A review of things you need to know before you go home on Tuesday; more retail rate cuts, RBNZ starts a move to unwind the LVR caps, eyes on the next dairy auction, swaps fall & flatten, NZD holds, & more

It hasn't started to drop yet and they throw the kitchen sink at it.

It's maths. They're looking at the numbers going - damn we need an expansion of credit in the housing sector by 6+% a year for prices to hold. We're out of clients bringing in overseas illicit funds to keep it going (Foreign Buyer Ban haha the plebs were sold that dummy), and we know damn well the slaves of Aotearoa can't afford a house. So, we'll drop this LVR to defend the maths. If that doesn't work we'll come out and say we'll buy distressed mortgages outright from the banks.
There are 2 rules: 1. Banks don't take a hit. 2. Taxpayers are there to pick up the cheque after the party.

Here's my submission, if anyone wants to use it, feel free!

The suggestion put forward today to remove LVR limits to encourage lending set's a dangerous precedent that retail banks in NZ can lend to anyone, without thought of moral hazard while simultaneously increasing the risk of future bank failures and potentially further institutionalising housing inequality by favouring property owners over potential home owners.

The introduction of the LVR limits to try and dampen an already overvalued property market have been reasonably successful in their original goals. They have stopped the housing market from running away (although it is still in bubble territory by almost all objective measures), while ensuring banks are lending responsibly. The Reserve Bank itself has noted in it's stress tests that this policy has ensured banks are available to withstand a significant downturn.

Now that we are facing such a crisis, we must ask if these stress test results were imaginary or whether they were accurate? The RB stress test results available here, test whether our retail banks can survive a downturn where unemployment rises to 13.2%, GDP drops 5.5%, there is a 40% decline in Residential housing values along with a 35% decline in the Commercial Property values. The result of the stress test is stated as: "Overall, these outcomes suggest that, as a group, the large New Zealand banks could absorb material losses in a downturn event while remaining solvent.". Was this information correct? Because we are currently facing a downturn which is predicted to not be as bad as these numbers state, however the banking system suddenly requires the loosening of monetary policy by the RB. How is that possible?

I would refer you to another document produced just last year available here. This study examines if the LVRs have improved the resilience of the retail banks. In it they state unequivocally "We find that the LVR restrictions have significantly improved the resilience of the bankingsystem. The LVR policy has reduced the scale of mortgage defaults and credit losses thatwould occur in a housing downturn, due to a reduction in risky loans on bank balancesheets and the mitigation of a potential house price decline." The study shows the LVRs have been highly effective at improving financial system resiliency. This resilience is required in times of stress and uncertainty, times very much like we are in today.  To remove these LVR restrictions now is likely to undo all of the resilience built up by this policy in the previous 7 years, right at a time when the resilience of the financial system is most critical. Frankly, it beggars belief that such a change would even be thought of while we are at the start of a crisis and it sounds very much like the RB is abandoning it's mandate to ensure long term financial system resilience. Is this the case?

If the LVR limits are removed it is likely it will also institutionalise housing inequality as those that currently hold capital and property will be able to obtain lending against it with no restrictions.  The LVR policy has been set up well, with investors, requiring significantly more equity than potential home owners looking to enter the market. This progressive policy approach has ensured the competition for housing is more even, those with less property or equity currently do not have to compete on the same playing field as investors who already own potentially multiple properties and who have benefited from the significant growth in house prices over the previous two decades.  By abandoning the LVR policy the RB will be forcing those without capital to compete against investors who hold more property and capital.  The results will be obvious, a further deterioration in housing equality, exacerbating inter-generational anger and potentially leading to social and political instability. None of these are good for a country's financial system, so it seems the RB is again abandoning it's mandate to ensure long term financial system stability. In addition this policy seems contrary to the Finance Ministers goal to use this crisis as an oppourtunity to address long standing inequality issues, which are most obvious in housing.  This submission will also be forwarded to his office.

In summary, the removal of the LVR policy will be disastrous from multiple angles in New Zealand. It appears to be an ill thought out, ill informed, rushed change. There appears to be no modelling work or research papers to back up the change, it appears to simply be a policy to cater to banks who do not need the support (as evidenced by stress testing) and will lead to a less resilient financial system. It will also negatively affect housing equality, further heightening tensions in NZ society between land owners and renters, which could lead to social and political revolt.

It appears more that the RB is no longer acting in the best interests of the NZ public with such policy changes, but is working for the shareholders of banks and over leveraged property owners.  Such bias should not be tolerated by a government intent on resolving long term inequality and will not be tolerated by a public who is becoming increasingly disadvantaged as financial mistakes become socialised in the bad times, while profits are privatised in the good times. 

Exactly - the UK leased Hong Kong from mainland China - Britain to this day acts and behaves if it still remains an empire, when clearly it is not.

I haven't made up my mind yet, but my thinking is that there is no longer a good reason to have my savings in a bank. It's not earning any interest. The way things are going, it could get much harder to get access to cash in the future so better to be prepared now. I can always deposit it again later but could be safer for now buried in a safe somewhere.

2 weeks before the lockdown you could walk in and walk out with 100's of 1000's and we were told many did, there were no restrictions. 1 week before the lockdown different banks applied different restrictions, including filling in applications for large withdrawals (that took several days) and others applied withdrawal limits. The bank tellers were all also trying to dissuade customers from these withdrawals verbally, to no avail of course. Cash machines have also been taking heavy hits and I know of some people having to walk around hitting up several machines to try and maximise withdrawals over a day.

There has been next to no reporting on it. But people are taking their cash out of the banks.

Make of that what you will.

Even electric cars need lubrication and cooling, otherwise they go bang in an even bigger way than ICE cars.

Elimade. That's how it's pronounced, get it right!

"there is only one overall strategy that can be followed. Control the spread to avoid overwhelming the NHS." - in the UK , yes.
Less obvious it is the only strategy here...

not to worry, they can go into beef and dairy.

The same as ACT. That combination should scare people.

Perhaps after the reset they'll be able to beat their suppliers down in price so a trip up to SE asia for dental work is no longer a sane option if its anything more serious thana couple of fillings.

"architecture is another profession in trouble, along with dentistry"

Mr T, murray 86, scarfie and Pragmatist: As far as dentists are concerned I've seen it all from the time at primary school when"Toastie" Cook and his stupid friend with the constant guilty smirk on his face pulled the seat away just when I was about to sit down and I broke off half my front tooth when it hit the top of the seat. That and my sweet-tooth and teeth that were small and close together meant that the remainder of my life would involve many trips to many dentists over the next 50 odd years, and I'm still going. I have only 19 teeth remaining and one implant. My broken tooth was replaced with a gold filling by our neighbour dentist. His fingers were too big for my small mouth but after many attempts he managed to attach it with a couple of pins set into the gold filling. During a highschool rugby match against Papakura Highschool I suddenly found my gold tooth had gone missing so I told the referee and he stopped the game and told all the players to get down on their hands and knees and look for it and someone did find it. This was the beginning of my lifelong odyssey to dental clinics. So, I am in a good position to tell you how they have changed over the years.
Up until the 1980s or so a visit entailed getting the plaque scraped of by the actual dentist as he poked and scraped and prodded your teeth for 5 or so minutes. Today, there is a separate 'professional', a hygienist, who takes somewhat longer than what the dentist used to do in 5 to 10 minutes himself, but you are expected to pay $165 to $230 dollars a 'clean', not once but up to 3 times a year!! Even if you've only got far less than the full complement of teeth.
The last broken filling or broken chip of tooth I had repaired cost me $330 plus the 'required x-ray' of $115. I got him to look at another tooth that I thought might need capping and he quoted me 'about' $1600 dollars which was cheaper than another dentist quoted: $2500.
I had just switched dentists from that other dentist because his female business partner had just charged me $560 for a broken filling repair.
Of course, if you change dentists the first thing the new dentist will ask you is 'how did you find out about us'....it's very important for them to know this apparently. This is because they ALL charge these high prices and the only way to increase their revenue is to obtain new customers whose teeth obviously need a lot of work like mine.
And another recent habit I have noticed in recent times is that when they have finished the work on your teeth the dentist ensures that I am all but frog-marched by himself or an assistant straight to the cash register and in one case told to sit down on a chair in front of it, and 2 or 3 of them hang around eyeing me expectantly until I produce my wallet.
So,anyway, I was very surprised when this last dentist texted me DURING THIS LEVEL 4 LOCKDOWN to say that I should come in and get that capping done!!
One dentist a few decades ago broke off the tip of one of his tools in my tooth and left it embedded in my tooth and covered it with a filling without telling me. A subsequent dentist from the old school discovered this and told me. This dentist went ahead and built a bridge to replace my front tooth with the gold filling which was an excellent job and worth the high price but he surprised me by saying he was very worried that once he had done the bridge I wouldn't return. This spoilt my opinion of him and I didn't return.
One dentist near me has expanded by literally having a corridor with many separate clinics on either side to accommodate the huge demand for under-18-year-olds' free dental treatment the government brought in some time ago. I gave that clinic a go to have another opinion on the state of my teeth (which I paid $165 for); I paid up and they gave me a bag with a tube of toothpaste and a few tiny plastic things for flossing my teeth which I thought were freebies. When I got to my car I read the bill and discovered that they had charged me $30 for the toothpaste without even asking me if I wanted it; I went straight back and gave them a piece of my mind and told them I didn't want the toothpaste and got my $30 refund. I have no doubt that all those kids under 18 years also have the $30 tube of toothpaste foisted upon them but of course in their case it would be paid for by the tax payer.
As a good turn I took a Maori chap under the mental health to two different dentists to obtain a Winz quote for extracting a painful molar. As both quotes were well over $1000 dollars I was shocked; both dentists had taken it upon themselves to include a few other things in the quote that we hadn't asked for, but, and this is what really shocked me, one dentist's 'a few other things' were for completely different teeth and procedures from the other dentist's 'a few other things' In the end I found out that the chap was eligible for the dental clinic at Middlemore Hospital where I took him and I gladly paid $40 to have the tooth pulled. They also had a quick look at his other teeth an said that they looked to be ok! So, I can't help but think that this is a scam employed by some dentists on poor beneficiaries who ultimately have to pay the amount back by weekly deductions from their meagre benefits. I have noticed in the past in front of another dental clinic near where I live ( there must be over a dozen within a square mile) there were always two shiny Porsche cars ostentatiously parked outside.....can't be doing that badly!
I remember that tucked away on an inside page of the NZHerald some years ago a journalist who had had his teeth examined by an honest dentist whom he knew went around a few city dentists and got itemised quotes for work they deemed needed to be done: what had to be done and costs varied extensively between the dentists thus 'surveyed', and quite a few quoted for work that did not need doing.
In summary, I do think there are dentists out there, more than there used to be, that are noticeably ethically-challenged shall we say.
(I have other 'experiences' that I haven't mentioned.)
So, I'm looking forward to the new world order when such entitlement isn't the norm, and dentists concentrate on doing a good professional job for a fair and reasonable reward instead of so conspicuously, unashamedly and unprofessionally chasing the dollar.

It is a sense that what is government doing or not doing for business, rather than where are the voices from business about what it perceives it can do.
I think the covid health response has to a qualified success from the Health Ministry.