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ANZ chief economist Sharon Zollner says 'good on' the Reserve Bank for recognising the scale of the inflation problem 'and fronting up to the fact that hoping inflation just goes away is likely to lead to worse outcomes in the end'

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ANZ chief economist Sharon Zollner says 'good on' the Reserve Bank for recognising the scale of the inflation problem 'and fronting up to the fact that hoping inflation just goes away is likely to lead to worse outcomes in the end'
Source: Copyright: pwsr01

The Reserve Bank (RBNZ) deserves kudos "for not shirking their responsibilities" over inflation, the chief economist of the country's largest bank says.

"Good on them for recognising the scale of the inflation problem, and fronting up to the fact that hoping inflation just goes away is likely to lead to worse outcomes in the end," Sharon Zollner says in an ANZ NZ Insight publication.

"They are not wrong that the real cost to the economy – ie people – of losing inflation-targeting credibility would outweigh the cost of accidentally causing a harder landing than necessary," Zollner says amid a detailed crunch of the outlook for the Official Cash Rate in the wake of the RBNZ's record 75 basis point hike of it last week.

She says, however, that the RBNZ's in a "high-stakes game, and the risk of oversteering at this point is absolutely real".

"The uncertainty is enormous, and even if policy is actually set perfectly to achieve the best possible outcome, it won’t look like it in real time – and will never be known after the fact either.

"The fact is, as things stand, the choice is between a bad outcome and a worse one. Inflation targeting currently is like that old joke about asking the old man in the village for directions to the post office. 'Well, son, I wouldn’t start from here'," Zollner said.

She said it would be nice to be able to say with a high degree of certainty "that we know where things are going and what the ‘right’ thing for the RBNZ to do is".

"But that’s just not realistic. We’re in unprecedented times. The RBNZ just delivered its biggest OCR hike ever, at a time when house prices are already down double-digits.'

But Zollner did say "that the risk profile is tilting".

"Though no forecasters have covered themselves in glory in the past year, it has been one-way traffic in terms of forecast revisions. The next 12 months look far more nuanced.

"At some point, given central banks are having to drive looking in the rear-vision mirror at inflation outcomes, odds are they’re going to miss the turn. And the RBNZ is driving faster than most."

Zollner said the RBNZ had "startled all comers" with its hawkishness last week.

The ANZ economists are now forecasting a peak OCR of 5.75%, compared with the RBNZ's own forecast last week of 5.5%. The OCR is currently 4.25%.

Zollner said the RBNZ was aiming to engineer a “shallow” recession next year – "but a controlled burn could jump the fire-break".

"The key vulnerability in the New Zealand economy is the level of house prices – google global housing risks and there you’ll find it, in bright red.

"The good news is that house prices are already down 12% from their peak in an extremely orderly fashion. Very few people have been in a ‘must-sell’ situation and so have been reluctant to accept sharply lower offers, preferring in many cases not to sell.

"The prolonged stand-off between wary buyers and offended sellers has resulted in an ideal adjustment path back towards something more sustainable.

"It’s enough to reduce economic growth, certainly, by changing the maths around new builds, but so far, there’s very little blood on the floor.

"However, the potential exists for nasty feedback loops between the labour market and the housing market. If enough homeowners were to lose their jobs and have to sell at whatever the going price is on the day, house prices could start to gap lower, taking confidence and more jobs with them."

Zollner said on the ANZ's current forecasts (a 22% fall in nominal house prices and strong wage growth), "the real house price index falls an impressive 32% from its peak".

"But to get back to 2010 levels (before the angst about housing affordability really intensified) real house prices would need to fall about another 20%. So our forecast should certainly not be interpreted as a limit on how far things could go."

Zollner said clearly the housing market slowdown is a risk to the labour market and vice versa, "and with every rise in the OCR and mortgage rates, the risk of a harder landing than expected or intended intensifies".

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Not sure about "Kudos". This never-ending game of rates up, rates down is just leading us to an infection that requires amputation or death. 

Each time they play this silly game, the rates go lower, both ways. Game is over once we get to negative rates. 

Good luck convincing younger generations to agree and follow these rules. 

Fiat money is speeding towards a fatal collision. Bankers will happily praise any actions as they continue to make record year on year profits off it. 

People still wonder why younger generations have hopeless thoughts, depression and a bleak outlook for the future. Birth rates consistently declining, loneliness and hopelessness on the rise. 

Property gold mine has come and gone. Time to retire our nations reliance on the giant ponzi. 


Well done, Sharon. You've put it out there in print, ahead of everyone else again.

Zollner said on the ANZ's current forecasts a 22% fall in nominal house prices....real house prices would need to fall about another get back to 2010 levels (before the angst about housing affordability really intensified)

So closer to 40% then. Looks more realistic, and anything else will be a waste of the opportunity that the RBNZ is taking advantage of.


40% fall aligns with discounting future cash flows at higher mortgage rates (i.e. 3% increasing to 8%)


Kudos? really?  Shirking away from their responsibility?  They have a sense of responsibility to begin with????

They are playing games with people's lives.  They are reacting and not doing their job in forecasting out the future and playing the long game.

When you go from 7% interest rates, and then to practically 0%, and then again back to 7% over a span of 2-3 years, you are intently hurting the average joe/jane who works hard and wants to make a good living in NZ. 

What they should get (instead of kudos) is a boot in the rear end out the door.  But of course, we always celebrate incompetence by awarding them another 5 years extension contract.

I feel bad for every NZ'er impacted by their horrible decision making.  Even though I left, my heart is still with NZ along with my friends and family who are there struggling to make ends meet; many who are young families who were FHB's buying a home to live in with a little patch of green garden in the back for their kids.




The one year fixed rate went from 4.7% in October 2017 to the lowest of about 2.5% then back to just over 6% today. Lets not forget the world shut down for two years. Yes RBNZ deserves kudos.


I remember attending BBQs shortly after returning to New Zealand where friends and family were laughing at their million plus dollar mortgages and trying to egg me into participating in the Auckland property bubble.  People were quite literally drunk on debt, validations and stupidity.

"A million dollar mortgage isn't that much these days"
"You can afford it, easily"

... and every other platitude and sound bite under the sun.

I am glad that sanity prevailed for me and I nope-d the hell out.  I recall getting some very strange looks after mentioning that:

a) It's an enormous bubble
b) I'm not interested in spending my life being a vassal of the bank.

For those that were hopelessly addicted to Auckland and couldn't control the FOMO, a serious life lesson is about to be taught.


You literally described my exact experience. I lost 'friends' by arguing that the housing mania was detrimental to NZ society. I'm glad I left NZ.


you know its bad when they start talking about 2010 prices as a possibility



I wonder what is more authoritative: the history of housing bubbles showing the most similar to ours (Ireland and Japan) both dropped over 60%?

Or the fact our DTIs blew out to almost 4x the reasonably well-respected 3 (for the average earner, not borrowers, as only the well-off could afford to borrow)?

Which one would you use for your crystal ball?

Both see us going back well before 2010, in terms of prices - maybe even back to the mid-2000s when the Auckland bubble started to rear its ugly head.

The rot lies very deep here.


ANZ have made record profits due to the RBNZ leaving rates too low too long, of course they will be giving credence to them however they can. Meanwhile there will be some ANZ christmas functions around the country akin to those on the wolf of wall street.


Heavens above - it's the Reserve Bank's job to take inflation seriously. Let's save the kudos until the job is done.


Sharon the ass kisser.



"RBNZ deserves kudos for m̶a̶k̶i̶n̶g̶ ̶u̶s̶ ̶l̶o̶t̶s̶ ̶o̶f̶ ̶m̶o̶n̶e̶y̶  not shirking their responsibilities"

It took them how long to decide inflation wasn't transitory?  Zollner is being duplicitous that RBNZ handled it well for everyone else, they handled it well for the banks only, as they are continuing to do with the FLP still open.  Had they raised earlier, we might have already peaked with the OCR raises as they likely would have controlled inflation better.

How many of us were screaming at the RBNZ that inflation wasn't transitory at all and the fact they couldn't see it (when they had more data than all of us) showed how blind they were and still are.  I guess better late than never.