The 2nd coming? Possibly not

Much ado about RBNZ Governor Graeme Wheeler's Wednesday speech

2nd Feb 15, 11:21am by Gareth Vaughan

Graeme Wheeler.

Were you surprised this morning (Monday) to see comments and reports of a speech from Reserve Bank Governor Graeme Wheeler this week that almost built it up like the second coming of Christ?

Because I was.

Wheeler will be speaking to the the Canterbury Employers’ Chamber of Commerce at 1pm on Wednesday.

The Reserve Bank Governor has been making a speech to the Canterbury Employers’ Chamber of Commerce at this time of year for several years now. This has included holding a lock-up in Wellington allowing reporters to read an embargoed copy of the speech and news release, as it's doing this week.

As a Reserve Bank spokesman puts it: "We’re not doing anything different with this lock-up and speech process than we’ve done for quite a few years now."

So some of the excitement, including the suggestion the Reserve Bank's lock-up is unprecedented for such a speech, is misplaced.

That said, Wheeler may well say something important, market moving and/or interesting. He is the Reserve Bank Governor after all.

He may well provide more explanation for last week's Official Cash Rate review that saw the central bank come out with the intriguing line that the "OCR could go up or down."

And he might provide more detail on the Reserve Bank's plans to make trading banks hold more capital against loans to owners of multiple rental properties, as its ongoing battle with the hot Auckland housing market continues.

Late last year Reserve Bank Deputy Governor Grant Spencer said the Reserve Bank was working on how to categorise a borrower as a residential investor, noting it could be based on the proportion of their total income that's coming from their investment portfolio, rather than just the number of houses they own. This could make loans more expensive for property investors, and potentially harder to obtain. In November Spencer said the Reserve Bank would be "consulting further" on these plans in the first quarter of 2015.

There's a whole range of issues he may talk about. And given his audience, these may well include the Christchurch rebuild and the New Zealand dollar.

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18 Comments

by Doubting Tom | 2nd Feb 15, 12:37pm 1422833856

I have come to the conclusion that the only way that Auckland House Prices can be controlled would be to surcharge mortgages by their post codes. Punishing all of NZ because of prices rising in NZs second city is ludicrous.

They could also introduce Stamp Duty by post code too - aren't post codes a brilliant thing :)

by Stephen Hulme | 2nd Feb 15, 1:12pm 1422835958

He may well provide more explanation for last week's Official Cash Rate review that saw the central bank come out with the intriguing line that the "OCR could go up or down."

Who cares - such sloppy and inept guidance deserves to be relegated to the rubbish tin - investors cannot make decisions based on the Governor's flip of a coin forecasting techniques - I suggest he remains deeply tucked up in his sinecure to await instructions from his masters. More money to be made following the Bank of Japan QE pronouncements which determine tangible outcomes.

by kelfy | 2nd Feb 15, 1:54pm 1422838444

Actually the housing affordability in most of the place across the country are affordable. People can live at somewhere else. Auckland is not the only choice.

by steven | 2nd Feb 15, 2:02pm 1422838953

Its one of the few for a well paid job, or even any job.

by Value Added | 2nd Feb 15, 3:12pm 1422843162

It's also home for a lot of us - it's where our elderly grandparents live, it's where our sick fathers live and it's where our kids have started their lives. It's not just a financial decision.

The disdain for Aucklanders is ridiculous. Sad in fact...

by Doubting Tom | 2nd Feb 15, 3:47pm 1422845232

I agree - it is a shame nobody outside of Auckland can own a vehicle to travel into the Metropolis to visit friends and relatives. Are you suggesting that the RB should keep house prices artificially low so that you can live next door to your dad?

When Auckland sneezes, the rest of NZ gets Pneumonia and that is how Aucklanders like it.

by Mark L | 2nd Feb 15, 5:09pm 1422850148

This is a big part of the problem. People can't be blamed for going where employment opportunities are best. However, we put govt in to set the conditions that will provide the best outcomes for NZ. Surely encouraging business to be elsewhere than Auckland would be to the benefit of Auckland and the rest of NZ

by Value Added | 2nd Feb 15, 3:10pm 1422843026

Yeah - or they could introduce restrictions on foreigners buying up existing residential property, introduce a capital gains tax on second (and 3rd, 4th etc) houses, remove tax breaks for having rentals and the government build more houses...

But that would be common sense right??!!

by Doubting Tom | 2nd Feb 15, 3:44pm 1422845085

Doesn't work though - look at every other country that has those restrictions - we need to try something new and different - not just keep raising rates when the rest of the country is suffering.

by Mark L | 2nd Feb 15, 5:13pm 1422850438

It doesn't work? So I can buy property in China?

by frazz | 2nd Feb 15, 9:14pm 1422864847

Doesn't work.?..or the incumbent government doesnt want to upset the Boomers entitlements, thats the real problem.

by Doubting Tom | 3rd Feb 15, 2:00pm 1422925206

You can't cherry pick odd laws from different countries and say why can't we have them here - you have to have the full package. Please don't compare China with NZ as it is like comparing Kiwi Fruit with Lychees!

by Doubting Tom | 3rd Feb 15, 1:56pm 1422924979

Do you really want to do that - would you like to live under a government like the one they have in China - no freedom of speech? House and apartment prices in China are only not far off Aucklands in China's main cities and for that you get a run down apartment and lung cancer becasue of the smog!

by Ergophobia | 2nd Feb 15, 5:28pm 1422851305

GV, best to leave Him out of the grubby speculations here - you'll be better off that way in the Long Run.

by Gareth Vaughan | 2nd Feb 15, 5:40pm 1422852033

Cheers, I'll keep that in mind in the future!

by Ergophobia | 2nd Feb 15, 5:53pm 1422852832

Good on you GV.

My regards, EP

by Stephen L | 2nd Feb 15, 8:26pm 1422861981

It seems from your report that the arrangements for the speech are not unusual.

However the following circumstances do seem to need comment.

1) He has missed his CPI inflation target, and likely by some margin. What are his plans to get back on target, why will they work, and when will they work by?

2) He has shown some concern about Auckland house prices. Apart from implausible effects on bank solvency, and possibly impacts on rents, why is he concerned, if he still is? (The government might reasonably be concerned, and many central bankers might be, but his stated targets do not mention asset prices) Does the inflation target miss now trump any concerns about house prices?

3) He has announced the change to a neutral OCR. That change is clearly worth comment. While he may not wish to steer the neutral one way or the other, he could easily give guidance on what circumstances would lead to an up or down move. Is it purely inflation? What time horizon is he looking at?

I would also personally like him to comment on incoming capital flows and the current account, our passive approach to currency wars, whether his targets and tools are in fact ideal and sufficient, but won't hold my breath.

by cowboy | 3rd Feb 15, 11:09am 1422914998

It's not so much disdain for Aucklanders ..as such.

Its for the Aucklanders who do things like say the house prices are shooting up (where in the rest of hte country they're dropping), that the average wage is 67k (where in the rest of the country 35k-45k is more the liklihood). etc. The disdian is for Aucklaners who are like the "Amercians" for whom the US is the whole world/universe.