”


Your link is a good read.

the Bank of Canada announced it will cease buying mortgage-backed securities after October 26, having realized that it has gone overboard, seeing the....insane surge in the Canadian housing market...Which makes me wonder: Will the Fed, after the election (it never changes policy shortly before an election), start muttering musings in the same direction concerning its MBS purchases? It too is seeing this housing insanity, and after having already quietly mothballed its corporate bond-buying program, its repos, and its dollar liquidity swaps, it would be an unsurprising next step.

The RBNZ had the chance to get out ahead of its compatriots ( and make NZ look like a hero again for being so prescient!) but it hasn't.
Now, it's going to look foolish, in all of the way many of us on here have been suggesting.

For the last couple of weeks the Fed’s balance sheet has actually been GROWING again

A regulator bucking the "follow the Fed unthinkingly" with "pretend and extend" policymaking:

Fed researchers are not certain current central bank policy is effecvtive:

In January of this year, the Federal Reserve – maybe looking ahead? – discussed some of these Japan, err, lessons.

"First, the Japanese experience shows that an announcement of a higher inflation target does not guarantee that inflation will increase to the new target level, even if the announcement is accompanied by a historically unprecedented degree of monetary accommodation. One could argue that the BOJ could have provided more accommodative monetary policy by even more aggressive asset purchase programs, interest rates at more negative levels, and better communication strategies. However, although such additional actions might have helped raise inflation to the new target level, it is highly uncertain whether these additional actions would have led to substantially higher inflation in Japan. In particular, there is a high degree of uncertainty regarding the effectiveness of asset purchase programs, especially when the size of the central bank’s balance sheet is already large, as well as regarding the effectiveness of negative interest rate policy…

Thus, in thinking about whether to raise the inflation target to a certain level, central banks need to take into account whether they are able to raise inflation to the new target level. If a new inflation target is too ambitious, and the central bank fails to attain it, the central bank may lose its credibility, which may render less effective any other policies it pursues."

Hear that, Jay? From your own central bank’s research. Bloomberg? CNBC? Anyone out there in the financial media? Bond Kings? Bueller?Link

Reserve Bank Governor Posistion is like that of a Dictator as can do what suits him only difference maybe that he has to somehow come out with justification of his action wether they are acceptable or senseible it does not matter.

Mr Orr if following herd mentality than please look at Canada :

The idea of negative interest rates smacks of desperation just where are we at in terms of the numbers of owners struggling with their mortgages. Are we on the cusp of a flood of defaults or forced sales does Orr know this ? Where are the mortgagee sales ?

They are on deferral. They gave 6 months to anyone who wanted one and then extended another 6 months.
Last stats I read were 80,000 were on total deferral and 60000 on interest only holiday.
While these are in place there will not be a flood of defaults.
As a further step the RBNZ has changed the rules so banks dont need to provide extra capital against non performing loans.
So basically they are screw deposit holders and anyone who does not have property.

So for those with mortgage issues reality hits Feb-March next year

why can't we live with no inflation?

Imagine what consumers would do if they collectively believed that prices (of anything or everything) was going to be cheaper in the future...why buy now if I can but it cheaper next year? Economic growth falls, businesses aren’t profitable, pay cuts, job losses...

But isn’t that going to be the case regardless for a large percentage of goods? Electrical, clothing, etc has been getting cheaper for years. The only things going up are the ones you must buy - food, petrol, etc.

What is wrong with prices staying the same....along with wages? Why do you want to pay more each year for the same thing?
And where is the evidence creating price inflation is possible in a world where we continually create efficiencies in production?
It is natural for deflation to occur - don’t you try and do more for less in your work environment?

So what is inflation? It is tax. That’s why they want it.

We might turn into a society of savers if we knew there was no inflation on the cards! How terrible (it would be from a governance perspective...)

As much as the RBNZ is doing a terrible job with all their latest policies from which the removal of LVR restrictions deserves a special mention, looks like all this funding for lending programme highlights the fact of the nonsense that is having commercial banks as an intermediary for lending when the central bank could do the exact same thing saving loads of money and fees working as a public service for the citizens of this country.

Like many others, we will be facing some issues when our retirement term deposits mature next year. Just a thought: how much tax, ie tax on interest earned, will be lost at 1%< compared to 4%>? It will bump my other income/super down a notch, so I’ll be paying a lower rate on that, too. And much of this maturing term deposit cash is or will be going into tax-free assets such as housing or shares. Have to be pretty stupid to have cash in the bank soon, better off in KiwiBonds.
Orr did some iffy stuff at the Super Fund, and seems to ad hoc-ing at the moment. We deserve and need better. Never thought I’d say it, but thanks JK for standing up.

You will spend lesd

I will spend less cos I won’t have it to spend. It really hacks me off to know I’m subsidising property speculators. I would get 1% if I was silly enough to leave it in the bank. They’ll borrow my cash at 2% and get eye watering returns on their equity if they’re highly geared (who wouldn’t be?) and the RB’s revised house price forecasts are correct. Has the world gone mad?

So why are Floating rates still 4.6%?
And when are the 1.75% fixed rates being rolled out?

Who pays Fixed these days? I do, kind of, but because it's OffSet I pay nothing.
That's the problem (as noted above). I pay no tax on what otherwise would be taxable income.
We have transformed the economy into a tax-efficient vehicle ( property speculation being the prime example) without any consideration of the social consequences.
But not to worry! When no one pays tax we will have MMT to provide for all our needs. What could possibly go wrong?!

Perhaps ok if you have debt.
But no use to those who have no debt.
You are just getting screwed if you have savings!

All a negative ocr will do is further boost the housing market. It's a nonsense. Of course, personally it would benefit me along with all other mortgage holders.
By further inflating the housing bubble it endangers financial stability rather than strengthening it.
Orr is a moron.

Wholesale negative interest rates are theoretically the right thing to do for low inflation/deflation however the system is so systemically distorted as:

1) We dont have comprehensive forms of capital tax to tax the resultant asset inflation (Asset inflation is also not captured by the CPI) of lower interest rates

2) We have a very tight land supply and very poor implementation of the RMA (restrictive) - even with net zero immigration, house (land) prices are still surging.

3) A 2% inflation target is the happy trade off between inflation & unemployment when the world are markets are functioning correctly. However the Govt & RBNZ should be formally accepting 0% at the moment in a 160 year crisis before even considering negative rates.

4) We allow systemically distorting recourse mortgages so banks lending on unproductive housing (land) is effectively guaranteed a return. Lending to business is thus deemed more risky.

So yet more money is being pumped into bidding up house(land) prices - this is the most unproductive use of capital possible and has been going on long term since the 1980's as the real price of NZ houses(land) is driven higher - it doesnt create any new jobs except a few middle men real estate agents that do not add any productivity to NZ:

a) It drives inequality in NZ even wider with "rich" property (land) owners reaping unjustified capital windfalls and the young and poor left further behind.

b) the further the property (land) price bubble blows the longer it will take to unwind & the more risk of negative equity cases
"Blown out of the water: Pre-auction offers back with a vengeance"

c) super low interest rates are adverse to savers

d) low interest rates also create zombie companies that wont survive nominal interest rates eventually returning to more typical levels

We don’t need more cash pumped in.... we need environment with less constraints on entrepreneurs to produce!

Access to money is not holding business back... it’s heavy regulation, red-tape and anti business sentiment that is.

Voters are dumb... they obviously think when government finally drives business into oblivion government will open up printing press and support them... doesn’t matter that nothing will be produced, we can always eat money!

We used to have a real economy... the RBNZ is hellbent on trading it for a gigantic housing Ponzi scheme.
Entrepreneurship has almost become a bad word: just get hold of some assets, sit back and enjoy their relentless growth: who needs to take risks with productive, risk-taking activities.

I support Mr. Orr & RBNZ team to curb this 4 OZ big banks year in/out profits out of NZ. This incoming Nov. the FLP should be at least up to the tune of 150billions, put Feb 2021 OCR into at least double digits negative rates then Mid 2021 doubled more the QEs announcement into 300billions - Don't worry Kiwis with high skill work will still be employed. My estimate is the avalanche of run away RE cost, will resulted to higher living cost, that eventually made Kiwis go down the street protesting, more work strikes, then followed by raft of govt subsidies? or Not?, But here's a things.. like it or not? Neither blue or red would do anything the past 15-25yrs fixing broken neoliberal structure - Which left RBNZ to do something meaningful, we're lucky to have visionary like them. If recently, the old, derelict house sold for 700K? - RBNZ job will almost be fulfilled if the same house to be on the market again the next 12months and can fetch the price of 3.5M (couple combined income of 700k to service mortgage in negative rates, woa), this come into ideal bank customer 5x DTI ratio - So please, Kiwis support our housing & steadfast on this. It will be only short time storm until 2023.

I am involved with several companies with borrowings and none of them need these ultra low interest rates.

With savers, particularly retirees, receiving virtually nothing on their deposits, how much purchasing power is being sucked from the economy.

There are massive bubbles right before their eyes but the Reserve Bank ignores them and marches on lockstep with the other central banks of the world where their policies have completely distorted the markets and eliminated true price discovery.

It is all going to finish badly and those that have been forced to invest in riskier assets are going to get the fright of their lives.

Exactly! A few years ago (around 10 years ago), I did have a very small (4-5 employees) IT Consultancy, for which I needed some operating liquidity.
I could not have cared less about 1 or 2% difference in interest rates, what I needed was to get a loan at all!!!
The banks where I went to were only keen on lending on house speculation, not on a business (which, by the way, operated in a fast growing segment of the market and had made a small but increasing profit since the first year in operation).
The statement that 1 or even 2% decrease in interest rates makes a significant difference to the access to money by small businesses is pure bullshit. This ultra-low interest rate policy only benefits speculators and creates dangerous asset bubbles, simple as that.

They are happy to loan on houses significantly more so than over commercial property.
I was talking to a commercial bank manager about indicative interest rates on a long term tenanted commercial industrial property approx $3m.
If you put in $2.5m cash then the bank wanted 5.5% to 7% on the 500K despite 83.33% equity. They also wanted personal guarantees from all directors.
But if you want to buy a sh#t box in South Auckland quite happy for you to put in 15% equity or less and loan at 2.55%. So the risk in the commercial scenario according to the bank is results in a 200% plus higher interest rate over the house with no equity. Total bullocks.

Yes it is crazy. The current environment is the opposite of what it should be. The resulting long term damage to the financial and productive system will be substantial, if things do not change.

We're just setting ourselves up for decades of debt slavery - or if not, deleveraging, defaults and debt restructuring.

Why we think we're any different to any other nation that has tried its hand at a property bubble and that we can have a different outcome, simply blows my mind.

Extract from today's article (see

"Reading about Adrian Orr’s latest outburst at the inevitable consequences of his failing monetary policies made me chuckle at the absurdity of the pantomime of this modern major-general.
We now know how Muldoon’s policies bankrupted this country and forced us into a radical and painful transformation. We are yet to discover and enjoy the price that we shall pay for Orr’s equally reckless monetary adventures but in time we shall.
Muldoon ended his career camping a parody of himself in the Rocky Horror Picture Show and earned a sliver of redemption in the process. Maybe the Reserve Bank Governor has a similar finale in his repertoire."

I don't think I need to add any more words to it. Apart from a few self-interested speculators, the large majority of Kiwis would agree, at least in part, with this perspective. But the plonkers at the helm of the RBNZ are allowed to continue with this ultimately suicidal and reckless policy, and nobody is stopping them.

Orr is serving his political masters if the housing market falters the economy crashes along with political fortunes so keep kicking the can and hoping. To hell with the average young couple trying to form a family and just get on with life.

It's about time someone stood up to Adrian Orr and his ridiculous policies. And you know it's bad when it's the banks doing it. They have never been the "peoples friend", unless those people were shareholders.

Does our Labour Government really think negative interest rates are a good thing? Maybe they'll put together another working group, only to not do what the working group said should be done?

I don't see Adrian Orr resigning, so who has the power to oust him?

Cindy and her team have no financial experience outside what their officials tell them. So they would not have a clue what to think and whether good or bad.
Officials will be making the case much like 80000 people were going to die if we did not lock the country up.
Cindy said in debates she does not want house prices to fall but for them to stabilize. So she is happy with the recent inflation in prices and the low interest rates. Given she apparently owns two from some reports I read she like all other owners are licking their lips. I dont blame her and other MPs for wanting personal gains. Its natural. But not when its created by artificial rates when you screw deposit holders paying them nothing and refusing to bring forward a bank guarantee all the while piling on more and more risk to the banks.

I’m not sure savers are being screwed. It sounds like the banks have plenty of savings coming in at current rates, doesn’t that imply they are market rates (or maybe even higher)

No it doesn't as these are not market rates. Rates are being artificially manipulated by Orrs money printing and obsession with saving the debt fueled. So a branch of the government is doing it to save those who cant manage there money.
Zero return and no deposit guarantee. If you have millions on call you are getting nothing for it. Well $2m gets $500 interest for a month. Pre 31 March 4.2k in interest a month.
If you want to keep in cash you have very little alternative.
You cant contract and pay in cash for property, cars and other high end items.
AML rules and bank policies are putting an end to this.
Also its what the RBNZ want.