Surging demand in the service industries after the re-opening of the borders has seen the economy grow at a much faster pace than expected in the September quarter; the Reserve Bank won't be pleased - 75 point rise to OCR in February appears certain

wasn't the 2degrees network established as an IWI settlement ? Hopefully 5 waters doesn't go the same way.

2degrees is owned by  Voyager Australia so its not ours to sell. Same could be said for Spark as its a public company.

If we look at the problems created by the sale of our refinery maybe we should keep essential infrastructure ownership with the crown. What are ACT/National planning to do if they hype themselves into power?

5% in Feb, then they expect only 0.5% increase total during the next four months to it’s peak? I don’t think so. 

Very low unemployment, massive GDP growth, worst government ever?

'Somewhat offsetting these increases were falls in central government expenditure and household consumption.'

Supply side inflation doesn't seem to be affected by falling consumer demand; but maybe rising interest rates are affecting this?

Housing costs have been rising above inflation for years, so isn't it time wages started catching up? Won't be the end of the world if wages and housing gets a re-balance, though unfortunately some are going to suffer, while the banks profits probably increases again.

I suspect the rate increases we have seen to date has mainly only impacted what purchasers can afford to pay. As a result, sales volumes have dropped.

Vested interests, regularly featured in media articles, have been insisting for months that rates will soon start falling and property prices might start rising again soon. This has convinced people to “hold on” to negative yielding investments (or just unaffordable mortgages) on the belief low rates (or price rises) are on the horizon to save them.

The question is where is the capitulation point where sentiment shifts from “I just need to hold out a few months” and instead people start rolling into increasingly unaffordable rates, and start becoming sellers

Joe Wilkes is that you

Pretty much as I've been saying about the economy, right. Have been a voice in the wilderness, that's not a big boast. BTW your post doesn't make sense, conflating strong economy with more liquidations 🤣

I don't know anyone whose incomes are keeping up with CPI. Looks like a very bad thing from where I'm sitting.

It's time to reconsider the preconceived idea that deflation is bad.

Goods and services should get naturally cheaper as productivity increases.

Relevant article: https://www.economist.com/finance-and-economics/2022/04/23/does-high-in…

I think on 2023, the RBNZ will accept to live with higher inflation and increase its target inflation higher.

The increase in income was to make up for the previous deficit. For other costs to then increase, then you are still always that much behind, even though both income and CPI keep increasing at the same rate.

Inflation is theft..but if you are ok with that all good?

As much as I would like that, I don't see the OCR getting there. 75bps in Feb see us at 5.0% and you can be sure the economy will start to turn south by the second quarter of next year. The moment the data starts to turn, the RBNZ go on hold. I see a peak of between 5.0% and 5.5%. 

Core inflation in the US looks to have already peaked and next year the global macro-economic outlook is ugly.

The housing market is toast either way. The damage has already been done and as long as the RBNZ don't whipsaw themselves into a sharp easing cycle at the first sign of economic pain (we can't rule that out by the way) then another 20% decline next year is almost inevitable. At that point there will have been so much pain in the property market that buyers will be very cautious and you could easily see another 5% or so decline over 2024. 

Amazing the reserve bank doesnt have a better estimate of the effect of %OCR increases. Surely they would have better data.

One suspects that there are a ton of cashed up people, with huge equity or $millions in the bank and safe jobs or pensions who are spending up big, for these peeps the OCR raises and inflation has probably barely registered on their budget.

Meanwhile  those who bought houses late, the poor, young families with mortgages or big food bills, and leveraged up investors .. these people  have already stopped spending are unloading houses cheap and will be getting more and more hammered and depressed with every murmur of a raise or food price hike.

I know a couple tradies/builders who have back to back work to Q2/Q3 2023.  They arent fussed..  new rangers on back order.

The way to stop it was 12-24 months ago by raising the ocr and stopping the house market bullet train that is now gonna derail with the whole economy

Completely agree. This data is just too important for such a lag. 

Ridiculous right?

Maybe we could use another lockdown to slow down the services growth?

We have 85%+ mortgages on fixed rate.

USA has <9% òn fixed. Australia 60%ish on fixed (might need updating).

So every time we raise the OCR it affects maybe 1 in 36 peeps with a mortgage that month. So it has 1/30th ish the impact it does in the US and maybe 1/2 the impact it has in aus.

Hence if we raise at the same rate as those countries then measure the impact much later than they do... guess what we actually are way behind them in stopping the inflation train and then act surprised.

At the same time we will for sure overshoot everyone else on the required ocr..  as we need a much higher ocr to have an impact in the short to medium term. So we will kill our housing market and with it our economy.

Better for RBNZ to insist on more floating rates so they have some control.

That gap to the Feb meeting does look really long right now doesn't it. They do have the power to call another one, though I rather doubt they will.

Carnage from about May ‘23 is what I have been saying since early this year

Not if you’re a House Hunter…it’ll get better by the month 

Yes, I think that's right.  New Zealand will increasingly become seen as a profitable risk play, with interest rates likely to be well elevated over the next couple of years. Mrs Watanabe and her boyfriend, the Belgian dentist are no doubt contacting their broker as we speak. 

Exactly, all that growth during the Key-English years, was basically zero when you calculate it per capita

https://datacommons.org/tools/timeline#place=country%2FNZL&statsVar=Amo…

Which is where the wage demands of 20% will come from. They have to with an employment market is such rude health.

This thing is off and running now, and short of a much bigger recession that we've been asked to prepare for, then expect industrial disruption to get worse.

Great comment.  The lag between ocr increase and full effect is very long.  So far only the full effect of early timid 2021 increases felt, later ones only partially.  With 2/3 of properties mortgaged and 2 year fixed typical, half of mortgage holders haven’t seen any effect yet; the other half only partially. Even if RBNZ make no further raises the greatest effect of existing raises is still to come.  But there will be more raises, so mortgage stress will continue increasing for at least another 2 years, and property market lagging that further.  By the time the house price falls stop in 24/25 banks will carry substantial non performing loan portfolios and be extremely cautious of lending.  

The definition of a "technical recession" can be two quarters of negative GDP, but it can take many forms. Such a strong jobs market, for example, is very unusual during a recession. Agree that MSM reporting is horrific when it comes to finance!

It would be useful if it worked. It certainly didn't cope well with anything that covid threw at it. To be fair, those circumstances were perhaps exceptional, but then arguably so are these...

I'm kinda thinking if JK was in charge,he would be saying it is a good problem,a successful economy and folk would be slapping him on the back...hard to argue unless you are heavily leveraged...full employment,economy growing,exports rising,house prices falling...

Disclaimer at the bottom. lol

He is worse than Gartman and that is saying a lot.

NZ economists and bankers seem to base their predictions on the recent past. They don't seem to read the live data or look for leading indicators. Hence Orr pumping the housing market for too long and then putting the brakes on too hard and too late. Inflation has been high but all the indicators I see would suggest it has peaked and is falling rapidly. Container rates are now below pre-pandemic levels and inventories are high. I think we will see big price drops across a range of goods by Easter.

That's pretty much what Gideon Gono said.

What will you do if the CPI target is upped? So will everybody else...and before you know it, bread will be $50 a loaf - that is, if there's any left on the shelf at Countdown.

Some of us hate Roulette, so when we got big wins in Nov 21 we took our chips off the table, we cannot lose now as we have no bets on.  

We have moved over to the Blackjack table and have been counting cards, we think that the HOUSE may be in for a bit of a fall here.

I have sat on enough trading floors for long enough to know, if you are not convinced then don't place a bet.

Good luck on Red here,   I think Blue has a chance.