What economists are predicting the RBNZ will do on Thursday

What economists are predicting the RBNZ will do on Thursday

What do you think Reserve Bank Governor Graeme Wheeler will do with the Official Cash Rate (OCR) on Thursday (December 10)?

That's when the Reserve Bank is set to review the OCR and issue its final Monetary Policy Statement for 2015.

The OCR is currently at 2.75%, but inflation is very low, driven down by falling energy costs and the rise of "the second machine age".

Low or falling prices leaves money in household bank accounts, and encourages consumer spending.

We see both in many countries, and we see both in New Zealand as well.

Consumer spending is the fundamental base our economies are built on, and New Zealand will report its third quarter growth on December 17. In the June quarter it was running at +3.0%.

Money markets are a forum where investors place real money on the table anticipating policy rate moves. They do this in part by trading the 90 day bank bill market.

Today, that is sitting at 2.88%, which implies less than a 40% chance of a cut, and receding.

But the professional economists who put their name to their forecasts are almost all in the "he will cut" camp.

Their theme is that the Policy Targets Agreement requires inflation at 2% and we are well below that target.

Therefore, as a legal obligation he must cut, they say.

El Nino, and low dairy prices are also a theme of many commentators, but strong sector performances by tourism and education, and rural sectors like horticulture and forestry, seem to get discounted. Construction and services strength are likewise discounted. And most expect Wheeler will pigeon-hole the asset-bubble distortion that low rates generate in housing and commercial property markets by claiming that is the central and local government's job to fix.

And they also come to this conclusion knowing the RBNZ looks past the headline rate, and is looking at future maintainable core inflation.

Most also note that the NZ dollar is still too high, and that a sharp fall that may come from a rate cut will help add back inflation.

The big question of course is whether the RBNZ governor is convinced that a -0.25% cut to 2.50% will actually make any difference, especially considering the cut from 3.00% on September 10 can arguably said to have had no impact at all.

And whether the US Fed action the following week has entered RBNZ thinking is not clear, but it certainly has not been enough to change the mind of the herd of professionals.

Here is where they stand:

Institution (chief forecaster) Cut to
2.50%
Hold at
2.75%
     
ANZ (Cameron Bagrie)  
ASB (Nick Tuffley)  
BNZ (Stephen Toplis)  
HSBC (Paul Bloxham)  
Kiwibank (Zoe Wallis)  
Westpac (Dominic Stephens)  
     
NZIER (Christina Leung)  
Harbour Asset Management (Christian Hawkesby)  
Infometrics (Gareth Kiernan)  
UBS (Robin Clements)  
Forsyth Barr (Matt Sturmer)  
BusinessDesk (Jonathan Underhill)  

Email us if we need to add others, or if you think our analysis needs updating. Or use the comment section below to record your prediction and reasons.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Wheeler should cut, especially in line with the PTA.
But ....
NZ has commitments to maintain a relatively high interest rate policy, & interest cuts are no longer having any stimulus effect or much effect on deflation/inflation, and the PTA is now relegated to irrelevance in the postGFC era.

Also most borrowers are fixed at 1 to 3 year terms at 4.x%, so they are not concerned at any great need for a cut. Banks are maintaining very high floating rates which borrowers are forced to avoid hence more OCR irrelevance.

Either way is fine: Cut = cheaper mortgage (eventually).
No Cut = NZD at .94 Aussie so cheaper Australian summer holiday!

What NZ needs is a Government that can see the need to increase 'good' Govt spending on Schools, roads, research, universities, etc. Reopen regional govt agencies.
The need to balance the Govt books and aim for Surplus is far less important than keeping an equitable economy flowing in globally very troubled times (economically & politically).
Then restraining immigration is possible, thus avoiding the need to turn Auckland into another/mini Mumbai/Shanghai/KL/

Not sure I agree. In the eye of a teacher, "good' govt spending is more for their salaries. For a doctor, 'good' govt spending is more for their practices.

'Good' should be related to outcomes for most people, not special interests. And 'most people' should not be just those at the top end (like universities, doctors, etc.).

I think one thing most would agree is that public policies should be focused on increasing the real incomes of those at the median and lower. 'Real incomes' don't necessarily involve rising nominal incomes; low costs can boost purchasing power just the same.

But rising real incomes are impossible if the cake gets smaller. Then we just fight over division.

The key is to look past the pleadings of those always above the median who frame their claims "for" those below. Teachers and doctors are often the squeakiest wheels. Besides they know that politicians control the purse-strings so they pitch their messages at them. They have been incredibly successful doing this in the past and Govt budgets now direct $29 bln per year their way.

The rest of the community can't plead in that way. But it is them we should focus on, those paying the taxes, earning median or lower.

Restraining the special pleaders is important. And one way to do that is to commit to a surplus.

Teachers, and their annual pay is typically what?

and we pay CEOs huge sums to get / attract the best? but that doesnt apply to teachers?

"if the cake gets smaller" its not if but now, ie its happening and will continue to happen as we power down to no fossil fuel energy by at the latest 2050.

I agree 2050 is not going to be pretty for New Zealand, we are way behind compared to Germany on renewables and electric vehicles. If the fuel dried up within the next 5 years, Germany would survive but we will be riding sheep to work.

Govn Surplus? no very bad idea.

A surplus is not the best economic practice if you accept you can grow for ever on a finite planet ie there is evidence / thought that actually a Govn running a surplus causes / helps cause a recession. So such a wish is obsolete economic thinking (think Ricardo) that produces un-stability and is therefore damaging to those on the lower income brackets, those you say you wish to protect.

On top of that I see no link between restraining the pleaders and having a surplus, its simply saying "no".

This is the National Party argument (DC).
How is it working so far for SMEs and households?

Here are the pay ranges of the 'special pleaders':

Nurses: $69,000 to $93,000 plus allowances (41,300 in 2013)
Doctors: $114,000 to $216,000, plus allowances (12,950 in 2013)
Teachers (PPTA): $47,000 to $78,000 (51,800 in 2013)
University teachers: $65,000 to $145,000 (14,100 in 2013)

all paid from taxes collected. The above are not entry level rates, rather the range for employees who have settled into the job. Claiming they need even higher pay to help service people who are 'struggling' seems very self-serving to me.

I'm completely with Chaston on this one too. These civil servants portray they are underpaid. But actually their incomes are much better than most in New Zealand.
Many of the common taters on Interest.co. make much more than the teachers et al, but we need to realise we are actually unusually high earners compared with most New Zealanders.

Doctors start on $80,000 working 60+ hour weeks. Heck, even a GP trainee (who's worked as a doctor for usually at least 3 years prior) only earns ~$70,000 in their first year.

I am interested Pluto, and it appears you know, so perhaps you can let us know. Many GPs are employees these days, working quite regular hours. No great business stresses or challenging practice. What would be the going rate for such a GP, say aged 40, of reasonable experience, but not a star. ??

150-200000 for full time

...sounds good, but I bet you wouldn't last 5 minutes dealing with the c##p in a public NZ hospital. No breaks, understaffed, high expectations, continual change, shift work, dreadful mngt .....I'v got two family in the game. The most exhausting, draining and pressure jobs you could imgaine. if you want a target, aim at the firservice....

LoL Rastus. I am in that game. I am waiting for your apology.
And you fall into the usual civil service rant of just fighting over the pie. Rather that trying to figure out ways to make it better for us all together.

Sorry DC I call BS on your nursing data. $69,000 is the top rate for a registered nurse -from that you are expected to take control of your shift/ward in the evenings and weekends.

My shift yesterday evening we had two nurses on this top rate.Two enrolled nurses who are on significantly less with little prospect of improving and two new graduate nurses -both with high debts from student loans and who face many years before they even get to your $69,000 bottom of the range figure. That shift was not atypical.

To get a higher salary you either have to take on higher management or clinical responsibility. In my hospital of several hundred nurses this is probably about 20 nurses.The number of nurses getting this higher salary is actually much smaller than the number that receive significantly less than your indicated range.

Nursing is an internationally accepted qualification/profession. Nurses are highly mobile and if New Zealand does not pay the internationally accepted going rate then retaining/attracting experienced staff becomes difficult. David like in other fields -you get what you pay for.

Finally it is well known in the economics field that collectively tax paid health care systems such as NZ's are significantly more efficient in measurable health outcomes versus the proportion of GDP they consume.

David if you are going to label nurses such as myself -'special pleaders' then I am going to label your argument 'special whinging'.

Also that includes shift work?

Nursing employment is certainly international Brendon. But if NZ underpays it's nurses why are they all still here. We have no shortage of nurses, but an actual shortage of nursing jobs. So we can probably work out that nursing is paid comparatively well in New Zealand by international comparison.
Further, given the rabid union action at any sign of progress, health services are being retained inappropriately in large DHB facilities, when a modern health system would be more distributed. It's not just money. New Zealanders are denied appropriate services by health service unions.

a) because some of the pay better involves moving to a country that is less safe, eg USA,
b) then there is lifestyle choice and even family life.

Not sure about the rest of it but from my decade in working in the health service as it was a decade back I'd say no.

KH it was DC who was whinging about nurses getting overpaid -you also have a tinge of that -with emotive language like 'rabid'. I am ok with how things are going employment contract wise -but I do note my DHB has to train a huge number of new nurses due to the number of nurses who leave the service. My union recently has calmly negotiated with the DHBs the latest employment contract -I didn't observe any rabidness from either party.

Don't know what you mean about huge DHB facilities but my psychiatric hospital has been de-institutionalising for decades and this hasn't been opposed by health service unions.

Brendon:

I am not against the income levels of nurses or teachers - or even doctors or university staff. Far from it. We need an economy that allows everyone a fair, living wage or better.

But it will be temporary and unsustainable if it is not based on economic productivity.

(And I also pointed out the self-serving claims that paying them more will somehow 'serve' the lower paid better. They can only do that because politicians fund their pay from taxes, creating an easy pressure point. Everyone else has to win pay increases from productivity, and that is an issue public service unions bridle over, these days more so than the pay levels.)

The issue is the pay levels at median or lower. These levels are a genuine problem.

Public policy needs to focus on getting a higher-wage economy. Sadly there will always be some who get left behind, but minimising that goup should be the aim. Training, retraining, and strong work-ethic encouragement will be a part of that, but broader settings will play the most important role, in my opinion

Whatever David. I note there was no apology for calling me and my profession a 'special pleader'.

You were whinging and attacking a hardworking productive group for no reason. I haven't heard nurses make any undue 'pressure' on politicians. Unlike various other vested interests.

Sure NZ like a lot of places has economic challenges. Something I have contributed my 2 cents to try and improve. Your comments today have not helped.

David why don't you focus on the real problems, rather than attacking groups who are peripheral to the problem? Why not focus on how to move NZ on from the massive amount of mis investment in speculative property at the expense of investing in productivity and diversification of the economy?

I can say that I have belonged to your union Brendon, and continue in very close contact with DHBs. I have arrived at a different view from you on how it works.
Similar to DC I don't think nurses are overpaid. etc.

Perhaps Brendon you should look at what is underwriting all this bureaucratic public servant spending!!

How many kg of milk solids, liters of wine, kg of lamb or beef, tons of pulp of logs, how many average spending tourists etc does it take to pay that nurses wage?? Obviously the "special whingers" have not been whinging and the special pleaders have had a free reign.

How many kg of milk solids, liters of wine, kg of lamb or beef, tons of pulp of logs, would there be if there was no nurses caring for those producers and their families?

We are all part of a system and we should make it work the best we can. Attacking one group or another will not make the system any better....

This discussion was originally about levels of Govt funding for enterprises such as schools, hospitals, universities, etc - which is being underfunded.
A) The underfunding is unnecessary - & somewhat secretive
B) why cut at this time of our economy?
We are all part of an overall system - so pitching private vs public is not really useful.

One part of that system has real skin in the game, they have to move with the market, they never get to sit on their backsides always receiving the same payment annually......the system you talk of is flawed, treats people very unequally, and when people bring up the issues those inside the system play psychological games using fear and greed to distort the real picture by over-valuing their inputs and importance.......Reality TV programmes featuring the public servants clogs up my sky TV channels every night........this is nothing more than more public servant promoting themselves - you get this sort of stuff in communist countries.......so which sort of system are you advocating???

That last sentence of yours applies both ways.....and public servants are always attacking private enterprise.....aren't they!!! They know full well when they lobby the Government for wage increases that the money to pay for any increases comes from the private purse!!

Chaston says it correctly here.

Nice one David. Everyone has a soft spot for people like nurses, but I think we easily get upset about the wrong things. A better place to focus would be on the bottom 25% and how much they get paid, and why that situation arises.

...I's suggest a betetr place to focus would be the top 1%.

Global rhetoric among central bankers seemed to change after a G20 meeting in September, since when most have talked of tightening, or at least finishing easing, or have actually tightened. Wheeler's out of the blue speech was consistent with that change.
Therefore I suspect they have all agreed to try and get interest rates back up, and would prefer no countries were gaming the system too much by going the other way. Hence the Euro less easing than expected this week. At a global level I agree with this move. ZIRP hasn't worked for a long time. Too much capacity (and therefore supply)has been built with not enough pressure to weed out the weakest. Meanwhile asset prices of course have ballooned, and savers have been penalised. The effect of low interest rates on consumption (or the demand side) is circuitous at best, so low interest rates have in fact been deflationary by boosting supply more than demand. That is a long way of saying I expect Wheeler to hold, and wait and see the effects of the presumably now certain Fed tightening. And I would support him in that, even though inflation here still looks some way off.
What then I think is less likely to happen, and will get less support on this website, but what I think should happen is:
Where demand remains weak, (defined by higher than NAIRU unemployment), central banks and their respective governments should agree an amount of fiscal stimulus, either infrastructure or tax cuts, funded by direct monetisation by the central banks.
If that starts it is critical that NZ plays its share, or we will be gifting our assets to foreigners (as we already are doing). We need to keep the exchange rate in a competitive band, and domestic demand up.
These tax cuts can easily be explained to the populus to be temporary, until demand matches supply.
In the short term expect a vacuum sound in the value of assets, sharemarkets first off, but property as well. The central bankers will need to hold their nerves, and the finance minsters will need to earn their keep with other creativity and leadership.

I don't see the rate changing as everyone is looking at what the anticipated Fed increase effect is. The fear of falling into a liquidity trap is at a high point and as you've pointed out ZIRP isn't doing anything. All we have is a world flooded with currency and people trying to preserve wealth. When people are using tools to resist wealth redistribution it's not going to work.

No matter what the RBNZ does there's too much foreign currency about to change anything substantially.

I'm just waiting to see if RBNZ ends up rapidly increasing interest rates again. I'm mostly interest to see if they do it in a way that bursts the property bubble here in 2-3 years time.

I odnt think central bankers have ever really stopped talking about tightening. They want to very much just their are frightened of the damage evidence in the economic data that will occur when they do.

My pick is that the RB may well hold off until the Fed makes its rate move later in the month to gauge market reactions, and more importantly, where the USD goes. If the USD shows little upward trajectory into next year, the RB will have little choice but resume rate cuts.

my pick is they will hold as they the FED will raise, and when has the RB ever been bold

I dont think the Fed can afford to raise unless its tiny like 0.1%

For what it's worth (not much presumably) my guess is he will cut. Inflation in NZ is very tightly linked to the NZD/USD, which has been going up (hence inflation heads down). Governor Wheeler needs to get back in Bill English's good books pdq and he can't risk the NZD strengthening any more...

Unless, of course, the yanks have given Bill an assurance they really are putting up their rates next week, which is quite possible. So, if no reduction by Governor Wheeler then you can put money on a Fed hike, perhaps?

He should cut hard to get mortgage rates down even further or what happened in Mt Wellington yesterday will become an avalanche of receiverships in the building industry

Bit early for an "avalanche of receiverships in the building industry", I would have thought, but then, you are the master...

16
up

That's probably the worst reason of all to cut; to protect developer mis-pricing and buyers who want quick capital gains. Good grief no. Receiverships will happen when markets misprice risk. That is what markets do - clean out when they get frothy. Perhaps they do it crudely, but at least someone is doing it. 

I very much doubt Graeme Wheeler is motivated to protect the irresponsible.

yes lets throw the baby out with the bath water....

that has been the consequence of ZIRP and QE for a too long a period, risk leaving the markets and the over inflation of certain assets with created debt.
I'm sure many a reserve bank governor especially the ones with over inflated non productive asset holding up their counties growth are worried about their countries created debt mountain and are praying we don't have a GFC2 or even that like the world wars they may think they knocked out the GFC but what they really did is kick it down the road where it will reappear worse than before

Isn't it how New Zealand became the Debtor Nation with $200,000,000,000 of household debt paying $4,500,000,000 every year in wonderful profits to its Aussie owners? Not forgetting the most munificient management remuneration it funds as well.

Hogwash, humbug, and more nonsense

The corpulent-one recommends "get mortgage rates down even further"

To what end ?

In all the news published so far - the project had no shortage of willing buyers - clamouring for delivery of what they had bought - so they could cough up the remainder of the purchase price - buyers finance was not a problem

Problem was the developers couldn't deliver what they promised

"will become an avalanche of receiverships in the building industry."... and that is a problem why?? Indeed it might solve the immigration problem, which might solve the traffic problem, which might solve the education problem, which might solve the hospital problem and indeed might solve our no ideas leadership problem.
Remember a Ponzi is a Ponzi and this time it is no different. Immigrants building houses for immigrants building houses for immigrants...... will all go tits up at some stage.

Rationale of uncontrolled migration? - Michael Reddell - 30 November 2015

Has anyone ever seen a white paper setting out the government's objectives in maintaining high rates of immigration

I haven't and it puzzles me

Croaking Cassandra has been having a seires of cracks at it lately, the latest being this one from a week ago wherein he suggests the rationale has been lost in the mists of time and nobody knows anymore

We are fooling ourselves – or rather our governments seem to keep trying to fool us – if we believe that plausible immigration (volume, type of people, or whatever) is the answer to New Zealand’s economic challenges. There is no sign it has been in the last 100 years, and the boosters – MBIE chief among them – offer no reason to think that is about to change

http://croakingcassandra.com/2015/11/30/on-reading-migration-trends-and-...

The immigration vision is following a UN doctrine to move NZ to a full multicultural society, and ensure we lose our heritage of Judeo-Christian values and European/UK uniqueness.
Economically, to artificially prop up our narrow housing/tourism/export education/commodity economy short term. The 'reason' of needing skilled IT workers, regularly trotted out by JK & SJ, doesn't quite cover all the semiskilled immigrant workers we are growing.

Many skilled IT workers have run away from NZ due to high cost and low wages.

Indeed yet IT workers are better paid than most.

That's very colonial. The last thing we need to retain is "European/Uk uniqueness". This type of 'looking back' for a monoculturalism that existed on the other side of the world 30 years ago, to a an ethos of superiority and stagnation, and is a good reason why we deperately needed to broaden the types of migrants we attract. Those running away to NZ because they didn't like to live with others of a fdifferent culture are exactly the type we don't need here.

Most of the so called skilled migrants and up skilling international students end up working in fairly unskilled jobs or for extended family businesses at no net gain for NZ.
What is wrong with having our own national (small n!) identity?

"our own' national identity surely should be Maori, not white European/UK?

I think Pacifica is the identity I like for NZ most.

He will follow the Worlds pattern...

They will cut and cut until their wrists bleed. Well not theirs, god forbid.

When over indebted as the whole world is, the only way you can get ahead is to steal the March/April/May/June/July etc... on all those so called savers, as they are being screwed to the wall of housing in this fair land. As in others I hasten to add.

We are just going to match their so-called wisdom.

And how has that worked out I would like to point out.

Negative. I hear you say.

All except those doing us all a favour, over leveraged up and up and praying for no increase, pretty please Mrs Yellen, Mr Wheeler and Uncle Tom Cobley and all.

Except they are paid to manage our affairs badly and that is what makes me negative.

and why dont the saved and yes its the saved invest elsewhere?

I'm hoping he will cut. I've been leaning towards 'he will hold', but after reading the analysis of the banks' economists, I'm not so sure.
It's pretty much 50/50 (how I feel, I mean). Will a decision to hold really send the NZD higher? perhaps. Enough to warrant a cut? Perhaps not. Kiwi's pretty low at the moment, compared to what it's been for the past 2 years.
If the rate gets cut now, and the expected drought has a big impact on GDP, then there will be calls to cut even further.
So he may well surprise the market, and hold....gives him a bit more wiggle room down the line, and I do think he wants to see what the Fed does, first, before he makes any rash decisions...a hold is a hold and the markets will shrug it off more quickly than a cut......

many an importer has been feeling the dropping of the NZD for a while, its only the lack of demand for an over supply of goods that have kept prices in check.
many retailers are feeling the squeeze on margins

Would like to see more products locally made, instead of imported.
I believe a lot of the materials used in the building industry are imported.....which is ludicrous, because we produce a lot of it here.
Must be that the price producers get for exports are higher than what they get on the domestic market....That does mean, though, that the consumer loses out. Because we're the ones that pay a relatively high price for substandard, imported products.

that's the effect of the exchange rate and countries that have lower cost of manufacture than we do
take sanfords they send raw frozen fish to china to be turned into fish fingers.
the people here that would do that are amongst our cheapest paid but they are nowhere anywhere at the pay level of the staff in a factory in china.
same goes for many many products.
and as a consumer we all want that bargin.
the only way to build a high paying export base is to specialize in high end goods and as a producer of food we have missed the target by a long way
there are some successes but not enough, wine, premium meat cuts, computer games, movie (weta workshops) , software , soon to include rockets
interestingly as china has moved forward they are now being overtaken by india as a cheaper manufacturer of goods,

I'm not in it for a bargain. I buy very little. Most of it just groceries. Anything I buy, I try to buy local and I try to buy quality.
I'd rather buy once for a decent price, than over and over again at a bottom low price....
Quality, not quantity.

That's laudable, unfortunately the masses don't necessarily share a similar sentiment. A trip to your local big-box retailer would highlight the copious amount of imported goods (junk) people like to spend their money on.

I agree with your ethos though.

It's a combination of a few things. People feel the pressure to buy, both being brainwashed by advertising and trying to keep up with peers.
The binge buying (the more the better) definitely is a reason why people buy low quality, large qwuantity goods. It's an addiction, lots of people get a high, a good feeing, from buying a new item.
The other thing which traps people into buying crap, is a desire to keep debt down, and thinking that buying something cheap is economical. It's not. It usually means you'll have to replace it more quickly and so end up spending more, but a lot of people simply can't afford to spend money on good quality....
.

Raise the OCR to 8% please Graeme.. that would shake the tree.

So you want a depression?

No, lets have cheaper and cheaper money until its worthless..

8% OCR implies 11% mortgages, we'd have no economy as the un-employment would be an even bigger %

--edit-- The money and assest is already pretty worthless we just dont know it yet.

Funny because a rising OCR used to mean that the economy was bubbling, but all that seems to have changed.. I just worry about the imbalances occurring presently that may lead to inflationary or deflationary spirals..

The world is already in a deflationary spiral.

The economy isnt bubbling, CPI inflation is pretty much zero, the tradeables sector is approaching is under 0% and maybe -2%. Un-employemnt is increasing and is now 6%.

I can understand your concern on the stupidity as I do to, unfortunately raising the OCR as NZ has recently shown and other countries in/since the GFC is a disaster for said economy. What needs to happen is severe LVR / lending curbs however even that is quite dodgy.

I wouldnt worry about an inflationary spiral, that is actually quite curable if nothing else. What isnt or is hard to cure is deflation and severe un-employment, if that sets in and we see 30%+ property losses then we will be in a bad way. Inflation on the other hand the lesser of 2 evils.

I think part of the problem is cheap money coming from the rest of the world, then being used to purchase our assets. Maybe stopping that inflow would even the playing field for Kiwis?

So someone is willing to pay for an asset based on the assumption there will be a bigger fool down the road? maybe we should be thankful....

My pick is, Governor Wheeler will hold.

Reason: he ultimately wants to raise it and lowering it will only make it harder to raise in future, so will only lower if he really really really has to, which, at the moment, he doesn't (even with the political pressure, which must be getting intense).

He can't raise it for obvious reasons, so the only other option is to hold until such time he can start raising it again.

What you will see is 'though, the banks will keep lowering the longer term rates, e.g. 3.59% (1 year) around second quarter of next year and the 3,4,5 year rates going under 5%.

My question is: In time, what sort of Governor will the Governor Graeme Wheeler be remembered as, and does this thought ever cross his mind?

If as reported elsewhere 75% of the buyers at Springpark were Chinese perhaps the developer or his financiers received strong indications that the buyers would walk - spooked by the 2 year holding requirement of the new CGT policy and the 30% deposit rules - these were announced well after the pre sales in that project were made. Buyers probably relieved the project has tipped over - Chinese buyers probably not wanting to register with IRD and freaking out over information sharing with the Chinese government.

I overheard a farm real estate agent saying that interest in buying farms was very weak. He said there might be only one or two buyers who would look at a farm. It is obvious to me that this is because property prices are too high relative to weakening commodity prices due to oversupply from cheap money. It gets to the point where you can't just keep dropping rates to try and prop up the property market. Farm prices have to be driven by the price of the commodities produced. If you value money at zirp it creates bubbles as has been said many times before on this site, and bubbles create the potential for a crash or instability. . The job of the RB is to maintain stability, not to help property speculators.

There was I thinking the job of the RBNZ was to maintain the cash flow of the Big Four Banks by modulating the interest rate to a level kiwis could afford.

To a level Kiwis can afford??? Thats the point prices are unaffordable due to the flood of cheap money,and the big four Aussie banks are making handsome profits.

With raising rates comes the reality that the low rates have created a bubble. It will be interesting what happens in the US if they raise.

With a Fed almost certain to hike a week later, I would have been confidently expecting that the RBNZ will keep its ammunition dry and hold off until Q1. Unless we get something different from them on Thursday, barring a worse than expected drought, it would seem that one more cut is about all that they feel is warranted in the current cycle, and that the Fed hike will take some pressure off them if the Kiwi comes off on the back of that. The small concern I do have though at this point is the current 0,6740 level of the NZD. Its too high in the current environment, but with the Fed hike currently more than 80% priced into markets, we may well not get much of a reaction on the 17th when they do hike. But then I guess the RBNZ 'waits and hopes, and uses that cut in the early new year if that proves to be the case.

Yes I think the ECB disappointing the markets with a more subdued change to their QE programme than expected earlier in the week indicates most global central banks are taking the wait and see approach to the imminent Fed rate increase. It will be the first change in policy for them in many years and will be watched with interest.

A couple of Fed hikes, tips the threshold, & the whole set of dominoes will be falling with global repercussions. Remember 1987 Stock crash, 1997 Asia woes, 2008 Lehmans/BearSterns, 2015/2016 risk of crash with no ammunition left to cut rates or increase QE. Banks are concerned with property values also in line to devalue.
NZ is better to play safe and cut now while asset values are just holding.

NZ is better to play safe and cut now while asset values are just holding.

How many magnitude rises in residential property value can one generation endure without choking upon the outcomes?

Interest rates are not the main driver of Auckland House prices.
You can finance an apartment in FrAnkfurt at 1.5%, or buy a house in greater London at 2 or 3%.

Why are all non-Auckland houses in NZ largely static if interest rates were the main driver?

My Wellington property has doubled in price over the last fifteen years, while interest rates have moved consistently lower over the same period.

Interest rates lowered during 2000 to 2006 were a main factor for every part of NZ for house price rises, but since 2009 they are having less effect than immigration, foreign buying, investment and a move to safe havens for cash.

Interest rates were climbing in 2004 to 2008, peaking at +10% then collapsed, just like the oil price.

http://www.tradingeconomics.com/new-zealand/interest-rate (go for MAX)

and so?

I thought you proclaimed yourself a master of finance? yet this statement looks very wrong to me.

Having had a house about the same length of time during that period I was paying 10.25% I think at one stage so I dont think you can say consistent. In fact here you go,

http://www.tradingeconomics.com/new-zealand/interest-rate

certainly shows the interest rate / OCR climb to Peak oil price.

Now since 2004 or certainly 2008, yes, but what did you expect post peak oil / GFC?

So if interest rates are not the main driver, why do we need to cut rates?

For relative parity with other developed countries/economies, to keep the NZ dollar in check, to attempt to stimulate some consumer economic activity, and for the RBNZ to actually obey their PTA mandate and attempt to get inflation back up from .4 to 2%.
The RBNZ has to do the heavy lifting for a 'do nothing' govt which is effectively cutting govt spending by not inflation adjusting funding or acknowledging added costs for regional hospitals, schools, research centres, universities, etc. So we have a tightening effect when global conditions are precarious.

Talking to a early learning centre ex-employee she lost her job because the Govn is cutting some millions from their budget Im not so sure they are even not allowing for inflation..

Interest rates are a big if not the driver, however in broad terms as it approaches zero the effect it seems becomes marginal. 2.75% isnt there yet, 1% yes maybe.

I would think the main reason would be to hit the strength of the Kiwi $. There can't be too many idiots left that think there is much fat left in the AKL housing market so Wheeler shouldn't be too concerned about causing a lift off there. That ship has sailed and is probably called the Titanic.

Cut, I predicted one months ago for December and also another within the first couple of months next year. We are still way over the rest of the world and we don't own any of the major banks here anyway so we are just getting screwed with high rates. We have to keep this party going somehow or its going to get ugly in the housing market.

Cut.

This is because I actually believe it should hold, and the RB never does what I think it should.

why should the rb hold?

Know some nurses and agree not many would make much over 70k full time. For an important job which can involve admin or life saving, life ending (if wrong) drugs they need to be paid more and/or working conditions improved in public hospitals anyway

Nurses can get it wrong and kill you. So can lowly paid truck drivers coming at you on the highway.

..what a stupid comment.