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The Reserve Bank cut rates as expected but surprised the markets with a relatively 'hawkish' view of any future reductions in the OCR

Economy / news
The Reserve Bank cut rates as expected but surprised the markets with a relatively 'hawkish' view of any future reductions in the OCR
[updated]
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Source: 123rf.com

The Reserve Bank (RBNZ) has cut the Official Cash Rate (OCR) to 4.25%, down from 4.75%.

It means the RBNZ has now trimmed the OCR by 125 basis points since August, taking it down from the peak level of 5.50% it was at for over a year. Banks have been similarly trimming their mortgage and deposit rates. ANZ moved its rates ahead of Wednesday's decision and more falls from other banks are likely to quickly follow.

The RBNZ said the average rate on outstanding mortgages has now peaked at 6.4% and is expected to decline to 5.8% over the next 12 months as borrowers refix their mortgage interest rates at lower levels in line with a falling OCR.

Wednesday's review of the OCR is the last for 2024, with the next one due on February 19 next year. The Kiwi dollar rose immediately after the announcement from US58.3c to US58.7c.

Westpac senior market strategist Imre Speizer said the announcement from the RBNZ was a "slightly hawkish" surprise for markets. He said the RBNZ had not lowered its OCR forecasts as much as expected in its newly published Monetary Policy Statement. He said immediately after the announcement the two-year swap rate was up 10 basis points to 3.71% and the 10 year swap was up 7bp to 4.15%.

The new OCR forecasts are the first ones since the MPS in August. The RBNZ latest forecasts suggest that the next cut in February may be just a 25 point cut, while the OCR is forecast to be around 3.5% by the end of next year. 

By the end of the forecast period in December 2027 the OCR is forecast to be a little over 3% - and that's actually slightly higher than the terminal rate forecast in the previous MPS. 

A 'hawkish' announcement

Kiwibank chief economist Jarrod Kerr also described the announcement as "hawkish" and said as a result of it "our view has been tweaked, a little".

"More cuts are required. And we need the cash rate below 4% asap. We advocate another 50bp move in February… but we now expect a 25bp move.

"And we’ve lifted our forecast terminal rate to 3%, no longer 2.5%. We've made these changes on the back of the RBNZ's tweaks. But we note that the RBNZ may be too hawkish, again (as they were in May)," Kerr said.

"The RBNZ is more comfortable than we are in the economic scarring inflicted and recovery. We think the RBNZ may be moving in the wrong direction, as they did in May. Time will tell. And we have a lot of time until their next decision in February," Kerr said.

Inflation as measured by the Consumers Price Index (CPI) dropped to an annual rate of 2.2% for the September quarter, down from 3.3% in the June quarter. The RBNZ has a target of maintaining inflation between 1% and 3%, with an explicit goal of 2%. The actual rate of inflation had been outside the targeted range since mid-2021.

According to the notes from the meeting of the RBNZ's Monetary Policy Committee, "measures of core inflation are converging on the target midpoint, and inflation expectations at all horizons are close to the target midpoint".

'Inflation pressures will abate'

"With significant spare productive capacity expected in the economy over the next 12 months, the Committee is confident that remaining inflation pressures will abate. Feedback from recent surveys and business visits suggest domestic price and wage setting behaviours are becoming consistent with inflation remaining sustainably at target."

The Committee said it discussed two key uncertainties to the near-term outlook.

"While domestic price setting behaviour is now more in line with the Committee’s inflation objective, members discussed uncertainty about the persistence of some components of inflation. The Committee also noted that, while lower interest rates are expected to underpin a recovery in the domestic economy, the exact speed and timing of the recovery is subject to uncertainty." 

The Committee said geopolitical risks and climate-related energy and food risks pose uncertainty over the medium term.

"There may be higher relative price volatility and more unpredictability in aggregate inflation. The Committee agreed that having consumer price inflation close to the middle of its target band puts it in the best position to respond to any shocks to inflation. 

"If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year." 

This is the statement from the Reserve Bank:

The Monetary Policy Committee today agreed to reduce the Official Cash Rate by 50 basis points to 4.25 percent. 

Annual consumer price inflation has declined and is now close to the midpoint of the Monetary Policy Committee’s 1 to 3 percent target band. Inflation expectations are also close to target and core inflation is converging to the midpoint. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year. 

Economic activity in New Zealand remains subdued and output continues to be below its potential. With excess productive capacity in the economy, inflation pressures have eased. Domestic price and wage setting behaviours are becoming consistent with inflation remaining near the target midpoint. The price of imports has fallen, also contributing to lower headline inflation. 

Economic growth is expected to recover during 2025, as lower interest rates encourage investment and other spending. Employment growth is expected to remain weak until mid-2025 and, for some, financial stress will take time to ease. 

Global economic growth is expected to remain subdued in the near term. Geopolitical conditions and policy uncertainty could contribute to increased economic and inflation volatility over the medium term. 

The Monetary Policy Committee agreed that having consumer price inflation close to the middle of its target band puts it in the best position to respond to any shocks to inflation. 

Summary of Monetary Policy Committee meeting:

Consumer price inflation is sustainably within the Monetary Policy Committee’s 1 to 3 percent target range, and measures of core inflation are converging on the midpoint. Restrictive monetary policy and subdued economic activity overseas have slowed domestic demand. Lower import prices have also contributed to lower inflation. Expectations of future inflation, the pricing intentions of firms, and spare productive capacity are consistent with the inflation target being sustainably achieved. This provides the context and the confidence for the Committee to further ease monetary policy restraint.

Global economic activity expected to remain subdued

Economic growth rates in the US and China are expected to slow over the year ahead, while the growth outlook for Europe remains sluggish. Headline inflation is close to target in most advanced countries, but some persistence in services inflation remains. Central banks are reducing interest rates, although the pace of monetary policy easing varies across countries due to differences in economic conditions. Global sovereign debt levels have increased markedly since 2020 and continue to expand. This creates risks of higher global bond yields and risk premia.

Significant spare productive capacity expected over the next year

Domestic economic activity remains below trend, as a result of weakness in demand for durable goods consumption and investment. This has been reflected in falling activity in interest rate sensitive sectors such as construction, manufacturing, and retail trade. In contrast, some services sectors have continued to grow.

Considerable spare productive capacity remains in the economy, although this is expected to steadily reduce over the projection period. Consistent with feedback from business visits, high frequency indicators suggest that the economy has stabilised in recent months. Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery. 

The Committee noted that the projections incorporate the fiscal assumptions from the 2024 Budget Economic and Fiscal Update.

Labour market conditions easing

Wage growth is slowing, consistent with inflation returning to the target midpoint. Employment levels and job vacancies have declined, reflecting subdued economic activity. Unemployment is expected to continue rising in the near term since the labour market typically takes longer to recover than output. Net immigration to New Zealand has reduced significantly from high rates over recent history. The rate of migrant arrivals has slowed, and departures of New Zealanders have increased, partly in response to subdued labour market conditions relative to Australia.

Lower OCR passing through to mortgage rates

Market interest rates have declined in response to actual and expected OCR reductions. The decline in mortgage rates has been less than for wholesale rates, in part reflecting changes in the composition and cost of bank funding. The average rate on outstanding mortgages has now peaked at 6.4 percent and is expected to decline to 5.8 percent over the next 12 months as borrowers refix their mortgage interest rates at lower levels in line with a falling OCR. 

No trade-off between meeting inflation objectives and financial stability

The Committee noted the findings of the Bank’s November 2024 Financial Stability Report. Some households and businesses are experiencing financial stress. While non-performing loans remain low compared to past recessions, further financial stress is likely to emerge even as the economy recovers. The banking system remains well capitalised and in a strong financial position to support customers experiencing distress. The Committee agreed that there is currently no material trade-off between meeting inflation objectives and maintaining financial stability.

Inflation is expected to remain near the midpoint

Headline consumer price inflation has declined to close to the target midpoint, measures of core inflation are converging on the target midpoint, and inflation expectations at all horizons are close to the target midpoint. With significant spare productive capacity expected in the economy over the next 12 months, the Committee is confident that remaining inflation pressures will abate. Feedback from recent surveys and business visits suggest domestic price and wage setting behaviours are becoming consistent with inflation remaining sustainably at target.

There are near-term risks to the economic outlook

The Committee discussed two key uncertainties to the near-term outlook. While domestic price setting behaviour is now more in line with the Committee’s inflation objective, members discussed uncertainty about the persistence of some components of inflation. The Committee also noted that, while lower interest rates are expected to underpin a recovery in the domestic economy, the exact speed and timing of the recovery is subject to uncertainty. 

There is a risk of greater inflation volatility over the medium term

Geopolitical risks and climate-related energy and food risks pose uncertainty over the medium term. There may be higher relative price volatility and more unpredictability in aggregate inflation. The Committee agreed that having consumer price inflation close to the middle of its target band puts it in the best position to respond to any shocks to inflation. 

The Committee agreed to lower the OCR

With headline inflation close to the midpoint and measures of core inflation converging on the midpoint, the Committee has more confidence to continue removing monetary policy restraint. The Committee agreed that a 50 basis point cut is consistent with their mandate of maintaining low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates and the exchange rate.

If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year. 

On Wednesday 27 November the Committee reached a consensus to lower the Official Cash Rate by 50 basis points to 4.25 percent.

The November Monetary Policy Statement is here.

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170 Comments

Inflation is still 4+% right? I don't understand the reasoning to cut 50bp, it feels like a V shaped economy - those without debt and have jobs are having a great time, and those with debt or have lost jobs are having a very rough time.  

 

EDIT: Sorry I misunderstood the stats between CPI and non-tradables, leaving original comment as all comments below refer to it.

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Ah thanks, got very confused for a solid hour.

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CPI is 2.2%. And most people have debt, homeowners, business owners, etc. Those without debt will not have a good time if their job is gone because their boss has debt. Rates need to be cut.

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Actually John you might be surprised to know that only 1/3 of NZ households have mortgages.

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Yes what I was meant to say was people are tied to debt one way or the other since it drives our economy. Since most businesses have loans, we can assume most people will be affected once rates are high enough to shut those businesses down as they lose their jobs. 

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Non-Tradeables is 4.9%

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And most of that is in things that won't be affected (much)  by Interest rate policy.  Rates, Insurance, Electricity.

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Domestic inflation is 4.9%.  Its only deflation in imported goods that is bringing down the official statistic - which is meaningless to most households.  And Trump will be taking care of that.

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To calculate CPI we select a fixed 'basket' of goods and services. We choose the items and determine their relative importance based on spending patterns. The items in the CPI basket represent how New Zealand households spend their money.

https://www.stats.govt.nz/topics/consumers-price-index#:~:text=To%20cal….

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I wonder if it takes onto account shrinkflation. If  chocolate bar is decreasing is size but stays the same price,  then it may not show in the figures,  but you are getting less for your money. Same goes with cutting services,  but paying the same price. 

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Stats aren't that dumb.  It does take shrinkflation into account.

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Do they know how much each and every product has shrunk??? I'd imagine this is overlooked in stats but it's only a reckon'

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Again, they aren't that dumb.  The prices for food, groceries etc are taken back to a $/kg or $/litre value.   

Its changes in quality that they probably can't track, like when a 1L bottle budget bleach drops the concentration of sodium hypochlorite (ie, more water, less bleach).    Maybe they can for simple stuff like bleach when its written on the label, but there is no way they could do it for complex food items.

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I wonder if the CPI weightings get reweighted as soon as spending patterns change? 

The reason I said imported inflation is meaningless to most households is because most of those items are entirely discretionary spending.  You can choose not to buy a $3000 new iphone and make do with your old one for another year, or you can choose to buy a $100 Oppo instead.  You can choose to not take an overseas holiday.  You cant choose to avoid paying rent, medical, electricity, mobile, broadband, insurance, rates, house repairs, and you have no ability to substitute them for cheaper items.  Households are held hostage to domestic inflation - which is 4.9% so everyone feels it.  Those that can still afford to can spend freely on new clothes, cars, holidays etc - so interest rates are now dictated by those who are well off and still spending not those who are forced to cut back.

And as high domestic inflation on those non-discretionary goods and services outpaces wage increases, households are going to get poorer and poorer over time.  

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Gas is imported, and it remains an essential spend for most

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"Inflation is still 4+% right?"

Yep, it's currently at 50%

 

 

 

 

..... in Turkey

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Great time for a trip there then! Great food and culture, diverse landscapes and rich history, intricately designed goods to purchase, and you get to contribute to their economy while you're at it.

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Interesting (pun intended), I was there in September, interesting country indeed.  I didn't realise Istanbul was Europe's biggest city with 17 million inhabitants!

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It would be if it was in Europe...

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Half of it is

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SND, this from Google:

Istanbul, the fifth largest city in the world by population, is considered European, yet it occupies two different continents, Europe and Asia

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Indeed, it amazed me that on a large motorway it still took an hour on the bus to get in from Atatürk Airport through the urban mass with no stops.

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Yvil looks like you were right at .5 percent.

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"those with debt or have lost jobs are having a very rough time"

I'd adjust that slightly - those with debt AND have lost jobs are having a very rough time - and that would be true at any stage of the cycle. 

Those with jobs AND have debt have struggled for sometime and will be looking forward to some relief.

Those without debt AND without jobs (retirees) are facing a reduction in their income.

 

You cant please all of the people all of the time.  The worst aspect of this is the people who were responsible for driving us into a recession aren't accountable.  

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"the people who were responsible for driving us into a recession aren't accountable"

 

I agree, but who is going to hold the inadequate Chinese public health system to account when they are our largest trading partner?

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There are two measures of inflation.

1. RBNZ's CPI ... This is the one we hear so much about. It is not a real measure for most kiwis. Further, the RBNZ introduces b.s. by introducing statistically unsound measures like 'domestic' and 'imported', i.e. non-tradeable and tradable.

2. Stat's NZ's CPI ... Called the HLPI. This is a better measure. (It includes the bollocks the RBNZ gets to shaft the average Kiwi with.)

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This is inaccurate.

There is one CPI, produced by StatsNZ. This includes tradeables and non-tradeable, although stats don't labour the point. 

Stats also produces the HLPI, which has different baskets of goods than the CPI and allows for different income ranges.

RBNZ uses stats CPI, but also its own sectoral factoral model. They do make a bigger deal of tradeables and non-tradeables.

There are also other inflation types indices for various sectors

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Thank you for confirming what I just said was accurate.

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Add small business owners to the unfortunates list. At this rate the only places to shop by mid next year will be your local service station, supermarket or K-Mart! 

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Not a 'V' but rather a 'K'....and the bottom leg is much bigger than the top

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Slow to react, slow to respond.
ToThePlan

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[ Please refrain from personal comments. Stick to the policy issues. Ed ]

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Hey asking someone to change one number every 3 months and in between patting yourself on the back for ruining the economy is a tough job

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Too conservative in my opinion - NZ is suffering

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NZ is suffering under a pile of poorly invested debt, incompetent leaders and ignorance.

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Would you class the RBNZ as "incompetent leaders"?

Surely it is their fault that "NZ is suffering under a pile of poorly invested debt"?

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I think the tax system also bares quite a lot of responsibility for our poorly invested unproductive debt, and that isn't the RBNZ

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Concur. But the tax system has been fck up for years. Recent RBNZ policy took just 4 years to screw the pooch beyond recognition.

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"Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery."

Hahaha, dream on. 

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the exact speed and timing of the recovery is subject to uncertainty. 

If it even arrives during  Mr Orr's term.

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Keep hearing this all the time - that things will be better in XX months/years time?

But why would they be?

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Cutting rates working well in China......

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Come on rastus, I thought you'd know that even if you only grow by 50c for each dollar of debt added, you're still growing!

Thank goodness we're leaving behind the crazy high interest rates that limited how much debt we could take on for, ahem, productive purposes.

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NZDUSD up around 0.7%. Wonder why. System 1 chicken bones broken?

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Because they aren't going to cut rates nearly as much next year as the market had priced in. Swaps are sharply higher, as is the Kiwi. 

Better get comfortable with 4% cash for a while.

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Too True.

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Thanks bro. Strong sense there. 

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Swaps are sharply higher

 

Which swaps exactly? Nothing here indicates sharply higher swap rates:

https://www.interest.co.nz/charts/interest-rates/swap-rates

 

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They aren't live prices. 1y is currently 3.95% and it is showing 3.82% on that page.

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TK

Better get comfortable with 4% cash for a while.

Yep, until Feb 2025.

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They will cut in Feb(they will have no choice as unemployment and Gov policy force their hand)....all they are trying to do is keep a lid on RE inflation.

Psychology ...the only (positive?) tool in the box.

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Spot on Frank

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Yet they were also equally responsible for RE inflation in the first place. Captured by the banks and financial system. Borrow and spend. 

Chickens coming home to roost after decades of BS monetary policy.

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Quelle surprise!  Not.

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I am shocked I tell you. Shocked.

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10 points for effort 😁 

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"the unemployment rate projected to increase further to a peak of 5.2 percent in the March 2025 quarter. The unemployment rate is then assumed to steadily decline in line with the forecast recovery in GDP growth."

Looking at the graph that goes along with that statement, that is actually a lower peak unemployment rate than they predicted at the Aug MPS. I have a feeling we are going to blow well past 5.2% unemployment!

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Ha ha to that..

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Anyone notice how '7 house luxon' just became '4house luxon'

Obviously he is expecting a surge in house prices over the next few years  😀 

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They originally forecast 5% so they really have no idea. It's dollar-each-way thinking.

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This from Australia .... Now imagine how much worse it is in NZ and how much longer it will be before NZ households recover.

Australia’s living standards are unlikely to return to the levels they were before the inflation crisis hit until well beyond 2026, and possibly not until the end of the decade, with the household pain caused by the price shock set to continue for years to come.
Real household disposable income will recover only half the ground lost during the crisis by 2026, with the likelihood that households will continue to remain worse off overall even after inflation has been returned to the central bank’s target band.
Analysis of the RBA’s own forecasts contained in its November statement on monetary policy show real household income per capita will rise by 1.2 per cent in 2025 and then 1.1 per cent in 2026 with a forecast increase of 1.3 per cent in the latest December quarter. It suggests a recovery in living standards has begun but on the back of the sharpest decline since World War II.
The Coalition has used the last parliamentary sitting week of the year to zero in on the decline, after The Australian last week revealed that living standards over the past two years had fallen more sharply than any other period since 1959, including the four technical recessions to have occurred since then.

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But I heard the PM say we will get back to normal...... soon

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One in five Australian renters are living without essential items and in poverty, peak body study finds

One in five Australian renters are living without essential items and in poverty, peak body study finds - ABC News

 

Inflation rate holds steady in the year to October, keeping price rises at their lowest level since July 2021

Inflation rate holds steady in the year to October, keeping price rises at their lowest level since July 2021 - ABC News 

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"One in five Australian renters are living without essential items. 22% of those live in poverty" as per the article shared.

Some of those Kiwis who are immigrating to Aus for a better life could just get added to those Australian statistics. Still, the grass will always "look greener" on the other side.

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But they'll be employed presumably, so there's that upside.

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Great info - someone over in Aus saying how it actually is.

In NZ its all good apparently from this point forward, I disagree with this simplistic unrealistic approach and as 2025 pans out time will tell as the numbers don't lie

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What exactly are these "living standards" we're expecting to return to?

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Meanwhile China warns New Zealand from joining AUKUS.

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I have no idea why we would want to join AUKUS with Trump in charge in the US. I suspect many in Aus will be getting cold feet too!

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I had cold feet with Biden in charge!  

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That shows how naive you are. If things heat up we would be an absolute sitting duck for the Chinese and their allies to control. Our 2 broken waka’s wouldn’t put up much defence and we’d be screaming for Uncle Sam and co to come and help. 

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Whether we're in the agreement or not, there's no scenario in the current climate where China or any country would invade NZ or be 'allowed' to invade NZ. If the world gets to that state, nuclear war is almost a certainty.

Infinitely more likely is being dragged into conflicts like Iraq and Afghanistan.

What we need to focus on is protecting our EEZ against soft invasion from illegal fleets. 

NZ's only meaningful contribution to any form of defense pact is in reputation. If there's quid pro quo in it economically, why not, but it should be high.

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I'm sure people would have said the same about Ukraine a few years ago yet here we are

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That's so funny. (You weren't serious, right?)

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Easy to not understand that the years of relative peace (for most) was due to the nuclear threat and one big boy on the block calling the shots.

Like it or not, without being mates with the big fella, we are helpless.

Human history is littered with slaughter, rape and pillage.

Being a peacenik is no defence.

 

 

 

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Your proposition falls apart (and becomes supposition) when you take on the reality. I.e. There has been no "one big boy on the block" for may years. There are many.

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I don't think so. US has been the global superpower since ww2. It. has around 750 bases worldwide, no other nation comes close to this level of global military infrastructure. Not as dominate as they were, but a big enough boy to still dominate ...easily.

 

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I am one of the few on this site who would have been around and genuinely terrified by the thought that we were in for a nuclear war. 

It was late October 1962 and I was in the 4th form of my district high-school possibly doing end-of-the-year exams and looking forward to the summer holidays.

From mid-October that year the Cuban Missile crisis started dominating the news.  The crisis quickly developed into a very dangerous stand-off between the USA and Russia. 

It happened that President Castro of communist Cuba was a great friend of Russia and was happy to allow Russia to site missiles aimed at the USA on Cuban soil.

Russia, under Khrushchev, was sending ship-loads of missiles to Cuba which is located very close to mainland USA.  Kennedy and White House advisors were in panic mode with the result that Kennedy decided to set up a naval blockade to prevent these Russian ships reaching Cuba.

This was the tense situation in late October as the USA naval ships and the Russian naval ships carrying missiles confronted each other in the high seas off Cuba.  The whole world was on tenterhooks for a few days hoping for a peaceful outcome but nevertheless realizing that a nuclear war could ensue at any moment.

Meanwhile, I had been closely following events and I was terrified.  I went to bed one night during this stand-off only to be woken up in the early hours of the morning by a deep rumbling sound which I immediately took to be nuclear bombs exploding.  I gathered my nerves to pull the curtains aside expecting to see the huge fireballs of nuclear bombs exploding nearby.

To my relief I then realized that the loud rumbling sounds were only the sounds of thunder from a passing thunderstorm.  

But my panicked reactions had been very real and frightening.

The next morning I heard on the news that Khrushchev had backed down on the promise from Kennedy to remove all missiles that were aimed at Russia from Turkey.

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And it's suggested that bombing Hiroshima and Nagasaki was ultimately a show of power to Russia.

Little boys and their toys and little egos.

M.A.D is a suitable acronym.

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As an addendum to the above recollection, I recently watched a documentary on the Sky History channel where the Russian captain of a nuclear submarine involved in that naval stand-off was interviewed, obviously some decades ago. He clearly remembered that during the stand-off his submarine lost all communications with the Russian commander who was in charge of the Russian side. 

He said that during this absence of contact he had to make a judgement call as to whether he would fire his nuclear armament or surface.  He had thought that the communication breakdown might have been the result of a conflict already underway and his initial thought was that he should fire off his nuclear armament.  In the end, he decided to surface and history tells us that this was the right decision.

So, this is how close the world has come to a nuclear war...just one man's decision on whether to surface his submarine or fire his nuclear weapons.

 

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Much later, but in the early 80s, as a 11-12 year old, I was also terrified. I had a teacher who was actively involved in the anti-nuclear movement and some of the stuff he talked about and showed set off a year or two where I often had nightmares. I also once awoke in the night to a thunderstorm thinking it might be a far away nuke explosion. The early 80s tension probably wasn’t too far off the Cuban Missile Crisis.

I think it’s terrible that nuclear warfare is once again something that is more than a very small probability.

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20 years later but I think nuclear testing at Mururoa was prevalent at the time.

https://en.m.wikipedia.org/wiki/Cuban_Missile_Crisis

Is worth a read, especially the US "terrorist" activities leading up to the crisis. The US and their "fears", and their foreign policy, would appear to be the instigators in many situations.

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streetwise,

I remember it well. In 1961 our school corps had a civil defense platoon and we were shown diagrams of the blast areas for various bombs. We were shown how to make areas of a house 'blastproof' and other useless information. That was in Scotland. 

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Really? Then how come when other nuclear armed states start rattling their sabers the 'big boy' get's all coy and shy? 

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In one framing, it is easy to see the 750+ American military bases as being a strength which cements the USA's position as the sole global superpower. In another framing it is easy to see those same bases as having become a critical weakness, exposing unmanageable vulnerabilities around the world and draining the life blood of an economically struggling continental mainland. Time will tell which it is.  

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Much like the Roman Empire was unable to maintain their distant strongholds?

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Military industrial complex in action. How have they fared in the actual conflicts that they invited themselves to? 

Grounds for claiming they'd be better off without all that military expense, but those nuclear arms aren't going to proliferate themselves!

A foreign enemy is good campaign fodder too, self fulfilling prophecy stuff 

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It's interesting that the RBA isn't planning to cut rates until May next year. Their cash rate is 4.35%, while ours is slightly lower at 4.25%. Our 10-year bonds are pretty close, both around 4.4%. Can the RBNZ cut below our 10-year bond rate and will in make a difference to mortgage rates? The NZ10Y has already climbed 7bps since the rate cut.

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Short end can be lower but its difficult for the main banks to fund as there are so few term deposits here vs Mortgages in value, so most banks fund longer offshore from Europe or USA and swap back into kiwi, thus international funding markets play a bigger part of 1 year plus mortgage rates.

The RBNZ could print cash again and run a funding for xmas campaign...

 

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NZ banks have 457b on deposit. Of that 224b in TD's ad 109b in savings accounts.

So more than enough to 100% fund the 271b of owner occupied lending and personal consumer lending.

The 277b of business lending (that includes property investor "businesses") should be the sector that is exposed to offshore lending costs.

If Aunt Murtle is getting 4.5% for her 2 year TD. Why can we have a mortgage for 5.5% fixed for 2 years?

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0.6c rise in NZD/AUD following RBNZ announcement 

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"The NZ10Y has already climbed 7bps since the rate cut."

When bond yields rise it means the underlying 'face value' of the bond has fallen.

This could be vote of no confidence in the bonds being sold. One could say that holders of the 10yr bond don't expect things to get better. Ergo, the yield goes up as the risk has gone up.

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Prepare for some pretty lukewarm Black Friday spending data.

What is likely is that if anything, the Christmas rush is cannabilised and we end up with a moderate BF but extremely quiet trading in December. There simply won't be new spending that wasn't already factored in people's plans, which was to not spend much at all. 

Realistically it is too little, too late. The busiest hospo and retail time of the year is coming and is likely to be a bust. How many businesses will have been holding out for lower rates and a bigger spend up, who now face difficult operating decisions?  

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I have spent a bit on Stihl kit, but I have been waiting 6 months for the black Friday pricing.

Only Temu etc doing better this year.

2025 going to bring a lot of retail into liquidation, the rents are simply too high, and in many spaces online is eating their lunch, even domestically before you shop temu

 

 

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Mind they don't crank the price before discounting. I keep hearing ads on the radio saying very quickly "discounts are off the black friday pricing" - short for "we will up the price by 30% to discount by 25% and call it a deal"

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I caught Mitre 10 doing that with their 25% off Resene sale.  Prices after the 25% discount was higher than the full retail price the day before.  I only caught them out because I had to return an item and swap it for something else.  It always pays to check, especially before holidays or other expected sale periods.

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It's interesting yesterday you seemed to be going in to bat for the idea of Landlords using software to collude with setting rents, yet when you're personally impacted by dodgy pricing tactics from paint retailers it's bad?  

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Because amalgamating rental data and telling people what the "market rent" is, is not colluding to set rents.  If it was, then Tenancy Services which does exactly that, is also a landlord price fixing collusion service.  Retailers jacking up prices so they can offer fake discounts is completely different.

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Tenancy Services is not price fixing collusion service.  How does telling landlords what last year's average rent was send a universal pricing signal to the magnitude of next year's increase?  If they posted what they think next year's rent should be and it was +10% on last years data, questions about their ethical and regulatory standing would be raised.  

Landlords subscribing to an app (if RealPage existed in NZ) that effectively shares with other landlords what next year's rent increase should be is price fixing.  It's bizarre that you cannot seem to differentiate between these 2 types of information, but respectfully you do have a habit of commenting some mildly illogical things on here at times.  

As for your paint issue, yes it's deceptive conduct however using your ethical stance there's no wrong doing.  A price is merely an invitation to treat.  

 

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Because Tenancy Services telling landlords what the "market rent" is, calculated over the last six months of new tenancy rent data, is telling them what they are allowed to charge.  Any deviation from that market rent is considered a breach of the Residential Tenancies Act.  So Tenancy Services is not telling landlords what last years rent is - its telling them what they are allowed to charge today.  

"Market rent is the amount a landlord might reasonably expect to receive, and a tenant might reasonably expect to pay, for a tenancy. It needs to be similar to the rent charged for similar properties in similar areas.

If a landlord charges significantly higher rent than the market rent, a tenant can apply to the Tenancy Tribunal to ask for the rent to be reduced."

The fact that you dont understand that TS market rent suggestions are not suggestions but is a de facto setting of the rents for all landlords across the country, means you dont understand how the tenancy legal system works in this country.  It is not me being illogical.   

If a new tenancy rent is reset at the current market rent, of course that rent is going to be higher than what the rent was previously for that property. Especially in a high inflation period when rents are rocketing due to higher interest and other property costs.  Unless rents are consistently dropping across the entire market, rents will always go up as older tenancies reset to updated rent agreements.  If this is "price fixing" then TS is guilty of it. 

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They're telling landlords and tenants what the current market rent is, so you don't have (for example) scenarios where individual landlords think they can increase rents exorbitantly.  You've answered it yourself, if anything Tenancy Services prevents landlords from colluding to jack up the rent because it provides a snapshot of what the current market rate is and provides tenants with recourse if the rent is excessive.  If the NZPIF members  colluded to all jack up rents by 50%, they couldn't because of the Tenancy Services data.  

It's not price fixing at all, otherwise we've got a whole set of other problems if you've ever looked at the Rawlinsons New Zealand Construction Handbook.  But again, the big differentiation is which entities have the motivation to derive a profit from the data they're sharing.  

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"Prepare for some pretty lukewarm Black Friday spending data."

I'd love to agree with you, GV 27. Alas, the great unwashed have a bad habit of seeing lower rates as a license to spend, spend, spend. To be honest, I have no idea how people will spend this Christmas.

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I’m going to spend this Christmas day drinking, same as most other days of the year.

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Black Friday has overtaken Boxing Day sales for some years now.  Most people use it to do their Xmas shopping now.  My family don't even bother with Xmas presents nowadays - other than for the children.  We get together for Xmas lunch, and a few drinks, and that's it.  Then everyone heads off on holiday.   Black Friday I might buy myself something if the price is right (hint hint Dyson!)

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Was at a function tonight in a place that was about 30-40% full. Would have been bursting at the seams three years ago

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The over leveraged loan topper uppers will be happy. The people hurting from inflation driven pain will not, as they now expect more of that. That said the leverage speculation sector (construction) is all engines stop. The underlying issues is excessive land prices and inflation fueled construction costs. If inflation takes off again this will be viewed as another mistake, but that is Orr's track record.

The safe employment and low debt are all happy, but that is a result of their actions.

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Yep 100%. I got 7 figures I need to roll over in 2 weeks and I was pricing in getting rates around 6% at time of refix when I was looking mid year. If I end up closer to 5% on the 11th of Dec when I fix, I'll be pretty chuffed. For every 0.1% drop in rate, that's near on $2k a year in my pocket. So 50 basis is $10k cash in my pocket. #loantopperupperhappy TimeToParty

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Wouldn’t you use those ‘savings’ to pay down debt? I’m continually astounded by those people (not suggesting you) who are mortgaged to the hilt eating out, and generally buying crap. 

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Your correct, however my current structure means I can only pay about half of it onto the loan to reduce debt, due to the banks repayment conditions on the lending and already paying it off quicker than the term. In an ideal world I'd pay it all down as principal. It's a 'free' ~5.5% return 

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Some will argue 0.50 is not enough however it is still good news for those individuals and businesses that are currently struggling with their debt and other expenses. There are certainly plenty of them and the number will increase as businesses restructure or close down completely and people lose their jobs. Todays move by the RB is a positive move and signals better times to come. 

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Huff, Oh yes ANZ dropped a few basis points yesterday. 50 basis points is not going to encourage them to change fast.

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New Zealand as per usual is caught in a hard place between China and the US. Will we see any growth in 2025. Hoping on Ag exports as the remainder of the economy brings in the strait jacket is not going to be enough. If I'd been Orr I'd have gone for a either a 75 or 100 base cut forcing the Banks to respond. But that is just me.

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If this carries on, I'll have to buy another rental property and tighten my belt to pay down the mortgage.
No more meals out, sorry hospitality sector, things will be slow for you in the coming year.

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My guess is that the real reason you (and others) go out for a meal is to enjoy the meal out, not because you're magnanimously spending your money for the hospo businesses.  

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Can I see the cash rate at 3.8 next year. NO.

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I see Chris Luxon has taken credit for the CPI dropping! If it is National that made it happen, why bother with the independent RBNZ at all? We could have kept the OCR at 0.25 and Luxon could have reigned in inflation by sacking a few civil servants. 

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If he did say that, then that would be a very silly thing to utter.  The media tag line is him saying 'the OCR drop is positive news...'.  That's not claiming credit for a reduction to the cost of credit.  

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An alternative headline could be "RBNZ slashes rates as Coalition crashes the economy"

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The RBNZ crashed the economy. That's why non tradeable inflation is stalling. Tradeables inflation reduction is the result of externalities including lower global demand.

Overall result in lower interest rates to restimulate demand.

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Not too far from the truth. But Luxon would need to give some credit to our woeful RB.

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That's not how I see it.  The Coalition is in a tricky spot.  The Governor said RBNZ is concerned about administrative-led inflation (I think the Q came from Jim Hickey).  Loose Government spending feeds inflation, which no-one wants.  But its attempts to get the books back into black can also impact on the wider economy, for example a big rise in user-pays fees for public transport, and higher energy levies which impacts on discretionary spending power. 

Government spending is far above where it would have been had we not had COVID and Labour's spend-thrift response.  The National-led government can't quickly rein that back and we see a Government deficit lasting longer as a consequence.  

Private investment is crucial to a healthy economy, which in-turn, helps the Government fund the services you would expect it to provide without creating a debt-burden for future generations.  

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"Loose Government spending feeds inflation"

Um, No. At the right time, it does no such thing. At other times, it can.

(And when one's Reserves Bank starts throwing huge quantities of cheap money around? Well - the outcome is certain. The government of the day is fucked - inflation is guaranteed - and the government, no matter how good, or how bad, is right royally fucked.)

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What is a healthy economy and when did we last have one?

Private investment in the manner it's being done, and has been done, is creating the debt burdened future.

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Why is government debt a burden but private debt a blessing?

They're different obviously - a government can tax/print/borrow as they please right?

The lack of services is more of a burden as social outcomes are harder to turn around. Investment in people will pay long term, and when a govt gets it's sht together and taxes us properly there will be plenty to go around.

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Coalition crashes the economy

By that I assume your talking about the part of the economy that unethically relies on the benefit?

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I hope everyone ignore this. Trolls get fed enough on other social media.

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You did not ignore it.

I'm not trolling... at all.

It its a legitimate policy they are carrying out, personally i think it took far too long for someone to do something about it.

don't get me wrong i'm not talking the people who really need it.

I'm talking about people like the guy on the benefit who was caught trafficking weed from Whangarei to Hastings and got caught with $108,000 cash in his boot and claimed he didn't know how it got there, we have become way too soft on this.

But if you choose dismiss these topics by calling them a troll, instead of having conversation about it, are you really understanding how New Zealanders feel about these issues?

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+1

I commend your restraint at CONFs trolling provocation

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That's just entrepreneurship which should be celebrated.

It also highlights the real reasoning behind a UBI, so that people can employ their own talents and passions, and not be a wage slave or specuvestor.

It also highlights why criminalising weed (but giving exemptions to medicinal) is dumb.

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There are surely some people on the benefit who dont deserve it, morally speaking. But the difficulty is that to ensure they dont get it, you would need to design a system that perfectly sorts the deserving from the undeserving. Even if this were possible to do, it would likely be both wildly expensive and very burdensome on those who do deserve it (for example, would we need to regularly send MSD staff round to check up on benefit recipients at hone?)

I think of it this way - how would I like my auntie in her early 60s to be treated by WINZ if she lost her job and needed to go on the benefit? I would like her not to have to jump through endless stressful hoops and subjected to loads of invasive personal questions. If having a system like that means a few people get a benefit they dont deserve, thats annoying but not necessarily worth having a system that makes it incredibly difficult on those who do deserve it and are already going through a rough time. 

 

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There are probably a lot more at the top end who don't deserve it, morally speaking. But we celebrate them rather than "bashing" them like we do those at the bottom.

I've been in the WINZ system as a solo father and working. They are not helpful at all.

You are correct and your thinking is spot on. If only more could adopt your attitude.

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all fair comments, and i can relate, i have my own experiences in this too but i wont get in to that.

but if you get caught smuggling drugs and cash that should definitely limit your ability to get the benefit in the future.

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Mortgage relief is on the way because our plan is supporting lower inflation. The Reserve Bank has cut the Official Cash Rate to 4.25%, the lowest since November 2022.

https://x.com/chrisluxonmp/status/1861583926608961696?ref_src=twsrc%5Et…

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Haha governments taking credit and being blamed for the economy. And the masses fall for it every time.

The government does not govern "the economy".

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Correct.

But let's not forget that both RBNZ and Government should be seeking an environment for NZ to thrive.

Why aren't they?

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No western nation knows what "an environment to thrive" looks like or how to get there. Hence virtually every English speaking country and most EU countries are down in the economic dumps.

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Because they're both captured by "the market", which is ultimately the FIRE industry and multinationals, who don't give a rat's arse.

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The headline and article could also have been

'Interest Rates Increase to the Highest Ever over the last 15 Years'

The Reserve Bank confirmed today that "the average rate on outstanding mortgages has now peaked at 6.4%" as those mortgages that were on 3 to 5 year rates in the 4% range come off their terms and get refixed at approx 50% higher

Which means that the pain will still be there for some time, a pertinent fact that vested interests have been conveniently ignoring and implying everything is fine

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Spruikers never consider facts

 

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Doomie Gloomies always turd picking.  

1) as the rbnz statement says, it has peaked, all downhill from here.

2) the number of people on 4 and 5 year mortgages was tiny, scaremongering over 50% rises is laughable.

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Data doesn’t matter as much as sentiment when it comes to spruiking. Just gotta froth people up and sell!

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Practically nobody was on a 5 year fix and that would be ending soon anyway so they are rolling off onto lower rates by the day. Pretty much everyone is now either floating or on a 6 month fix so the drop in the OCR will flow through very quickly. My partner has her 6 month coming off at the beginning of Feb, the discussion now will be how long to re-fix for.

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Exactly. 2025 is likely to be at least as grim. The OCR needs to get to at least 2.5% by mid 2025.

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'Wage setting behaviour' New Zealand Health offering Nurses a 1% rise over the coming years.  Meanwhile in Auckland's ICU with the no reemployment the staffing is down 30%, and the prediction from staff is without surgeries occuring the next step will be to close off beds due to lack of demand. 

Simply translated the kidney transplant, etc not happening and instead the work load will be sepsis and pnuemonia and truama.

 

Just setting us up for the next crisis.

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There are already wards closed due to lack of staff, aka empty beds.

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There are hospitals currently running without specialist doctors on call.  Good luck to all the pregnant women, better hope they dont need an emergency C-Section in the middle of the night. 

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That's how National roll. Kick all the hard long term decisions down the road in order to claim a paper thin surplus that in reality doesnt mean much. Its what they did last time and its what they'll do now.

Except, this time, people will notice if their parents die becuase they couldnt get into ICU after a heart attack. The service has been cut back so much.

I really hope the nurses push back on this nonsense, they hold all the power here. Last time they were walkovers when National was in. They deserve to be paid the market rates for their salaries - or they should walk and go to Australia where they will be treated as the professionals that they are. Same with Police and across other critical professions too.

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It seems like Orr is setting expectations for there being a maximum of three x 25 point reductions in 2025.  

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The same Orr who told us he was still contemplating raising the OCR in May 2024. Does he moonlight as a Tui billboard creator?

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He might want to but come February there might be a few bellwethers he can no longer ignore. 

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Inflation numbers varies to suit narrative.

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Property investors and homeowners with floating mortgage will be happy.

The interest rate cut does nothing for beneficiaries and the poor who are renting at some of the highest rent/income ratios in the oecd and are the ones facing the brunt of the cost of living crisis.

They will be further screwed over when the power price increases come through.

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"Property investors and homeowners with floating mortgage will be happy."

Not just them.

Most NZ businesses have significant borrowings. Most usually at floating rates and higher.

Please spare a thought for NZ Inc. We're NOT just property investors and holders of absurdly big mortgages.

Some of us borrow to build and create new stuff.

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Not just them - everyone except the term depositors in their ivory tower. (One ivory tower cos I’m guessing they all get naked together)

Small businesses, large businesses, toursim, hospo you name it

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As predicted. Great news for mortgage holders on the 6 month fix rolling off early next year. Trump is now the fly in the ointment so the RBNZ will wait and watch now till Feb 2025. I expect no cuts then or maybe another 25bps, anyone expecting further 50bps cuts from now is going to be disappointed. Good news for the housing market we can now expect prices to start rising.

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Your dreamin Bud.

This housing market and current, sky high values,  requires 3.5% retail mortgage rates, to sustain these monstrous borrowings!

So above 4%...... and its further down in this stinky PonziTown!

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I think you are the one dreaming, prices are already rising. Like I said months ago, you have until Christmas to get into the market. One Roof had my place flatlined for months, it just went up $5K.

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Focused on checking your house value daily, you fail to consider business liquidations and general job insecurity are playing a bigger part.  Are you predicting unemployment to plummet in January too? That's also what needs to happen Zwifty. You said in anticipation of the first cuts last year, they would start sustainably rising.  

For starters, Health NZ are shedding 1500 jobs here 

 

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Our place is up 950k since we purchased it.  Puts your 5k in perspective of not even worth measuring and margin of error stuff?

While I may profit bigly on a future sale, this value increase in just insane and not good for our NZ country or the battlers trying to get their own property to live in. 
I would be happy to see my own profits erode and know the being greedy and money driven is not me,  Its a shame that others are uber-greedy to an obsession, Zwifty.  You could change your ways perhaps?  Something to ponder on, for the betterment of NZ?

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More cuts are required. And we need the cash rate below 4% asap

Which we? The banks? We the people need less debt running the economy.

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Dropping interest rates isn't going to get the economy back on track on its own. Where is the government's plan for reducing unemployment? I've seen nothing from them except creating a sanction system for beneficiaries. Whoop de doo.

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a lot of the beneficiaries won't work whether you have a plan or not, yet they will still expect an income, because they know they will get it for doing nothing.

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Even so, there are a bunch of people now unemployed because of the tanking economy that want to work, and need support to find a role in this dire economic situation.

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IKEA is hiring. 

https://www.nzherald.co.nz/business/want-a-job-ikea-needs-400-auckland-…

But presumably everyone on benefits wont be interested, and they will have to import 400 migrant workers to do the jobs.

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Here we go again, 10-20% up by the end of 2025 

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Hilarious

3-5% at most

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The RB has implicitly stated today they believe inflation has bottomed out at the midpoint. Let's see what the CPI in January brings.

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So the RBNZ rate cut will put more money in the pockets of mortgage holders (eventually)....just in time for the beneficiaries to pay the increased transport costs.

https://www.rnz.co.nz/news/national/534994/fare-deal-public-transport-u…

Fiscal and monetary policy in unison??

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