With the Reserve Bank (RBNZ) talking tough about fighting the highest inflation in 30-years, 50 basis points Official Cash Rate (OCR) increases at the next two OCR reviews are probably already locked in, meaning an OCR of 3% by August, Kiwibank Chief Economist Jarrod Kerr says.
Speaking to interest.co.nz in a video interview, Kerr says Wednesday's 50 basis points OCR hike to 2% was no surprise. But what did surprise him was how much heavy lifting the RBNZ believes it needs to do to get the inflation genie back in the bottle.
"The RBNZ prides itself on being one of the first inflation fighting central banks and here we are with inflation at 7% and their target is 2%. So they've got a lot of work to do. And what we were surprised by in the statement on Wednesday was the extent of the work that they think they have to do. They're now telling us that they're going to hike the cash rate to 4%. That's up from 2% today. So interest rates are rising and they've got a lot further to go," says Kerr.
With the March quarter consumers price index (CPI) weighing in at 6.9%, there's much interest in what the June quarter CPI will say when Statistics NZ release it on July 18. An issue for the RBNZ is this is five days after the next OCR review on July 13. This, Kerr, says, effectively bakes in a 50 basis points increase on July 13 given the RBNZ says it's "resolute" in its commitment to see CPI inflation back within its 1% to 3% target range.
"They want to see inflation turn south and they're not going to see inflation turn south in the next reading. The next [CPI] reading, which is for this quarter that we're in now, is going to be around 7.2%. So that's not going to satisfy them. We're really waiting until the back end of the year where we can see some signs of inflation coming off. So I think the next two meetings are pretty much locked in with this 50 basis point movements and we're going to see a cash rate of 3% by August," says Kerr.
After July 13, the RBNZ next reviews the OCR on August 17.
So what cost could there be to the broader economy from the RBNZ's battle to tame inflation?
"You're going to see quite a sharp slowdown in consumption in New Zealand. Household budgets are really going to feel the higher interest rates which are coming through now. Last year you could get a two-year or three-year mortgage rate in the low to mid-2s, now we're in the 5s. And given what's coming through it looks like interest rates are going to rise into the 6s. So that's a huge increase, more than doubling of the interest expense for households and that's going to have an impact," Kerr says.
"I think with every rate rise the chance of a recession increases. They're trying to engineer a soft landing, but as history suggests it's very difficult engineering a soft landing. On their own forecasts the Reserve Bank has the housing market falling 15%, which takes you back to the start of 2021. In terms of nominal levels [that's] a lot fairer level for house prices. But with that negative wealth effect, with the impact on confidence, you could easily slip into a recession in that world."
With people expecting future inflation to be high, Kerr says the credibility of the central bank is effectively being questioned.
"And when your credibility's being questioned you fire up, and you do what you can to get inflation expectations back down to 2%. So I think they have come out very strong. I don't think they have to deliver the full 4% cash rate [the RBNZ is now forecasting]. I think they'll end with a cash rate somewhere between 3% and 3.5%. I think that's more than enough. We are getting good bang for buck on mortgage rates today. But look, this is a central bank that's telling you it's going to do whatever it takes to get inflation down."
In the video Kerr also talks about what a rising OCR may mean for savers, and how the combination of central bank monetary policy and government fiscal policy has generated both economic growth and inflation.
140 Comments
7% is not too far as all experts are anticipating another 1% if not 2% rise from here so five year rates by end of year or early next year should be between 6.75% - 7.75% and to compare from the height ponzi last year when it was between 2.5% to 3 %.
150% to 200% increase Wow
https://www.asb.co.nz/home-loans-mortgages/interest-rates-fees.html
It’s not what the reserve bank does that matters now….it’s out of their hands
its what thousands of individual businesses decide to do with their price book
Importers will be copping a ten percent increase just on the fall of the kiwi
employers will be copping increased wage bills
if jarrod thinks only a further 1.5% increase in the ocr will bring us back into the 1-3% inflation zone then I’ll have some of what he’s smoking before the price of it goes up too!
Jarrod Kerr said the global response to Covid was loose monetary policy - remember the slashing of interest rates, the dropping of LVR restrictions, the quantitative easing programmes - combined with stimulatory fiscal policy. It was this combination which switched the world economy from a deflationary to inflationary cycle - that made the economies much more vulnerable to economic shocks - such as Chinese Covid lockdowns which affects supply chains and the Ukraine war which affects, food and fuel commodity prices. This has changed inflation expectations causing second order affects that the RBNZ (and the government?) need to counter to avoid a permanent 1970s type stagflation economic environment (low growth, high unemployment, high inflation). That seems like a reasonable argument to me.
The point that many are missing is that we have always been vulnerable to world events that are out of our control.
The real issue for us, is we have been ignoring those things we have more control over, like the price of our land, consenting processes, our health and education systems, etc.
Even in a time of peace and prosperity (for us), our local systems have pushed many households to the edge, and now with the added further world issues over which we have no control, it is pushing a lot over the edge.
If we had looked after our own issues better, we would have had a far greater buffer to weather the coming storm. Sadly we don't.
Thanks Dale. My comment was only partly about the NZ economy.
Pre-Covid the global economy was in a deflationary cycle. Post-Covid it is in an inflationary cycle. It was the combined 'global' impact of loose monetary policy - quantitative easing happened all through the developed world - and stimulatory government spending - deficits and government debt is much higher in most other countries - that caused the switch.
Supply side shocks have added to the inflationary cycle and globally there is a real risk of 1970s style stagflation economics if inflation expectations become imbedded.
Don't they know that with every OCR increase, property values fall, and not only that, other investment asset falls, like, in tandem.
Just the other day, a politician queried whether RBNZ considered the plight of failing building companies in Tauranga.
In the third year of COVID, FHBs are disenfranchised, builders are decimated, rental investors stuck with low yields and illiquid assets. Retail have to endure another few years of pain.
And less fee paying students from China.
What's next, the plaque.
Apocalypse.
The politician you refer to was Andrew Bayley I think. I saw the same article.
It’s a pitty Andrew didn’t reflect on whether a lack of competition in the building material game is the root cause of the problems.no he just took the opportunity to bag Labour.
And he still couldn’t his mind around the limiting of finance. It’s the excess credit over twenty years that has lead us here and allowed a multitude of inefficiencies to be covered up.
chickens are coming home to roost.
Tee, you say "Don't they know that with every OCR increase, property values fall, and not only that, other investment asset falls, like, in tandem"
Did they also not knew that with every OCR decrease, property values rises, and not only that, other investment asset rise, like, in tandem and on top of that they removed LVR..... than they also have the audacity to say that we do not control house prices....what a joke. Either they are stupid or the people who believe them.
.what a joke. Either they are stupid or the people who believe them.
Wealth effect or wealth illusion? The other therapeutic effect of lower-for-longer interest rates is the wealth effect. By driving up the value of future cash flows with lower rates of interest, all manner of assets – stock, bonds, and houses – increase in value and, thereby, can stimulate our marginal propensity to consume. More simply put, the imperative was to make rich people richer so as to encourage their consumption. It is not so hard to imagine negative side effects.
There are the obvious distributional effects between those who have assets and those who do not. Returning house prices in California to their 2005 levels may be good for those who own them, but what of those who don’t?
There are also harder-to-observe distributional consequences that flow from the impact of lower-for-longer interest rates on the value of our liabilities. This is most easily observed in pension funds.
Consider two pension funds, one with a positive funding ratio and one with a negative funding ratio. When we create a wealth effect on the asset side of their balance sheets we also drive up the value of their liabilities. Lower long-term interest rates increase the value of all future cash flows – both positive and negative. Other things being equal, each pension fund will end up approximately where they started, only more so.
The same is true for households but is much more ominous, given the inequality of wealth with which we began the experiment. Consider two households: one with savings and one without savings. Consider also not just their legally-defined liabilities, like mortgages and auto-loans, but also their future consumption expenditures, their liability to feed and clothe themselves in the future.
When the Fed engineered its experiment to promote the wealth effect, the family with savings experienced an increase in the present value of their assets and also an increase in the present value of their liabilities. Because our financial assets are traded in markets and because we receive mutual fund and retirement account statements, we promptly saw the change in the value of our assets. We are much slower to appreciate the change in the present value of our liabilities, particularly the value of our future consumption expenditures.
But just because we don’t trade our future consumption expenditures on the stock exchange does not mean that the conventions of finance do not apply. The family with savings likely ends up where they started, once we consider the necessity of revaluing their liabilities. They may more readily perceive a wealth effect but, ultimately, there is only a wealth illusion.
But what happened to the family without savings? There were no assets to go up in the value, so there is no wealth effect – real or perceived. But the value of their future consumption expenditures did go up in value. The present value of their current and expected standard of living went up but without a corresponding and offsetting increase in assets, because they don’t have any. There was no wealth effect, not even a wealth illusion, just a cruel hoax.
https://www.grantspub.com/files/presentations/FISHERGRANTSREMARKS15MAR17...
"The RBNZ prides itself on being one of the first inflation fighting central banks and here we are with inflation at 7% and their target is 2%. So they've got a lot of work to do. And what we were surprised by in the statement on Wednesday was the extent of the work that they think they have to do. They're now telling us that they're going to hike the cash rate to 4%
In the words of Ben Bernanke (former US Federal Reserve Chair):
“Monetary policy is 98% talk.”
Here's the full quote from Ben Bernanke's talk today at Brookings: "I think monetary policy is 98% talk and 2% action, and communication is a big part." (He was speaking about his new book: "21st Century Monetary Policy.")
I nearly forgot - Rising interest rates could see government suffer a $5 billion loss from the Reserve Bank's QE programme
When will we be rid of these clowns?
It would appear that there are a lot of regrets with the "least regrets" policy AA. I estimate the loss is now $7.5b.
There are also going to be a lot of regrets with the current tightening policy as well because we are already in recession country and only half way to their forecast. All supply side inputs and mostly a result of their policies.
I'm thinking a Royal Commission into the RBNZ is starting to look like a good idea. Rates up 400% from pre-covid looks like malfeasance.
Hardly likely.
Last month England’s department of education ordered schools not to use any materials in the curriculum that question the legitimacy of capitalism. Opposition to capitalism was described as an “extreme political stance” – opposition, let us remember, to an economic system whose relentless pursuit of growth and profit treats the destruction of the natural world as an uncosted externality. Link
I have a very strong belief in capitalism but that very belief is supported by studying the alternatives along with the basis of capitalism and its flaws. How can I make my passionately pro argument for Capitalism if I haven't compared it to theocracies where morality rules or the true communism of hunter-gatherers. Or pointed out that since land cannot be manufactured it is not part of 'supply & demand' so private ownership is bad capitalism. Or that while capitalism is wonderful at providing Coca Cola to remote villages in poor countries it has inadequate mechanisms for controlling the pollution that means every glass of water contains specks of plastic.
Replace 'legitimacy' with 'existence' and it makes sense. England is a capitalist country; its dept of education should be challenging capitalism not leaving it unexamined.
You have articulated a lot better than I ever could. The question I have is, why is this happening? Are we now a society that cannot be trusted, or is incapable of critiquing itself? I think the UK is a basket case and Brexit is the single largest act of self-harm since Japan bombed Pearl Harbour.
Capitalism is 100% fine, as long as it has strong government oversight. For instance we should have been taxing carbon, making the makers of plastics responsible for their clean up, focussing on productivity over expansion for the last 50 years or so, via strong government rules that are often world wide. Instead, the capitalists infiltrate government and flip all of that around. And we let them, because it's easier.
Yes, we have politicians that rant about Kiwis not being allowed to profit from one liquid resource in the ground (oil, and not that we ever profited much from it) while insisting that another liquid resource - water - should be free for companies to bottle and sell for profit and Kiwis should receive no benefit. (Coincidentally, I'm sure, some politicians may have had links to water bottlers...)
Where's the governance for regular Kiwis been, for too many years?
Sold 2 rentals, mainly because CCCFA meant all the renovation spend couldn't be funded and refinanced as agreed with the banks in advance and I have tax to pay. Also some powder to keep dry. I plan to reborrow and load up on shares to make the debt tax deductible.
The interest deductible rules are going to be absolutely crushing to many amateur investors, and more so, to their tenants.
Everything else now freehold or locked in for a few years. Inflation will eat away at the debt even as I pay it down quickly.
Hunker down time. This government is going to have to throw a lot more of us under the bus to stay in power.
He is the kind of opportunist this country needs. Morally i didnt invest in extra housing but i fully understand why others did and made plenty of money as that is how our system works.
Imagine if our (rubbish) government changed the rules to disincentivise property investment (the courage to put in place a CGT, put the OCR up etc) and instead incentivised investment in high tech and climate businesses... the outcome would be the same people that invested in property would invest in stuff that grows our economy in the right way. No bubble, plenty of high skilled immigrants, kids with a future here etc etc.
'7 houses' luxon wont help.
This is the fairly common argument, nerf housing, promote businesses, robust economy and high paying jobs for all.
Couple of observations:
- assumes there are many lucrative, high tech businesses able to be formed in NZ that currently arent.
- assumes capital currently allocated towards housing investment will divert to buying shares/starting businesses.
Most likely you'd have less overall economic activity.
Most people that try to achieve great things are told that they wont work.its why most people dont bother to try.
I work in tech. World is full of people that want to surf, ski, write code, do science, fix the environment, create businesses that matter.
NZ has exactly the right environment to attract and grow such people. Just no ambition from its leaders who would rather take the easy route...
Lets get more cheap immigrants, try to keep housing prices up, pretend we are doing some climate stuff .. it always worked before.
So you're wanting to pitch NZ as a destination for digital nomads.
What would make NZ preferable to somewhere with 1/3rd the costs, closer to more common markets? NZ is nice, but is there a competitive advantage to being here? Timezone maybe.
NZ Governments have been trying to push the "knowledge economy" for decades now. The only problem is, almost everywhere else has been doing the same thing.
Really the most logical play is tech investment to accompany our primary industries. Anything else is a gamble on an emerging technology, or something NZ will struggle to be competitive in.
Fair point.. and either way would work.
Personally though i dont believe nz governments have ever really tried properly.. more that they thow some words behind it and then do something else ( as labour have done will all their policies)
As long as there is no CGT or similar and the rules favor leverage and property investment (such as the tax rules deductability rule mr Luxon is so keen to reinstate) then the investment priorities for NZ will remain skewed toward property and property investment even in a recssion we are told to jusy hang on to the investment for another 10 years and it will be good.
I am not sure i have heard anything remotely solid from either party on changing policies to favor a shift that would motivate current property investors to favor investment in productive economy and thus drive kids and businesses to push a tech business from here.
Sooner or later social, climate and infrstructure cracks will force the change. Just a shame not to do so beforehand.
If I was PM for a day : I'd bring in a comprehensive LVT ...
... I'd introduce a sugar tax ...
Scrap WFF completely ...
... create a 0 % tax on the first $ 20 000 earnt ...
Bring back charter schools ...
... that's my TOP 5 wish list ... anyone else got theirs sorted ?
If I was PM for a day:
1. Comprehensive LVT - decrease PAYE taxes on bottom bracket income earners
2. Stop local government taxing buildings with capital value rates - we still have a housing crisis - it is stupid to tax buildings
3. Kainga Ora to adopt Austrian social housing model funded adequately so that 25% of residential construction is social housing - including Vienna's land fund so KO can purchase land years/decades in advance of construction. Meaning that social housing land costs are based on yesteryear prices not future inflated prices.
4. Waka Kotahi (NZTA) coordinates proper city spatial planning - purchases infrastructure corridors in advance of development so land costs are based on yesteryear prices not future inflated prices and so corridors are not overbuilt and therefore expensive/impossible to acquire.
5. Continue RMA reform so that local government implements more permissive planning (consenting) rules.
GBH, I HAD JUST ONE THING TO SAY YOU KNOW THAT LOVE IS ALL WE NEED TO GET US THROUGH
https://www.youtube.com/watch?v=b9ygIvMtcdw
The plan is to rid this country of landlords aka people farmers as far as is humanly possible, and I am all for it.
If interest deductibility again becomes a thing, then I am sure you would happy for it to apply to all owners of residential property, ie home owner/occupiers, otherwise it is grossly unfair, don't yo think?
A possible recsession...
Perhaps we need one to change the economy away from exploiting each other via leveraged debt. Debt that enriche Foreign Bankers and a few speculators while sucking the financial life out of NZ and drives productive youth offshore. We need to focus on something more productive and balanced for the good of the fabric of NZ society.
Not at all. There will always be have and have not, as there is in every society in history.
Will be happy with everyone paying their tax, especially the leveraged silent landed millionaires. It sounds like its been such a good gig for so long, that there is disbelief and bitterness that one should have to start paying their full tax again.
Rise in OCR is worrisome in NZ as housing sector is not a part of the economy but is THE ONLY ECONOMY.
Situation has been bad but has been created worse in last two years by government and rbnz, all in guise of pandemic and now is coming home to roost.
It could be bad in short term but will be good for long term economy as downfall is imminent and more the delay bigger the disaster, so is good that finally economy fundamentals have taken over.
Below news is in complete contrast to last year news where property were being snatched at unheard prices setting new benchmark. For fundamentals to takeover similar benchmark is required on the lower side though will face some resistance initially but will happen as will not be as prompt as when moving up.
https://www.nzherald.co.nz/nz/auckland-housing-market-downturn-five-auc…
Having worked in the fund management industry. This interview is nothing new and actually old news that that the Kiwibank economist is trying to get some air time and/ or just told to do it by Marketing (which is so typical).
The RBNZ had already provided forward guidance to global institutional investors that they intend to do 4x50 basis point rate rises in late April/ early May so this Kiwibank guy is not adding any value. He is just rehashing information priced in the market.
I just came here for your comments guys. ;)
The RBNZ provides guidance to all of us via it's MPS, the fund management industry get no special access. There are 150bp of further tightening priced in the swap curve, They will deliver no more than 100bp of this, happy to wager with you. As for the Kiwibank dude, good on him for making himself available.
Yes, all this information is public knowledge. I was relating to the reason why banks and financial institutions do the things they do and their content creation. I don't particularly enjoy arguing like others do in the comments except everyone has a right to their own opinion. Forward guidance itself is a policy tool in itself so you could be entirely correct. The proof is in your results.
Don't worry immigration to the rescue article I just read over 200000 applications for new fast track residency. 165000 plus hangers on in the pipeline new records for immigration being set , so much for government targeting 30 - 40000 they appear to be ignoring that . This should help drive wages down and keep the rentals full might kick house prices along again.
Yes, but having a full rental dosen't really help a landlord that was already negatively geared @ 2.5% mortgage rates, and now has to pay 5%+ interest rates.
It's been a while since statistics about negative gearing were released, but with the recent rate rises we'd probably have around 50% of landlords who are negatively geared (can't pay their mortgage with the rent). And that number will be rising fast.
The numbers just don't work. Many rentals are just bleeding money... and when mortgage rates are 6 or 7% they will be bottomless money pits... no matter how many immigrants you cram into them.
World over housing market is slowing but the speed and rise seen in NZ was unmatched so the fall too should be unmatched compare to other countries.
https://fortune.com/2022/05/27/housing-market-correction-peak-mark-zand…
Interesting the article says we need to slow the construction industry globally to get demand and prices for building materials to fall. Which will happen as the house price correction happens. As you say in NZ will be very pronounced as both were record breaking peaks.
Interested to see how our glorious leaders have been planning to offset this foreseeable crash.
Rising interest rates will crash the construction sector. We saw that in the years leading up to the GFC. And we saw the effect of lowering the interest rates in increasing the construction rate in 2021.
It is a completely foreseeable crash.
For instance Stuff journalist Dileepa Fonseka recently wrote "we all know the playbook: interest rates rise, construction firms go bust or stop building houses, homeowners panic and cut back on spending, the economy dives, interest rates fall, house prices rise as too few houses have been built – rinse, cycle, repeat." https://www.stuff.co.nz/business/128519952/wealth-inequality-debate-is-…
What we need is the government working with the central government to reduce inflation expectations whilst minimising the damage to the wider economy. It would do this by raising taxes or cutting spending. I would prefer a tax increase on the unproductive landed gentry part of the economy - in the form of a comprehensive land value tax. That would give the biggest bang for the buck.
It would tax land but not buildings - so it is not a tax or disincentive on construction unlike interest rate rises (and for the same reason it is not a tax on tenants).
The rationale goes like this. Landlord A decides he will pass on the land tax to his tenants. Landlord B in response decides to build another housing unit on his land. This doesn't affect how much land tax he pays, so he doesn't need to raise the rent. He takes Landlord A's tenants.
Of our choices.
1. Do nothing - this risks imbedding high inflation expectations and creating a stagflation economy. It could mean even higher social costs as there is a larger problem that needs to be fixed later.
2. Let monetary policy do all the hard pushing - risks a large boom/bust cycle - especially as sectors like construction are decimated - even worse than the GFC.
3. Raise taxes - can target less vulnerable sectors of the economy (see above argument re a comprehensive LVT tax).
4. Cut government spending - risks imposing long term social costs on vulnerable sectors of society - like occurred in the 1990s. See this article https://www.nzherald.co.nz/business/liam-dann-why-slashing-government-s…
I think building "in" is the real opportunity, well designed infill. Houses do not need to go up a hell of a lot, 2/3 stories is plenty for most areas but what needs to happen is for people to stop building massive houses in the middle of their sections with a tiny "garden" around each side and a setback from the street. Squish them closer together at the sides and bring them forward towards the street, like houses used to be built in places like Ponsonby and Devonport. You end up with more usable garden space, a better connection to the street and less need for massive driveways to get to rear sections.
Building up is for the areas close to public transport and main arterials. I would be very hesitant to build out, the infrastructure costs are too high.
The point is that the price of the land on the fringe sets the price of all land going in. The science is very clear on this. From Adam Smith to Alan Evans to more recent Alan Bertuad, shows this time and time again.
You can never get more affordable housing going in, on a like-for-like basis, if you restrict the going out.
If the land was allowed to be cheaper on the fringe, then for those people that wanted to move closer in, it would be cheaper to do that also. At present, our very expensive housing is forcing people to the fringe to find affordability.
Sort the land out, then the housing typology can be built to suit what the market needs for amenity, rather than only what it can afford.
And it's a myth that building out infrastructure costs are too high.
Yeah, I don't agree with your science.
https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.auckla…
That report was a very poor piece of writing, and the authors don't hold a candle to the likes of Smith, Evans, and Bertaud. You only have to look at the Demographia reports seeing the difference between cities with restrictive Urban growth boundaries and those that don't. http://www.demographia.com/dhi2020.pdf
Again, I disagree.
https://www.greaterauckland.org.nz/2018/10/06/flashback-saturday-demogr…
Mintaro's reply in the comments sections provides adequate answers. And as they say, again, it is a very poor article showing the bias of the writer,
But a few further points, historically prior to 1994, Auckland was also 3x median income multiple, so what you are saying is that the amenity value of Auckland has increased 3 fold since then. And further last year the price of housing increased by over 23% in value, again according to the author this would mean a corresponding increase in amenity value. We all know this is not correct.
Also, the amenity value is person-specific, so if someone lives in Dunedin, then for that person, Dunedin has a higher amenity value than Auckland. Also since more people live outside Auckland, then Auckland does not have the highest amenity value by your definition.
And for the writer to use livability reports is plain stupid. None of the livability reports mentioned actually survey what the inhabitants in those cities think about their liveability.
My apologies, in my haste I posted the wrong article.
https://www.greaterauckland.org.nz/2015/06/03/how-wrong-is-demographia-…
I like the Coalition for more Homes proposals for achieving what you are saying. I do not have a problem with outward expansion esp if it a TOD. It should be spatially planned for. I hope the direction of RMA reforms is in these ways.
Building up in the middle has huge infrastructure costs also. All power, water and sewage would need massive expansion. That means the roading being knocked out for years in places to deliver that.There was a survey for Grey Lynn and Herne Bay done post GFC and the provisional estimate as over $4B. Wont be cheaper now.
Perhaps we just need to stop mass importation of people and do it step by step. Means higher rates because the Cohncil is already at its debt limit.
Building up in the middle is way cheaper than building out. Building out appears cheaper because the costs are subsidised
You need to do a development or two to really understand why that video completely misses the point.
And you really need to ask why the two examples they give, Layfette and Auckland, have similar income-generating patterns yet Auckland's median income multiple is nearly 3x Layfettes?
Agreed.
It is important that LVT is combined with more permissive planning rules so that landowners face more competition - meaning supply goes up and prices go down. The extractive part of land prices has to be competed away. Land value taxes should only be on prices that are related to natural and community induced effects - such as, local public infrastructure provision and community size. As Winston Churchill argued: “Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still … he renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived.” This is such a good argument for LVT. The UK could not implement it a century ago because of the House of Lords. NZ faces no such obstacle.
P.S More on the difference between extractive and natural land rents can be read here.
https://www.interest.co.nz/public-policy/114063/brendon-harre-connects-…
It would be interesting to know how bank economists work - are they obliged to do PR media runs pre & post RBNZ decisions... It seems like it's the same cycle that we hear from them.
Clearly banks aren't happy with RBNZ going hard on OCR increases... so what do they do? Get their economist to start talking as DGM's to media to put the heat on RBNZ.
It's just PR and noise at this time from all involved...
Certainly that sounds like the case and they just want the average person to start complaining. Even from the above article it mentions households will have less to spend, which isn't true for people who already own their home mortgage free and for people who don't have a mortgage it means they can spend more in the economy since falling house prices mean they don't have to save every spare dollar then hand it over once to an Australian bank. Imagine the amount of $$ being shed from the economy every year to aussie banks that could be used in the economy with lower house prices.
We are hanging on by a thread. Businesses are trying to maintain their viability and continue to make a profit with huge inflationary pressures however the time is rapidly approaching where Joe Public is going to withdraw discretionary spending on a large scale and that is when the proverbial will hit the fan.
Or you can believe what Robbo is telling us in that there is nothing to see here, one of the strongest most resilient economies in the world and Orr stating "We've got this", so we can sleep easy people.
I'm of the same opinion of China as I am of Russia ... love the people , awesome folk , great culture ...
... shame that their leaders are a bunch of total dropkicks ...
Which , is kinda rich coming from me , considering who some of our leaders are ... Trevor Mallard !
.. I notice , day by day , more & more people not wearing masks in supermarkets , in food courts , out & about ... the " worm has turned " ... folks are over Covid , over the dictates & batshit crazy insanities of this government ...
Fed up to the back teeth with being told what to do ... yes ... change is upon us , thank goodness ...
.. still recovering from Covid19 , and being fully vaxxed & boostered , I'd say the vast minority who're vulnerable ought to take full precautions themselves , and not make onerous demands from the majority ...
It's a nasty little bug : take responsibility for yourself , dont putcha health into my hands !
Wearing a mask to help prevent negative impacts to others is such a small act to have to do, too. I am amazed at how sniveling and selfish some folk are, and feel very sorry for unfortunate folk in retail and hospitality who have to deal with the selfish folk regularly, to the negative impact of their own health.
Great stuff Gummy.
It makes a huge difference to be able to look at peoples faces, smile, and respond to each others expressions.
We've spent way too long glancing sideways at all the potentially infectious mask wearing strangers, and we have seriously underestimated how damaging that has been to our society and our mental health.
No more fear.
I see www.propertyvalue.co.nz have dropped their estimates back ... common Oneroof, you can do it.....
"You're going to see quite a sharp slowdown in consumption in New Zealand. Household budgets are really going to feel the higher interest rates which are coming through now.
...
Wait...what? Bare with me here because I am exceptionally stupid sometimes.
Less than half of New Zealanders pay a mortgage, so the benefits of low rates only accrue to a small segment of society. Everybody purchases consumer goods, so the benefits of low inflation accrue to all of society. Consequently, point-to-point, inflation has a wider impact on spending than mortgage rates.
So most households will be better off if the Reserve Bank raises rates and reduces inflation. Right?
Also, even in a household that has a mortgage, less income is spent servicing their mortgage (I seem to recall it was around 32%) than on consumer goods. So even if you have a mortgage you'd likely be better off with lower inflation than lower interest rates. Right?
... yes , Mr S ... on balance , I'm in madcap Orr's camp ... raise interest rates , crush inflation , reward savers ...
Robbo is pushing down hard on the accelerator ... silly fecker ... buying votes ahead , looking to the 2023 election ... not looking to the best outcome for the nation ... unless you're one of the minority who still believe Labour are the best of the two teams of clowns to run the circus ...
Contrast with Australia. Friday night@SYDNEY airport. Masks mandatory but 10% of folk not wearing them. In the Air NZ lounge it was 50/50. Complete over COVID-19 and Ardern.
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