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RBNZ leaves OCR 2.25% as most local economists expected; Wheeler says NZ$ 'higher than appropriate'; says Auckland house prices 'very high' and more housing supply needed'; says 'further policy easing may be required'

RBNZ leaves OCR 2.25% as most local economists expected; Wheeler says NZ$ 'higher than appropriate'; says Auckland house prices 'very high' and more housing supply needed'; says 'further policy easing may be required'

By Bernard Hickey

The Reserve Bank of New Zealand left the Official Cash Rate on hold at 2.25% on Thursday morning, as most local bank economists had expected, and has repeated its guidance that 'further policy easing may be required.'

The Reserve Bank's 90 day bill forecasts suggest the bank is planning at least one more OCR cut to at least 2.0% some time over the next three months, before being unchanged until the end of the forecast period in June 2019. The forecast track has barely changed from the bank's March quarter forecasts.

The New Zealand dollar immediately jumped over almost a cent to over 71 USc and sits as much as 5% above the Reserve Bank's new forecast for the Trade Weighted Index for the September quarter. If the currency stays this high, the Reserve Bank itself forecast a scenario where it would have to lower the OCR to under 1% to lower the currency to meet its inflation forecasts.

In deciding not to cut now, Governor Graeme Wheeler said global financial market volatility had eased and the domestic economy was supported by strong net migration, construction, tourism and "accommodative monetary policy."

He said the New Zealand dollar was higher than was appropriate, but he noted that Auckland house prices were very high and that house price inflation in Auckland and other regions was adding to the bank's concerns about financial stability. He added more housing supply was needed.

Wheeler said long term inflation expectations were well anchored at 2% and that short term inflation expectations had stabilised after dropping. He said the bank expected inflation to strengthen.

"We expect inflation to strengthen reflecting the accommodative stance of monetary policy, increases in fuel and other commodity prices, an expected depreciation in the New Zealand dollar and some increase in capacity pressures," Wheeler said in a statement with the decision.

"Monetary policy will continue to be accommodative. Further policy easing may be required to ensure that future average inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data," he said.

'6 years below target mid-point'

Economists at three of the big four banks (ANZ, BNZ, and Westpac) expected no change, while ASB had seen a very close decision to cut to 2.0%. But overseas economists had been much more confident about a cut. A Bloomberg survey found 8 out of 15 economists expected a cut, with most of those based overseas. Financial markets had seen a 25% chance of a cut, which helped explain the sharp move in the currency immediately after the decision.

From a purely inflation targeting point of view, the Reserve Bank has been under intense pressure to cut the Official Cash Rate, possibly as low as 1.5% as some have said (BERL and CBA) to get CPI inflation back up near the 2% midpoint of the Governor's Policy Targets Agreement with Bill English. Annual CPI inflation has been below the 2% midpoint since September 2011 and has been below the 1% bottom of the bank's 1-3% range since September 2014.

In March the Reserve Bank forecast annual CPI inflation would not return to 2% until March 2018. In this Monetary Policy Statement the bank forecast inflation would return to 2.0% in the December quarter of 2017, which would mean CPI inflation below the 2% midpoint for 6 years.

The Reserve Bank forecast annual CPI inflation would rise from 0.4% in the March quarter of this year to 1.3% by the December quarter of this year. That would imply annual CPI inflation had been below the 1% lower bound of the bank's target range for just over two years.

One scenario suggests 0.75% OCR

The Reserve Bank did however suggest the possibility of significantly lower interest rates if the New Zealand dollar did not fall as the Reserve Bank expects.

It included a scenario in the Monetary Policy Statement where the currency did not fall, which would leave it 4% higher than the bank's central projection. It said that would force the bank to cut the OCR lower than its central projection.

It published a 90 day bill track showing it falling from just over 2.0% in the central projection to just under 1%, which would imply an OCR as low as 0.75%.

Its other 'high' scenario looked at what the bank would have to do if house price inflation was higher than expected and that translated into higher household consumption. This scenario included house price inflation being as much as 5 percentage points higher than its central scenario, which would force the bank to lift 90 day bill rates to over 3% by the end of the scenario.

Economist reaction

Economists said in their initial reactions to the statement, which was the first without a lockup in decades because of an embargo breach by Mediaworks in March, that the Reserve Bank appeared more confident about inflation rising.

"Our overall conclusion was that the RBNZ is feeling less alarmed about low inflation than it was a couple of months ago, but that it still views another OCR cut as likely to be required," Westpac Chief Economist Dominick Stephens said.

ASB Senior Economist Jane Turner said financial stability concerns appeared to have influenced the decision not to cut.

"The RBNZ may be stalling to allow time to introduce further macro-prudential tools," Turner said.

"We continue to see downside risks to the RBNZ’s inflation outlook.  As a result, we continue to expect the cash rate to eventually fall to 1.75%, although the RBNZ appears very reluctant to cut rates," she said.

ANZ Chief Economist Cameron Bagrie said the Reserve Bank appeared to be playing a game of chicken with the Kiwi dollar and saw the chances of a cut in August at just over 50%.

"Importantly, the RBNZ is again highlighting that housing market as a financial stability risk. This not only sets the bar higher to future easing, but signals that additional macro-prudential measures continue to be more likely than not," Bagrie said.

He said the bank's steady currency scenario meant there was a limit to how high the New Zealand dollar could go.

"We note that the Bank’s downside scenario (which takes the 90 day bill rate below 1%, pointing to an OCR at 0.75%) is associated with the TWI holding steady, rather than rising, suggesting the currency hurdle to easing is not overly high (especially if housing can be cooled via macro-prudential policy). In other words, we’re back to MCI trading," he said.

Political reaction

Labour Finance Spokesman Grant Robertson said the Government's failure on housing had forced the Reserve Bank to hold and Wheeler's comments about very high Auckland house prices and the need for extra housing supply was a blunt warning and a shot across the Government's bow.

“New Zealand needs to build more houses now. Labour will do this through our KiwiBuild programme that will see at least 100,000 affordable homes built," Robertson said.

“The Reserve Bank Governor has a mandate to keep inflation at 1 – 2%. It’s well below that now. He is being constrained from cutting the OCR to meet his target because the Government isn’t doing its job on housing," he said.

"National has lost control of the housing crisis. The only way to get on top of it is to change the government, and implement Labour’s plan to build more houses and crack down on the speculators National has been happy to indulge.”

(Updated with market reaction, economist reaction and more detail)

Here is the full statement below:

The Reserve Bank today left the Official Cash Rate unchanged at 2.25 percent.

Global financial market volatility has abated and the outlook for global growth appears to have stabilised after being revised down successively over recent quarters. There has been a modest recovery in commodity prices in recent months. However, the global economy remains weak despite very stimulatory monetary policy and significant downside risks remain.

Domestic activity continues to be supported by strong net immigration, construction, tourism and accommodative monetary policy. The dairy sector remains a moderating influence with export prices below break-even levels for most farmers.

The exchange rate is higher than appropriate given New Zealand’s low export commodity prices. Together with weak overseas inflation, this is holding down tradables inflation. A lower New Zealand dollar would raise tradables inflation and assist the tradables sector.

House price inflation in Auckland and other regions is adding to financial stability concerns. Auckland house prices in particular are at very high levels, and additional housing supply is needed.

There continue to be many uncertainties around the outlook. Internationally, these relate to the prospects for global growth and commodity prices, the outlook for global financial markets, and political risks. Domestically, the main uncertainties relate to inflation expectations, the possibility of continued high net immigration, and pressures in the housing market.

Headline inflation is low, mostly due to low fuel and other import prices. Long-term inflation expectations are well-anchored at 2 percent. After falling in recent quarters, short-term inflation expectations appear to have stabilised.

We expect inflation to strengthen reflecting the accommodative stance of monetary policy, increases in fuel and other commodity prices, an expected depreciation in the New Zealand dollar and some increase in capacity pressures.

Monetary policy will continue to be accommodative. Further policy easing may be required to ensure that future average inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data.

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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Blah, blah blah
Need more house Supply
Nothing about Demand


Productive sector thrown under the bus in deference to the almighty Auckland housing market.

And maybe the useless buggers at FF should be jumping on the bandwagon here!!
Using the productive sector to ensure increased profits for the RBNZ and for ensuring recapitalising of the banks while adding to their profit margins is not a topic that is attracting any attention !!!


supply is because he unlike the government knows who is buying them.
if he puts more curbs on kiwis it just make them cheaper for the overseas funds.
its government policies that need changing
lower immigration and ban non NZ citizens owing property then you can drop the OCR 1%

This is as per government line as they are shouting about supply only and not thinking about demand. Why do they not realize that though supply is very important but unless measures are taken to control demand specially speculation and overseas buyer (Do not understand why in denial mode about overseas buyers when whole lot of New Zealanders knows - it is not a state secret). Shame


Also fixing the supply side issues takes time due to consents etc, fixing the demand side would be a much quicker fix.

leaves it up because of high immigration and house prices, looks like he just hit the ball back to JK and BE.
expect them to hit it back rather than change rackets

Like a stuck record!


Completely Agree Basel.

"He added more housing supply was needed."

Singing from the same songsheet as the government. I thought he was suppose to be independent of the government ?

Will go down as the worst Reserve Bank governor that NZ has ever had. First increasing rates while others were dropping and then being completely ineffective in the face of a huge housing crisis that threatens NZs financial stability and is keeping rates higher than they need to be.

The do nothing Reserve Bank with the do nothing government.

Focus on supply whilst completely ignoring the demand side of the problem.

Wheeler wake up. Investors make up 45% of property purchases and up to 80% in some suburbs.
Supply is not the only issue.

Investor demand is a huge issue
i. pushing up prices,
ii. reducing home ownership rates and
iii. keeping First home buyers out of the market

How do people like this keep their jobs ?


whilst I agree with your points again that is government policy.
take away the tax advantages of owning a rental house, take away the accommodate supplement and use that 2 bill per year to build and sell to nz citizens , let HC keep its dividend to build and replace state housing for those that can not buy
ban non citizens owning and lower immigration and the problem will solve itself

It is utterly ridiculous to suggest so many different things be implemented all at once. Seeing the lack of punctuation I can only suppose this comment was typed in a fevered state.


Why not implement one at a time?

When there is a systemic large problem, sometimes there is no silver bullet ZS. A multi-faceted approach may be required. Surely that is obvious from the failures of timid macro-prudential tools as evidenced last year (though you will remember that was more than one at a time as well)? I also notice you have no counter-argument for why one should be implemented at a time anyway. Vested interests perhaps?

They could implement one at a time, then backdate them 9mths, just like a parliamentary salary increase. :-)

Be nice to do that - I have consented plans for 24 beds social housing - but finding a builder who can start this years is more tricky than getting the consents!

Limit migration to what we really need - starting with builders and trades maybe two year work visas for qualified tradies -then implement the apprenticeships to train Kiwi's -

That would be a good start -

I'm sorry, but what are you arguing here?
This is a completely contrary comment.

1 - The RBNZ is independent. Because Wheeler states there is a supply side issue, it doesn't mean that he has has a political bias. It is simply stating the obvious opinion of 99% of economists.
2 - The worst RBNZ governor in NZ history? Based on what? I think it is unfair to state such a thing without a thorough understanding of monetary economics - which isn't evident in this comment. Wheeler has done remarkably well, considering the proverbial storms he has had to deal with in the face of the declining performance of inflation targeting as a regime.
3 - You say the issue is with the demand side and quote some very precise and coincidentally round 'statistics'. Holding the OCR is a response to this demand side issue you speak of...
4 - The AKL crisis is not a product of the actions or inaction of the RBNZ. It is a product of both central and local government policy.


If the reason for the housing crisis is so obvious and well understood, then Wheeler has no reason to go into it. Central bank statements are finely crafted documents and backing the government on its supply side story is significant as much as it is wrong. He could have just as well asked for fewer migrants. 99% of economists agree that less immigration means lower house prices.

The AKL crisis is mostly a product of global money printing policies. With no restrictions on the flow of cheap money entering NZ, a small market - in global terms - like NZ is very exposed to irrational pricing.

Valid point.
Not 100% correct with the "99% of economists ion means lower house prices" - there needs to be a clause there somewhere.

I wouldn't call it irrational pricing if our argument is that the majority of demand is coming from speculators. Inflationary prices, yes, but not irrational.
Arguably any irrationality would be coming from first home buyers, if anything.
Is fiat currency the issue? I don't think so - such economic paradigms have occurred regardless of the intrinsic value of the prevalent currency.

The fault is with the government who for reasons best known to them are being blind and deaf to reality. Also believe in Offence is the best form of defense, otherwise why would they support and come out with ridiculous insensitive statements. Shame

The Awkland housing bubble (to give it it's technically correct appellation) has no one cause, has been a long time a'building, and enmeshes so many sectors of the local (and, arguably the national) economy, that policy is now fairly much helpless to let it down gently.

If the bubble were to be pricked (defined as median multiple coming back to (say) 5 - still too high but possibly bearable) then the AKL median house price should be of the order of $400K (assuming a household income median of $80K). One could reasonably foresee dominoes clattering as follows:

  • Bank loan books take a 20-40% hit, with much higher bad-debt provisions lessening profits, dividends and performance in general
  • Possibility of OBR if the dominoes transmogrify into impending bank failures
  • FIRE sector bust/mass unemployment
  • Construction sector (non-modular, non-factory builds) bust
  • Materials and building supply dominoes also quiver, with effects on performance, employment
  • Legal field day (non-productive overhead/economic dead-weight) as playaz attempt to retrieve their investment positions by suing anyone in sight

Common taters can most likely add to this list, but the real point (sorry) is this:

Who, in their right political poll-driven mind, is gonna rock up to the Bubbular Beast on their shiny charger and drive the spear in?

The crime Waymad is that we have pitted those who have benefited from high house prices (includes me) against 'the rest' First Home buyers and Poor People. The criminals are the government who have set up that conflict and allowed the bubble to continue. We should not have that conflict but we do.
But not making a decision is still a decision. My vote would be to decide, and decide to prick the bubble.


46% investor and 4% overseas buyer (As per Government) and out of balance 50% government should release how many are students (Overseas parents buying in their children name to avoid detection in home country) and short term (Work Permit) - Everyone will be alarmed that actual New Zealanders will be a minority and our PM says that this is a sign of prosperity.

Yesterday again the housing minister comes out with a smirk on his face and has the audacity to say that houses are more affordable than 2008. This shows the sadism of the government and are totally not able to read the anguish and frustration of many. Government will change their tune only next year being an election year and are giving free hand to speculators to play till next year. Shame

RBNZ did talk about putting some restriction on loan to income, similar to government announcing land tax but were just an announcement for that moment only.

Yep, you've got Bill saying don't buy now as interest rates might go up, and Smith saying buy now it's affordable because interest rates are low!

The funny thing is Bill as admitted that immigration is a significant factor.


This government and the Reserve Bank have no idea - it is massive net migration that is the root cause of the problem. Shut the door on this high level of migrants make it policy that any new migrant can only buy a new home, spread the migrant load to other cities rather than Auckland. JK and BE are so infatuated with China that it is not likely they will do anything about it and Nck Smithwit has absolutely no clue.


Migration isn't the issue. The issue is overseas investment to move money offshore from China, Russia, South East Asia and Eastern Europe. These areas are still very unstable plus money is never made in these places unless you take some 'shortcuts' Most of it moves offshore to major cities....Auckland was just next in line after London, New York, Sydney etc. became too expendive. No stamp duty and no capital gains tax just fuels the fire. Wheeler is naive if he doesnt realise this. This is nothing new, just look at has 10 percent stamp duty but 1.7 percent mortgage rateand can move it's own currency using monetary mechanics coz it's not a carry trade currency as there is no spread. It doesn't need to use interest rates to move the currency. Wheeler is antiquated in his economic principles.

Yes.The scale of what is going on has become so large that you are seeing massive construction happening in Vietnam, much of which is going to be sold to interests "outside" Vietnam, which will be built around legal vehicles for money from China (remember that the Vietnamese have a long-standing hatred for China to put this in some perspective).. This is no more that money laundering and the Chinese "will" take haircuts of up to %50 (guesstimate) as there is nobody who can afford to buy or rent these apartments. It's a a mis-allocation of resources on a tremendous scale packaged by Western "credibility" such as CBRE, Colliers, etc.

Have REINZ released their May housing data yet?

Due out on Monday 13th. Here is a link to our calendar

Does any data matter when government fails to act and only talks about data that suits them, though faulty like overseas buyer data that was announced earlier. Everyone knows the truth but not the arrogant government for they do not want to face the truth or they will have to act, which they do not want to, so as not tospoil the party for their friends and overseas buyer.


The Lockwood flag above the Auckland clock?!? Really?!? The NZ public voted against that flag, no idea why Interest persists in displaying it. It's getting very, very embarrassing.

This proves policy makers in New Zealand are out of date with International macroecomics. Over the past 10 years globalization has created thousands of millionaires who are desperate to move this money out of second and third world countries. The only way to stop it is to restrict access to overseas investors as Singapore did when the spotlight was turned on them 8 years ago. Couple this with reducing interest rates to within 1 percent of the Euro and the USD to stop carry trading and the ship will right itself pretty damn quick. Right now Wheeler and Key are acting like 'rabbits in the headlights' and will eventually get run over.

They will be knighted - not run over - we need more poppies.

They are not doing a bad job coz the economy and infrastructure have improved immeasurably but this is creating social issues thru lack of supply of housing coz overseas investores are after capital appreciation not rental income. They want to park money quietly and this means empty houses and a squeeze on rental supply causing higher yields then higher prices. Key and Wheele's problem is not finishing the job properly coz they have little international exeperience to have the correct macro perspectives.

Well, said, they think "New Zealand needs to export more", ie the balance of payments is a total mess because of the current account. In fact the problems are caused by the massive money inflows on the capital account.

The huge surpluses created by Germany and China cheating the international system must result in exactly balancing total trade deficits in the rest of the world. Since a deficit on current account must have an exactly balancing credit on capital account, this is the cause of the excess capital inflow which force property to bubble.

National have said they want NZ to be the Switzerland of the South. That's fine but you have to accept higher property prices and a stronger exchange rate as a consequence. That is obviously going to hit exporters(dairy) so they can't have it both ways.
I think the migration flows will continue but at lower level,as simply,we are seen as a safe haven in a world that gets stranger by the day.

Everyone know it all comes down to overseas buyer except the PM and his his party for not in their interest to understand.

"... and additional housing supply is needed." is a purely political statement and none of Wheeler's business. It is a sign of a global institutional crisis that nobody is even pretending anymore to stick to mandates, rules, laws and treaties. The rule of law is a precious social good. Hard to establish and so easily squandered. It is bitter to witness the decay in our institutions.

The rule of law was for criminal law not all this nonsense of institutional law.....that is why the 1688 Bill of Rights guarantees/grants the ancient rights.......the right to free will rather than being treated as livestock !!!

This is a mistake, which will send the NZ$ higher as foreigners chase yield .

Here's a simple question .

Why should Kiwi producers and exporters be under pressure from a high Kiwi$ just because immigrants have pumped up Auckland property prices to unsustainable levels ?

Answer that Mr Wheeler

What exactly does NZ export btw, that is sooo exchange rate sensitive? Education? Hardly. They pay any price for their entry ticket. The courses and degrees are a secondary consideration. Tourism? Is overpriced anyway, but going to NZ has become something of a status symbol. Milk? Has fallen in price anyway.

A higher exchange rate will at least give us some protection from Chinese on a shopping spree for houses - as the government is refusing to pass legislation that could protect us.

A higher currency would have to be double what it is now to make a difference coz Auckland Property is still three times cheaper than most other big safe cities. The currency doesn't make a difference to property investment but makes a massive difference to exports and jobs.

No it isn't.

Correct. This is a massive mistake.....Wheeler and Key should immediately go to Singapore or Hong Kong to get a crash course on Monetary 'coupled' with Fiscal Policy and learn how to control it's own destiny. The problem is that they may have negotiated away all their potential tools in naive clauses in trade agreements which are now tying their hands behind their backs.


Once again the only person making a call to reform the Reserve Bank Act is one Winston Peters.

How on earth are dairy farmers going to service $40b of debt, on a significantly below the cost of production payout for the third year in a row, when the first green shoots of price recovery get burnt off by a now rampant NZD (TWI now through75)? Hail the all conquering Auckland housing bubble.

maybe those that took on too much debt need to fall on their swords, the problem we have in NZ is the amount of debt built up in all sectors, have people learned nothing from 2008

The amount of debt that has built up in Government is actually the more worrying and the rest of the productive enterprise has to not only pay their own debt but generate enough so as the Government and all the bureaucrats who need paying and most of them have private debt which includes their mortgages etc can also service their debts.....and that is the killer.!!!

While I agree with that sentiment, Wheelers mandate includes financial system stability. He stood aside and allowed the banks to flood the sector with money and now the commodity cycle has turned chooses not to facilitate the currency to act as an automatic stabiliser by running an internationally high interest rate. All to stop unproductive housing speculation. It seems we have decided to pick a speculative economy ,reliant on foreign money ,that provides a few low cost service jobs over a production led one.

The farmers that have most of the debt wont service it and the land will be sold to overseas interests and the bankrupted individuals will end up sleeping in their cars, seeking WINZ support.

Socialism always sacrifices good individuals that is how those people who piggy back off productive enterprise always have a cause that keeps them sucking off the teat until of course the whole system either gets cleaned up or we end with communism.

Yer free-market capitalism is really working well , all daisy's at the moment

We don't have free-market capitalism and have never had any system that remotely resembles free-market capitalism although there was a small window back in the 1980's when we were gettting close but the bureaucrats obtained control again and have extended their stranglehold to encompass every aspect of human undertakings.

The implementation of a highly regulated socialist regime that is hideously expensive and delivers much needed business capital and would be profits into the hands of bureaucracy will be the down fall of NZ and every other country who maintains this path.

It doesn't matter where you earn your dry crust from you will be regulated so money can transfer from the productive to the non-productive and that is not free-market capitalism.

Is the problem the fact that too many people have practically no hope of being productive in a modern, highly technological and automated world?

We don't have socialism, either.
We have interventionist capitalism. Still capitalism, though. With corporate welfare as a nice added bonus.

I'd hate to be Wheeler right now .. stuck between a rock and a hard place.

I'd throw fuel all over the fire and cut rates. "Sorry National, the housing issue is in your court. Deal with it" Cut to 1.75 and watch the dollar fall with the shock.

Then again, this is why I'm not a financial expert.

I hope your'e not claiming THEY are experts? If any of them were they would of seen the GFC from about 2006. If any of them were we would not be now running a "too big too fail" financial system. If any of them were they would not be employing zero & negative interest rates.

They are masters of legalized ponzi/pyramid schemes is all.

If anyone has VPN access and a spare hour then watch this. Auckland can only get worse, not even sure if it will get better.

A rich Asian-European alliance may not be such a bad thing. After watching that video what strikes me is that they buy the best quality European culture.East Asians have thoroughly embraced the best of things European and thus do not pose a significant threat to our culture. The wealthiest and safest places in the US have a 70/30 European/Asian demographic. I think I may need them to build my Elysium.

It's the silence - doesn't happen in New Zealand

Have you ever seen any NZ investigations or NZ documentaries prepared by an NZ team or published or broadcast in NZ?

Try this ABC documentary on the rorting of the education system by international students

Pretend it isn't happening

National party believes that Housing Crisis is everybody else problem but them. One should listen to absurd insensitive remarks made by the arrogant minister . This is the Limit. How can People of NZ tolerate and for how long. Government has to be shaken up and that too firmly to get up and take action. Shame.

If the government feels that what they are doing is right, should hold a public meeting and answer to the questions put to them by people of NZ unlike media person, who are unable to raise valid questions and that too strongly as are afraid of upsetting the minister. Am sure many people will attend. If the conscious is clear and doing no wrong, please come and face the public as after all you are our representative and answerable to us.

Ring your local MP.

Have Labour or the Greens come up with any answers ?

together nz first, labour and the greens have the answers,
but could they work together to get them through as a package to set the right settings
some they would,
some not sure they are opposed to each other on
two of the three want to ban non citizens from buying existing nz property
nz first and labour both want to reduce immigration by different amounts
labour wants to build houses for kiwis
greens want HC to use the dividend to build more state houses
green want CG tax on rental houses
nz first want more tax breaks for investors to upgrade them
so in conclusion if they work together I can see some light at the end of the tunnel depending on which policies they pick to run with and which ones they kick to touch

Nothing on debt to income ratio policy ????
Vey disappointed

Should havepublicdebate

RBNZ believe their battle with imaginary inflation is over. They could be more honest and say they are expecting more bad news, and that the policy target agreement breaches are deliberate as 0% is the current target.

Our interest rates have been falling yet our exchange rate is increasing... what gives?

The pound is nearly back at .50, and the usd is heading toward .72.

RB's are huge players of the carry trade. Our own one pays the government a dividend by this method

It has been the biggest disappointment for us to be in time when national government was in power. Shame. When will the government take some substantial action and not just wait and watch. SHAME.

Action? This is what John Key wants. Auckland is to be a city for the wealthy only. Switzerland of the South pacific is what John Key said.

Not a bad idea. The service economy could work on a FIFO model like mining in Australia and salaries / wages / consumer prices would go through the roof. 3 weeks working in Auckland and 1 week fishing in Whangarei.


Hi Nymad

1. It is called sarcasm of course they are independent although sometimes it doesn't appear so...
2. Based on my opinion. I am entitled to an opinion right.
3. Yes however he could have said "Investor demand and lack of supply". Interest rates remain high for this very reason. 99% of the economist agree with that point that NZ rates are higher than need be. Well maybe not 99%.
4. "The AKL crisis is not a product of the actions or inaction of the RBNZ". This statement is wrong. The housing crisis is a product of the Reserve bank and Central and Local government. Reserve bank could introduce tougher lending restrictions such as Loan to Income ratio's 4 to 1 on investors. Controlling the supply of credit would directly impact the market.

I thought the RBNZ wanted a lower NZ $, obviously not. If they want a lower $, cut the OCR, it's that simple. Housing is a separate issue

The OCR is only 0.25% lower than 2 years ago, whilst other countries have slashed their rates, no wonder the Kiwi $ is so high

I call for the removal of Mr Wheeler as the Governor of the RBNZ.

He is incompetent, not contemporary and afraid to undertake any meaningful action to reduce the value of the NZD.

What has he cost the country today in his latest hold of the rate?

It was posted all over a US forex discussion website yesterday that someone on the inside of one of the big US banks already "knew" there would be no rate cut and instructed his followers to BUY. The NZD/ USD pair just kept on trickling up after that until boom at 0900 hrs today the announcement came out.

The whole thing is rigged.

I second that call he should be removed.

He is just part of the establishment and doesn't have the initiative to fix the financial mess that he has helped create by his inability to act. Should it all turn custard there will be lots of finger pointing and I am sure his name as well as Donkey's will stick out in the head lights.

Good article

Exactly my point the Reserve Bank is responsible just as much as the government. Naïve to think otherwise.
per the article :
But Eaqub believes the onus is on politicians, and regulators like the Reserve Bank, to lead us out of this cycle before it ends in a crash.
"When you loosen policy it is easier. When you try and be more restrictive -- even if it's going to be good for you in the long run -- people don't like it.
"This is the job of politics to have those difficult discussions and change the narrative. Ultimately it is about sacrifice; you can't have your cake and eat it too."
How long we have before we face the next crash is anyone's guess.
"Bubbles tend to run further than you expect them to," Gaynor says.

Just what planet does Wheeler live on? He keeps repeating that the Dollar is too high, but somehow expects the exchange rate to weaken. He keeps repeating that the Auckland housing market represents a stability risk, but has done virtually nothing about it. He keeps repeating that inflation will soon return to 2% target, but fails to explain where it's going to come from. other than rising commodity prices. Let's just look at the wider picture.
The world is drowning in debt and this can only act as a drag on global growth. Disinflation is potentially a bigger risk than inflation. What about our own superstar economy? Some really bright spots, but on a per capita basis, GDP growth is anaemic labour productivity is shockingly poor. As was pointed out very recently, compared with the average of 33 OECD countries-including Mexico and Turkey- we work 13% more hours per capita, but produce 10% less.
King Canute was more believable than Wheeler and I agree with Nick Tuffley that the OCR will go below 2%.

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Days to the General Election: 39
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