Much of the huge financial stimulus being pumped into the economy seems as though it is being pumped into the housing market. David Hargreaves says the Reserve Bank has some serious thinking to do ahead of its last two major set piece events of the year

Much of the huge financial stimulus being pumped into the economy seems as though it is being pumped into the housing market. David Hargreaves says the Reserve Bank has some serious thinking to do ahead of its last two major set piece events of the year

The Reserve Bank has a lot of thinking to do over the next month or so.

Is it taking us in the right direction? And should it be changing tack?

It has two major set-piece events coming up, namely the next Monetary Policy Review on November 11 and the next (six monthly) Financial Stability Report on November 25.

These are its last major engagements with the public for this year and will be important scene setters for the country next year. Crucially, the RBNZ's next scheduled Monetary Policy Review is not till February 24, so, if the 'settings' are not right going into the holiday season then it could be a long, hot, uncomfortable, summer.

Just at the moment the RBNZ’s view of New Zealand and what appears to be happening in New Zealand seem to be on divergent paths.

The central bank has portrayed a consistently downbeat picture of the immediate future for our economy.

And yet, to date, actual economic data have kept coming out better than expected.

I'm not prepared to say the RBNZ is 'wrong' as yet. It clearly expects things to get worse and this may be borne out. But to date, things are not panning out as the RBNZ may have expected.

For example, there’s that housing market…

It is absolutely NOT doing what the RBNZ thought it would do, even though the RBNZ had the advantage of knowing just how much stimulus etc it was going to be providing for the economy.

That housing market...

As recently as in its August Monetary Policy Statement the RBNZ picked a -2.9% fall in house prices for the year to September. And it forecast a -6.9% annual fall by December and an -8.9% fall by March 2021, before recovering somewhat to a -4.3% drop for the June 2021 year, and a -0.2% drop in the year to September 2021. House prices were predicted to re-enter positive territory in the year to December 2021 with a +2.3% gain.

What’s actually happening so far?

The REINZ House Price Index for New Zealand, which measures the changing value of property in the market, increased 11.1% year-on-year in the year to September. Remember, as of August the RBNZ was picking a -2.9% fall in house prices in the year to September. That's quite a disparity.

Bank economists, earlier in the piece, had a similarly gloomy prognosis to the RBNZ. But with benefit of the most up to date housing stats – which have shown a post lockdown market absolutely roaring into life – the economists have been scrambling to update and upgrade their forecasts.

ASB economists are for example now forecasting a +9% rise in house prices for the year ending December 2020 and an +11% rise for the June 2021 year.

Rising house prices, at least for the moment, are likely to provide a boost to consumer sentiment and to spending, which should all help, for the moment, economic data to possibly be ahead of expectations.

All of which leaves the RBNZ in a bit of a pickle, it seems.

Mooted moves

It is still talking seriously about the prospect of taking the benchmark Official Cash Rate (currently at 0.25%) into minus territory.

Also it has now strongly indicated that a Funding for Lending Programme (FLP) to provide cheap funding for banks may be introduced as soon as next month.

The plan earlier was to run the FLP in conjunction with negative interest rates, but now that’s going to be done first on its own.

It does mean the central bank could readily decide not to go into minus territory with the OCR. That's important. Because I think at the very least that's what it should point towards doing.

The RBNZ has gone all-in with stimulus. It is taking the approach of basically no amount being too much and it would rather over-stimulate and deal with the consequences later if that's what happened.

But you can't turn off the housing market like a tap.

Right now the tap is running and the momentum may be tough to stop.

'Get in at all costs'

I'm concerned that Kiwis seeing what is happening will now take a 'we must get in at all costs' approach to the housing market.

Does this mean that people who may yet have question marks over their future employment prospects will just fly into the market anyway, and to hell with the consequences?

And does this mean this 'cure' the RBNZ is pushing ends up making the patient more sick?

Does it mean that more risks are going to be taken by people financially than would have happened without the stimulus?

I'm bothered that the RBNZ may be concerned how it would look for it to change direction now. It's been pretty firm about signposting what its planning to do months (even 12 months) ahead. That's good and bad. It gives certainty to the markets, but it does potentially risk locking in the central bank to a course of action that's no longer fitting the circumstances now confronting it.

Risking leaving it late

But if this is a concern for the RBNZ then it does run the risk of leaving things late to reverse direction.

Look, if the Reserve Bank is confident it is reading things correctly then of course it should stay with what it's planning.

But clearly it was not bargaining on a housing market going, in the words of one economist this week, "nuts". And if a change in direction is needed it should make it.

As I indicated higher up the article, one fairly simple tweak it could make would be to, on November 11, indicate that negative interest rates are off the table - and it will stick with the FLP and see how that goes. 

It doesn't appear likely the bank will tackle the subject of limits on high loan to value ratio (LVR) lending at this stage - again because when it removed those in May it pledged they would be removed for a year. I've made my thoughts on the LVRs clear.

So, anyway, I don't envy the job the RBNZ has right now. But it has plenty to think about over the next few weeks. And it really needs to make the right moves in November. This is crunch time.

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No way, who would have thought. Thinking doesn't seem to be on the RBNZ agenda right now.

Thanks, Captain Hindsight.


Clearly prices will continue to rise at 10-15% pa for at least 6m now that RBNZ has fuelled them.
LVR removal huge error, needs reversing
Plus RBNZ seems to make no reference to all the billions that NZ is spending at home rather than abroad, which pre summer, FAR outweighs what tourists are normally spending here. This is giving Kiwis businesses etc, a boost unanticipated by models of RBNZ. people are bidding $200k over CV, and CV is itself 3.5 years out of date.
Also, prices barely rose from March 17 to October 2019, meaning pent up demand from folk wanting to sell but unwilling to put house OTM. Now those potential vendors are really sellers and are OTM ATST as buyers been rocket fuelled by int rates and LVR. Combination is most unfortunate except for those able to leverage (investors) and those sitting pretty and those wanting to leave Auckland with a shed load of equity and to area of less pop density (see NSC sales). The thinkers at RBNZ do not seem to include much critical input from REAs. And RBNZ doing what it is doing whilst gov spending is rocketing, also never gets a mention re money supply growth. Which is huge. Clearly RBNZ thinks that a huge drop in spending to come due to rise in unemployment, needs a huge counter effect from them. But both sides of this equation seem to have been miscalculated. Inflation in asset prices will (finally) feed through next year to CPI and RBNZ will not be able to raise rates to choke it off. So, real wages will fall as a result and that will not be what RBNZ and gov want. Both parties have over-reacted.


We are very much an "eggs in one basket" economy. Thanks RBNZ for creating a basket case - a person who is helpless or incapable of functioning normally.

My understanding is , is they want it to, as it supposedly stimulates spending. But I wonder how big the hangover is going to be, because history as shown that bubbles usually burst eventually. NZ is seen by the rest of the world as having one of the largest property bubbles, but that appear to have been the case for over a decade.

Interestingly the effects of LVR removal are felt with a few months of delay, however should they be serious about economic stability they could pull the plug and revert this decision with immediate defect today.

Property is going a bit crazy in a few parts of the world right now.
In touch with my brother in Sweden this morning, outer suburbs and rural lifestyle areas within 1.5 hours drive of Stockholm are going mental- about 20% higher in the last 6 months. Stockholm itself, much less.

It's the Covid city flight and is happening in the USA as well.

It's no small coincidence that in Zombie apocalypse movies that people flee the city to the safety of the countryside.

I suspect a rather larger part of it, in reality, is that people and companies now know how feasible it is to Work From Home on a more regular, or permanent, basis.

Happening up in north Auckland, too. People obviously want to get out of the city, without being too far away.


I agree with the writers sentiments. Six months ago our economy could have easily tanked, sentiment alone could have driven us into a depression. The RBNZ was right to throw everything including the kitchen sink at it. Now we can see the world is not ending - at least not due to Covid. The RBNZ should now tweak upwards - very gently. The game they have been playing has been very lopsided to the advantage of those that already owned assets such as housing and shares and against those starting out. The rich have gotten richer and the trickle down effect only exists in the fantasy of National Party philosophy.

Yes, the only trickle down is into the same asset class. Bob sells to Bill, Bob buys off Sue, Sue buys off Sam, Sam moves to Gold coast.

Sam moves to Gold coast.

No bubble on the Goldie by all accounts. It wouldn't surprise me if it weren't a kind of Ground Zero for the inevitable depression (if it's not a depression already).


Your comment is very commonsensical, Wilco. Unfortunately, common sense is sorely missing within the RBNZ. They will not gently tweak upwards, but they will continue in their reckless policies regardless of the external and internal indicators.
Until the majority of hard-working Kiwis fully realize that they are subsidizing unproductive speculators at the expense of the real economy (with ultra-loose monetary policy, landlords welfare, unbalanced tax system etc.), nothing will happen: the RBNZ are a bunch of unaccountable and un-elected bureaucrats who seem hellbent on pursuing policies that have failed in Europe and Japan, creating significant structural distortions and a weaker financial system.


A central bank (and government) housing ponzi. What a bizarre world we live in these days.

Try explaining this to the children of 2050 - yes the central bank and government purposefully introduced policy to make it more difficult to buy a home (FHB) but made it easier for people gambling with leverage (investors) to buy more houses and make the situation worse. It really is daft.


Is it bizarre?
On one hand yes. On the other no - in many respects totally i n line with behaviour over the last 20 years


Who said behavior of the last 20 years was rational or non-bizarre? We've had a global financial crisis followed by this (whatever we want to call it?) and people thinking we can create bigger asset bubbles to save the world from asset bubbles in 2008. If that doesn't sound mad, I don't know what could be more so. That Einstain quote comes to mind about doing the same thing but expecting a different outcome is madness. So I think we've gone a bit mad - those who are benefiting from it will deny it is madness, like the SS would deny that the holocaust was bad before they lost their position of power and were held responsible for it.

Deep down I think a lot of people realise that what is unfolding at the moment isn't right (and feel a sense of guilt), but do they have the courage to take a moral as opposed to a financial position on it? Probably not - that's just human nature.

Exactly right. One of the major causes of the GFC was asset bubbles, and our RBNZ is hellbent on creating an even bigger one.
You are completely correct, this is madness. And criminal incompetence on the part of the RBNZ, I would add.

Part of me feels that central banks (mostly in Anglo-saxon countries) are now in part, treasonous. We needed asset prices to regulate, but instead they've made things worse. So in a sense, they're working against what is, from a utilitarian perspective, the best for the most people over the long term - i.e. what they've done could well make things worse not better (but instead of happening in 2020, it happens in 202X). And as asset holders, they are benefiting themselves yet we have no democratic way of voting for central bank representatives, nor the policies they implement. Central bank/ers have turned into self licking icecream cones.

It's not just the last 20 years guys. And come on IO, you've read plenty of Dalio. Dalio correctly states that the most common strategy in an economic crisis is currency devaluation. There have been currency devaluations for almost as long as there have been currencies.

The bubble will burst *if* there is a credit crunch or *when* the money supplies starts shrinking or *if/when* sentiment changes and people just refuse to spend (or an unholy combo of all of the aforementioned). But it seems that as long as the RBNZ can keep jaw boning the banks to lend and buying government debt so that the government can keep chucking money around, the aforementioned is less less likely to happen. It's almost like a magic trick, as long as you can't see the slight of hand and don't try to figure it out, you just suspend belief. I don't think RBNZ and the government magic tricks will have infinite ability to stimulate though. Things still have to be produced, services still have to be provided, people have to want to keep spending and banks have to want to keep lending. Now with the FLP programme its hard to imagine that banks will stop lending. It's also hard to imagine that there will be any sustained period of no production or services. We've already been through major global lockdowns and so have a better idea of the impact of that. So then the remaining factor is sentiment. Will people remain exuberant? Will people remain employed? Will their appetite for debt and spending perpetuate?

But for now at least lending is increasing, appetite for borrowing and spending is strong *and* the money supply is up;

Another great post Ginja, although I miss the absence of the word "bondage"

You're creepy.

Thanks ginger - great insights (as usual).

"whatever we want to call it"
A black swan event right ... yeah riiigght

Removal of LVR makes it easier for both the first home buyers and investors to buy houses. Also, both FHB and investors are using leverage.

So the reserve bank policy encourages everyone to buy houses. But, it makes the bank loans far more risky and makes NZ financial stability (supposedly the RBNZ primary focus) more shaky.

purposefully introduced policy to make it more difficult to buy a home (FHB)

Maybe you missed this recent headline: First home buyers are taking a record share of the housing market

'First home buyers, with Mum and Dad as guarantor and paying 50% of deposit' are taking record share of the housing market.

Some of them, plenty out there that can save and buy off their own earnings. No bank of mum and dad for us.

Define "plenty"

Is the market peaking? I've seen my share of predictions which have been wrong, and at the moment all predictions are for more rises.
The sale of a house in Upper Hutt sold a couple of weeks ago, has now fallen over due to a mortgage issue , and now a back up offer has fallen over after another similar issue.
It could be an LVR problem? , but I don't think so. An insurance problem?, its brick and tile, so maybe, but unlikely, what is going on this week?

See in the article how inaccurate the RBNZ were in their predictions, these are the so called experts.

I don't think anyone knows - the level of intervention in the market makes any predictions based on the fundamentals of the economy impossible.

Speaking as a software engineer and armchair economist I've thought the market was crazy and couldn't go any higher since like 2015. Shows how much I know.


Is it risky? At a time when we need a small amount of targeted stimulus, it should have been obvious what to do - ensure businesses can access funding to maintain unemployment. This would have meant restricting any funding to business loans at very low interest rates via the banks. Did they do this? Hell no, they threw the rule book out and allowed the banks to lend as much as they wanted to anyone. They did this knowing that the banks have most of their lending in residential mortgages. They could have restricted lending to housing by say increasing LVR's, to ensure it was targeted. Instead, they threw out LVRs, claiming the elusive "wealth effect" will get us through (hilarious), while greatly increasing systemic financial system risk.

I would suggest that they know exactly what they are doing. They see an economy designed to flow money to asset holders, particularly property holders. It is obvious to everyone, that when you have such an economy, lowering interest rates and borrowing costs while the gubmint prints money is going to cause those assets to increase in value. It's blindingly obvious to anyone that looks. So they knew. They did it anyway. And they aren't turning around anytime soon, with more housing market fuel coming in the next round of stupidity.

Since they know, I would suggest it's deliberate. I really hope a good investigative journalist is finding out why, but I doubt it. I would find it entirely unsurprising if Orr & Co are sitting around with the heads of certain large private financial institutions discussing future options and how they can all be better off.


Brilliant analysis.
And is our 'transformative' government giving any thought to changing the legislation governing them?

Is it risky? At a time when we need a small amount of targeted stimulus, it should have been obvious what to do - ensure businesses can access funding to maintain unemployment.

Well that's what they're doing. They believe a house price crash will decimate the economy (which I think it is a highly likely outcome) because house prices underpin business and consumer confidence (in itself an indicator of an out-of-control bubble). There is no house price crash (or consensus of it yet) so arguably they're doing their job. Remember, they don't have the luxury of being able to learn how to do all this in a flight simulator. They're running by the seat of their pants.

Of course the more of a bubble you get now, the higher the likelihood of a crash in the near future, at which stage the RBNZ will be largely out of ammo. Especially if the borders are still closed and the foreign buyer ban in force.

And why is business confidence linked to house prices? It's because of the reckless property bubble created by the RB!

Your reasoning is sound but it is circular, surely you must see that? "We created a bubble, which everything relies on, therefore we must keep the bubble inflating, to ensure stability (stability being an ever inflating bubble)". It's that sort of reasoning that will cause a nightmare scenario when they run out of ammunition or there are so many social issues much of the country is unliveable.

I would argue they are doing the OPPOSITE of their job, from a long term perspective. For the next year, sure they are doing their job.

When you see the top dogs at RBNZ resign, that is when you know the s@$t is about to hit the fan. They will know first. Near enough guarantee that if they aren't resigning into retirement, they will then pick up some sweet gigs in top management positions in the big banks.

The introduction of LVR's as designed to reduce the risk of financial impact to the economy in the event of a market downturn. Given these have been in place for a number of years you would think banks should have a level of resilience.

Given these have been in place for a number of years you would think banks should have a level of resilience.

They are, based on the 'ratios.' Much of the bank media propaganda out of NZ and Australia emphasizes the point.

There are two solutions to the problem. The first is so incredibly complex and painful that it cant be articulated. The second solution is as easy as pi, destroy the purchasing power of money. Which route do you think the central banks and governments will take?


You can understand how things like 1929 and the holocaust happen now - people collectively become stupid (and fail to think).


This comment is quite insightful, and its not pretty.

You can understand how things like 1929 and the holocaust happen know - people collectively become stupid (and fail to think).

I think your thinking is 100% correct, but I also accept that I could be wrong. By knowing and accepting limitations of your beliefs, people are in a good position. Following the herd right now is not necessarily a wise thing to do. Momentum trading perhaps.

As for the holocaust, you can already see people projecting their anger and frustrations on others.

Yes I'm still FB friends with people in the US - the rate of decay over there is scary. The posts and comments to those posts are completely mad. People who I thought were decent human beings are now either Trump lovers or haters (no middle ground) and appear to have lost the ability to have rational thought - they've gone tribal (Trump is god, or Trump must die), their mental capacity appears to have regressed to 'me vs you' as opposed to 'us and together we move forward'.

I can see how somebody like Hitler gained traction when scared and confused people become vulnerable to a dictator or to false narratives - and the people lose the courage to think independently and outside the accepted norms of the herd.

"I can see how somebody like Hitler gained traction when scared and confused people become vulnerable to a dictator or to false narratives - and the people lose the courage to think independently and outside the accepted norms of the herd."

It's hard to think independently and rationally when your back is against the wall and you're too busy just trying to make ends meet.

It's hard to think independently and rationally when your back is against the wall and you're too busy just trying to make ends meet.


Same in the UK. I have a broad spread of social media relationships. 5 years ago, there was less screaming at each other from extreme partisan corners. One of my family members has gone full alt right and was arrested for hate crime and banned from the internet (that was before the pandemic too). I have friends and colleagues who no longer acknowledge each other over Brexit and Trump (some love, some hate, no one acknowledges shades of grey) and a whole bunch of my friends have gone **extreme** left, they have all become polyamorous, gender queer and constantly writing online about gender/poly issues with so much hate and judgement of anyone who doesn't think exactly like them...they don't discuss anything else, there are no other issues. They all now hate JK Rowling and think she is the devil. And if you don't agree, you are cancelled. Same extreme thinking has happened with my previously right leaning friends/family who now insist that all Muslims are pedos and if you tolerate Islam you hate Britain and want your kids to be Muslim sex slaves. I mean, I'm exaggerating to make a point, but only a bit. People on both sides of the spectrum have gone nuts and both are as unreasonable and extreme as each other. I have just stepped out and don't engage. I have tried reasoning with people, it's not cool to be reasonable any more. No one wants objectivity.

My Mum (in the UK) went to the post office last month, she is a recent cancer survivor and in her 70s so needs to be careful and not contract the virus, understandably she was wearing a mask. A random woman pushed her and started screaming at her that she was "pathetic for believing the fear mongering" she shouted "i'm not wearing a mask and i'm fine, you make me sick". And then she followed my Mum as she tried to leave the post office, continuing to rant at her. My Mum was so upset, she has barely been outside since March. The woman was in her 40s/50s. The radicalisation is occurring across all age ranges.

I agree, the polarisation by political divide (and age/sex/race) is becoming scary. This US election could be a catalyst for proper unrest and some of the stuff going on there is hard to believe (open carry right v BLM, shootings, riots etc). We are so fortunate to live in a largely inclusive non-sectarian society. If I was one of the 1m Kiwi's living abroad (400k outside Australia), I would be engineering my return asap. There is a reason Peter Thiel obtained NZ citizenship.

Several years ago, my view was that US was slowly moving towards a civil war due to increasing polarization. This year has resulted in my viewpoint being revised to a civil war in the next couple of years.

From a political perspective, I used to despise Karl Rove and Newt Gingrich, and their politics of obstruction. The current democrats have taken this abhorrent behavior to entirely new dimension. They are aided and abetted by the censorship from MSM as well as silicon valley. The US is a complete $#!^show now.

If only they could get away from the current very corrupt two party system... sadly, they currently have a government that reflects the societal mores of the general populace (one of the big reasons as to why I pulled the eject handle about 15 years ago).

Theil is a smart dude - his book Zero to One I found to be very good.

by Te Kooti | 25th Mar 20, 1:54pm
I'm thinking a few hundred angry pakeha with term depo's isn't going to frighten too many people.
by Te Kooti | 2nd Jun 20, 1:56pm
In a nutshell, education and opportunity. How many Maori and Pacifica are on NZX Boards, Crown Boards, Councils?? There are talented Maori & Pacifica but they are locked out. I know several with phd's who just can't break through. Why shouldn't there be quota's for us like there is for white women?
by Te Kooti | 14th Sep 20, 12:50pm
You could just give us our land back and bugger off?
by Te Kooti | 9th Jul 20, 11:05am
Speaking of the cosy pakeha directors club, what happened to Jenny Shipley in the end?

What are you waiting for Pendejo, I'll pay for your ticket.

Well, centrism has failed so it's understandable.
In my opinion we need policy very similar to the Greens - well left of centre, but far from extreme (sorry right wing apologists, the Greens ARE far from extreme)

“The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum – even encourage the more critical and dissident views. That gives people the sense that there’s free thinking going on, while all the time the presuppositions of the system are being reinforced by the limits put on the range of the debate.” - Noam Chomsky

All the messgaes in the mainstream media I have heard, is that people would be stupid to not buy more houses with interest rates so low, for all teh tax free captial gains. Although a CGT isn't the only solution to the housing crisis, it could help.Is is stupid IMO that we don't have any real taxes on houses, when there has been a hosing crisis for so long. OZ and UK have a CGT and other property taxes, and their bubbles aren't as bad as NZ's. Infact apart from London where people can earn a lot, UK property prices now look cheap compared to NZs.


The income / house price mismatch is about the worst thing we can do to young people and all citizens.
Pretty much up there with cancer.
All this reserve bank talk and GDP, stimulus, balancing chatter is twaddle talk.
It enables us to forget low income New Zealanders could own houses in their twenties, have families and even a bach just meters from the sand.
The big talk makes us forget what it's really about.

The Herald ran the results of a poll yesterday:

"...just 6 per cent of Kiwis in the latest NZ Herald-Kantar Vote 2020 poll said house prices needed to rise. By contrast, 52 per cent said prices needed to fall and 35 per cent said prices needed to stay about the same."

Bindi had trouble working out how it could be so: "Real Estate Institute's Norwell said perhaps Kiwis believed steady price growth was healthier than a booming market that was too fast-paced and could cause instability."

"Real Estate Institute's Norwell said perhaps Kiwis believed steady price growth was healthier than a booming market that was too fast-paced and could cause instability."

She spun her own narrative to 'explain away' the opinions of the 87%.

Her other suggestion was that people who already owned homes might be worried about their kids getting into a property. Notably absent was any entertaining of the idea that ordinary kiwis might actually give a stuff about people outside of themselves and their own immediate family.

But I guess this is how someone like Bindi thinks - it's literally inconceivable to her that people might care about something other than their own wealth and stability and that of their own children.

Guessing shared equity schemes, including between parents and kids, will be the next thing to keep property prices going up. The government are already looking at it, as a way to get more people into their own homes. Allows house prices to go even higher.

And makes it even more difficult for those who don't have asset-owning parents. I propose a test: can two young people with ordinary jobs that require some education (nurse and teacher, say) buy a lower quartile house in the cheaper suburbs of our main centres within 10 years of graduating, without any financial backing from family. If not, there is something seriously broken.

The test is easier than that. If you can't buy a house with 3 x median income, then the system is dysfunctional.

Up until the early 1990s, housing only cost this amount, and in other jurisdictions still does.

Sure, but I can see some merit to the argument that the total cost of a house that's 3x median income varies hugely depending on interest rates: so measures like 'can you save a deposit in a reasonable time' (5 years or so) and 'can you reasonably expect to spend no more than 30% of your income on mortgage payments for the life of the loan'? Could be more useful (I know this site uses 40% in their affordability calculations, but that's way too high I reckon - by the time you add rates, insurance and maintenance you'd likely be spending at least 50% of your income on housing costs).

When the majority can’t afford a house then maybe that’s when we will get off our arses and start protesting!

The rbnz should come out now and say they won't allow mortgages longer than 30 years. Otherwise we might see 40, 50 year mortgages (which are possible with very low interest rates) which allows for even higher house prices to be paid.


We can only collectively hope RBNZ operate on the basis of evidence, not the "refuse to turn" that has been bred into politicians by media squawking about every u-turn as if it's a bad thing. Evidence changes, mistakes are better fixed, and when a hole's too deep there's value at least stopping digging.

that has been bred into politicians by media squawking about every u-turn as if it's a bad thing. Evidence changes, mistakes are better fixed

The point is that the government are supposed to be the experts. When they say the solution to problem A is programme X, they're supposed to have done the work and come up with the right answer.

If they later say actually programme Y is the solution to problem A, or actually the real thing we need to address is problem B, then it means the government aren't the experts they presented themselves as. So that is worthy of question and potentially criticism.

If the government said "well we think that maybe X is the solution to problem A, then we aren't sure" that might be better - but then you have the other problem, where you wonder why you elected these people into these highly paid powerful jobs if they can't actually do them, and perhaps we should have elected the opposition instead.


"Rising house prices, at least for the moment, are likely to provide a boost to consumer sentiment and to spending"
So those who aren't 'in' the home-owning market - you know, them there citizens who want to step onto the First Rung of the Property Ladder; the very Rung that supports all of the rungs above it - are going to have their sentiment boosted by the need to tie up even more than every cent they earn accumulating a deposit? I'd find that anti-boosting; depressing, personally! And I'd stop going to the cafe to buy a coffee, so as to save what extra cents I still hadn't applied to the cost of my current shelter.
But I could always cheer myself up by raiding my future; stored away in my Kiwisaver Account, I guess.

If only some of the DGM commenters had spent less time theorising about ‘the great reset’, and more time predicting the great price growth. We could all be celebrating great gains rather we have to listen to their continual complaints!


Yes we can all become rich together by creating an infinite amount of debt! Great success!

If us kiwis had had the smarts to make saving for retirement compulsory, way back in the early 90s when the question was being considered then you would have a richer populace... oh no shock horror we mustn't make sensible choices


Personally, I'd be delighted for the country if the 'value' of my home fell by 50%. It would mean I could sell, and the next buyer would pay half what they would today, and have lots left over to do other things in life. Likewise, I'd do the same. This sitting about and getting wealthier by watching 'the numbers' increase is all a bit boring. Doom is being held hostage to a limited set, or worse - one, set of opportunities.

Only if you have no mortgage. It's not all about you bw.


And of course, you've hit the nail on the head!
It's THE SIZE of our mortgages that are wrecking our lives and the option of doing more than just paying them off, not the concept of Debt as such.
More of what makes us sicker isn't the answer.

No, but house prices collapsing by 50% and trapping hundreds of thousands of home owners in a negative equity situation they can probably never escape will result in the biggest brain drain in New Zealand history.


I'll buy your house for half it's value to get the ball rolling

I've already been around that buoy, a couple of times. It's called Divorce. And as many will now probably find out; in these hard times as they follow in my footsteps, in those circumstances ( as with job loss?) it's unavoidable.

The value of a property is a matter of opinion, but debt is real.

Based on the behaviours I’ve been witnessing there isn’t much to worry about losing.

If they are trapped in situ, they can't be drained anywhere? They HAVE to stay put - and yes, that's probably coming, as it has done in so many places not that long ago.

I assume one needs to seek permission from their bank before they sell a house with negative equity?

FHB might have to ask Mum and Dad for some equity to pay the difference and get them unstuck.

Whoops, reported by accident.

Go have a read of the memorandum of mortgage you agreed to when you took out the mortgage, you are pretty much subservient to the bank in all matters relating to the property.

Hah....hah........hah.....ahhhhh......yes who reads those right????

It is about the bigger picture. It has to come down because it is unsustainable. 50% is a good number. Very bad for the FHB who has been sucked in. They were let back in to give the property investors a way out. The FHB is the sacrifice in this sordid story.

We have to keep in mind that the very people who let the FHB back in were the people flicking their investor properties. I really dont want anyone to have negative equity. But without a correction half of Nz will head to OZ because it is a no brainer. Why would you stay as a young professional paying tax and exorbitant cost of living. Then when you have saved a deposit compete against a non taxpaying and non working property investor at an auction..

I don't see why we can't do something to mitigate the harm to first home buyers. We've had the wage subsidy to keep people in jobs, and mortgage deferrals and lower interest rates to keep people in houses. No reason the govt couldn't target say a 10% reduction in house prices and put in strategies to help recent first home buyers (NOT investors). In a lot of cases a 10% reduction would take prices back to what they were at the beginning of the year, so unless you'd bought very recently it wouldn't affect you much. We could always just pretend: we've been pretending that non performing loans are pretending. Why not pretend that those who are in negative equity actually have positive equity.

"bw: Personally, I'd be delighted for the country if the 'value' of my home fell by 50%"

bw, I'm happy to oblige, when can we meet so I can buy your house for 50% of its value?


This makes me think that the black swan event caused by Covid might not be economy downturn or unemployment or falling housing price. But the real black swan could be RBNZ's overreaction causing huge amount risky debt overstimulated assets bubble. We might've been wrong from the start.

That's a great perspective.

I was only thinking that no one has mentioned the "black swan" lately. The RBNZ wrung the black swan's neck. In it's place we have the rising housing phoenix bird. Strange times.

The black swan could well be with us but are we conscious of it?

Think that is the point of Talebs work - that it’s easy to spot in hindsight but very difficult to be conscious of when it actually presents itself/becomes detectable.

The black swan could well be with us but are we conscious of it?

No. Lack of consciousness is why it's a black swan in the first place.

Yes good point - I guess this is why the GFC was a surprise to many, but not others.

What I observed while watching the GFC peak and unfold was people not wanting to process data that didn't fit with the desired outcome they held in their mind (i.e. me making money from my investments/decision making - confirmation bias - my decisions are always right or the best). Very similar to what I see on this website and from talking to people about things like property investment. They don't want to acknowledge or talk about the downside risk or the things that could go wrong or what might be wrong about decisions, or the data points used to make those decisions.

You may be right about potential negatives. But you have demonstrated the same bias for potential positives and you keep demonstrating the same bias when things do not turn as you expected. Yet you seem to be oblivious to this. I noted the same for followers of different religions. Ask a Muslim to tell you what is logically wrong with Christianity and they will do a fantastic job. A Christian will do as equally a good job for a Muslim or a Hindu. Yet, they will remain totally oblivious to glaring logical holes in their own faith.

After all this is decision making under uncertainty and different people will have different approaches to investment decisions. Some would be too risk averse, some too reckless. Some more data and information driven, some more into behavior and trends. Some blindly running this way and that without really knowing what they are doing.

Sure which potential positives shall we talk about?


The Reserve Bank have sort of backed themselves into a corner now because the repeated narrative among property investors Ive talked to is 'no matter what now, you can't lose'. 'Interest rates can't rise and if prices start falling the central bank will just throw more money at it!'. So now we have an asset class, of which the buyers think they're indestructible because of the interventions of an outside player, who people think have absolute control of the market. It might be a bit of a surprise if/when they realise that they don't.

An asset class with high tax-free returns and no risk. So it would be foolish to put money into anything else - starting a business or buying an education for instance.

Sure and that will work for a while until it doesn't. Be like giant game of musical chairs and everyone will try and find a seat (figure out who can pay what debt and who can't). Those that are new to the game might find themselves without a chair to sit on.

The potential answer is inflation. Prices of things must go up, as rent will rise, and people will need to earn more, so goods and services need to go up in price. But will the RB increase interest rates if inflation goes up?

I expected house prices to pull back 10-20%, so missed out and am still waiting. I can't believe that there isn't some degree of pushback from the media or general population, only occasional mention of 'central bank independence' from political influence, but what the hell, if their mandate is price stability, then why aren't they being challenged or held accountable? Is it general ignorance on the part of the media or population at large? On the bright side (to my thinking), you couldn't devise a better way to stimie excessive growth in NZ, as everyone's capital will be going towards paying their mortgage, young people will be likely leaving in large numbers, and those that remain will be delaying and having fewer children. Maybe they have a plan afterall!

Everyone still thinks they can be a winner by beating other people. Not realising that isn’t how this works.

I'm less convinced about any pull back. Personally I expect it to stagnate once this current surge ends. The majority on here, myself included, have simply been wrong about houses. It's the reopening of the borders and surge of immigrants that makes me think a pull back is unlikely.

Fair points. I still think though that a financial crisis is quite possible in the next couple of years. I wouldn't bet the house on it though.

I still think though that a financial crisis is quite possible in the next couple of years.

I think there's a 'financial crisis' happening right now. You don't need the ruling elite or Granny Herald to confirm that for you.

I agree - its just been masked by bandaids/short term remedies (but nothing to actually fix the underlying issues).

The property market (and tech stocks in my view) is a bit like a person with a recently broken leg, who while still high on pain relief, decides to show off to his friends by running out of the hospital. The question just becomes how far down the street will they make before requiring the ambulance. Will they make it past A&E. Possibly, but if they do, the risk of bleeding to death in the real world outside the hospital simply increases.

Govts in developed countries are paying people's incomes and paying for businesses to stay afloat. Banks have been essentially 'nationalised' through the central banks. If that's not a 'financial crisis', I don't know what it is. Like I said, people need confirmation from the media to understand the reality.

True - perhaps it won't be for a number of years that the man in the street understands the significance of what is going on right now and the implications for the future. We might need a 'Big Short' movie or similar to raise awareness - but even then, do most people care? Probably not (in my experience) - as long as they're not defaulting on their debt and the house CV keeps going up - life is good.

By financial crisis I mean a credit crisis.

"the reopening of the borders and surge of immigrants"
But what will that look like?
In the last 20 years the World has experienced probably a dozen outbreaks of one sort or another; from AIDS to Zika to Ebola to SARS to Swine Flu and now to Covdi19.
This time we reacted, but if there is one certainty to any of this - it's that 'another one' will develop ( probably in China as many of them always have) and what will we do then? Ignore it, because it might 'only' be SARS?
Future immigration and travel is likely to bear less resemblance to what it was in 2019 and more like what it is today for quite some time.

AIDS had limited transmission and predominantly affected gay men, drug addicts and people in poor African countries, so whilst there was some moral panic there was no need for lockdowns. It was on the news plenty though and many people were pretty freaked out about it.

Zika and Ebola happened in the developing world so the countries with money sent aid and didn't panic. The cases that got outside of the third world were contained. It got plenty of media coverage.

I was an NHS Clinical Manager during the Swine Flu pandemic, we had to send patients home because we had insufficient staff. The Swine Flu policy was very strict, so I didn't experience that as an "under reaction". Same was true for SARS, the countries that experienced it had a very robust reaction. An estimated 150, 000 to 575,000 people died from (H1N1) pandemic virus infection in the first year of the outbreak, we're not at a year of Covid yet but the death toll is significantly higher. China locked down as strictly as they did because of their assessment of the risks. SARS2 has been much more contagious than SARS1 (but less fatal), however, with pandemics you can assess the level of contagiousness much more easily than you can identify the full health impact. So, for a highly contagious disease, in the early stages while your data is limited, health policy errs on the overreact rather than under react.

I think the ugly, ugly geopolitical situation, pull back from globalisation and resurgence of nationalism could have *just* as much, if not more, impact on immigration and tourism than the virus. Also the cost of flights. If airlines don't survive or need to massively prune down, less competition could lead to higher costs. Much will depend on government support, how long this continues for and what sentiment will be like by the time the pandemic is over. It's impossible to tell at this stage what will happen. There are inflationary *and* deflationary forces at play.

Re: Push-back from the media. I have recently noticed that any comments I make on Stuff articles, in which I liken the RE market to a Ponzi or suggest that FIAT money creation is over-inflating house values, tend not to get published...

It is disingenuous to say this is an unintended consequence. I suspect the RB and our govt know that rising house prices are the lesser of two evils.

Shame about the moral hazard I guess - but who needs morals in 2020?

It is an engrossing situation. Behavioural economists should be mining this for years to come.
RB has underestimated the power of psychology. -- the sheer power of FOMO applied to an asset class as emotionally charged as NZ property.
I can't wait to see the next twist in the story.
It's also revealing seeing how bank economists are rapidly reversing their forecasts. It shows how inaccurate their predictions are, too -- probably because they expect rational behaviour.

The thing is though that if we’re this emotional on the way up, we’ll be just as emotional on the way down. It’s how our brains work.

Indeed, Preferences trump Plans. GingerNinja (ears on?), with a behavioural economics perspective, will perhaps chime in here.

Ha. I think economic predictions during this pandemic are delusional. Behavioural economists have uncovered many things, we see strong evidence for certain biases, herding behaviour etc, but behavioural economists have insufficient data for a highly globalised, indebted, financialised economy *in a pandemic*. We've had epidemics in modern times but they have been relatively easily contained. The last major and widespread pandemic was the 1918 flu and that was a weird time economically (after WW1) so the limited data we have from that time is too noisy to extrapolate from. The advanced state of medicine compared to 1918 alone would make a comparison problematic.

I am sure that we are all busily churning out lots of useful data that will be studied for decades to come but I don't think there is any precedent for our current circumstances to make predictions. Central Banks and bank economists have to make predictions, it's expected but I am ignoring longer term predictions and just keeping a close eye on the fresh data as it comes in.

I don't know which forces will prevail. I would never have predicted mortgages holidays, RBNZ funding for lending or negative rates in NZ. I would never have predicted global lockdowns, travel bans and government subsidies at this level. It's all unprecedented so bugger knows.

All we can say for certain is that there is debt everywhere and the global economy is extremely vulnerable.

Population growth in NZ overall is negative right now. By thousands per month. Nobody knows the granular data of who is coming in and who is going out. If they do know they are not telling. There are hundreds of dwellings under construction right now in Auckland alone. This is musical chairs. People going round and round swapping chairs with each other. Leaving rented chairs and buying their own chair. Upgrading their chairs. Buying chairs in the hope that others will pay rent to sit on them. But the game is flawed because we are adding more chairs instead of taking them away. Eventually, there will be some empty chairs that no one wants to sit in. Either nice new shiny ones or old and grotty ones. Their owners may not be able to afford the holding costs. 2% interest is still a lot when you have NO income.

60,000 returnees have arrived back in NZ this year - that's a lot - equivalent to 20,000 houses worth

I think that both perspectives are correct, the increased number in country as well as the reduced net since covid. Here are some quotes from your referenced article.

Statistics NZ estimated that in the 12 months to August, there was net population gain of 71,500 people from migration, with 98% of that gain occurring over the seven months prior to border restrictions being introduced.

"Many people who arrived in New Zealand in late 2019 and early 2020 have not yet returned overseas and are staying longer than usual," Islam said.

"Typically, there is a peak in New Zealand citizens migrating back around December each year, however last December this peak was significantly higher and remained higher than usual through to March 2020.

"There was also a higher number of migrant arrivals on visitor visas and other temporary visas, including seasonal workers, who typically would have returned overseas by now," he said.

15,000 houses worth if they're in I right??!?!?!

These are the raw stats for the previous 30 days. People in vs people out. Can assume that pure tourism is pretty much excluded now. NZ Passport Arrivals 6837 vs departures 3144. So + 3723. But other Passport arrivals 4284 vs departures 10666. So -6382. Overall net loss of 2659 people. Doesn't tell us a lot. Apart from that, we are losing more people than we are gaining. Many long term residents never want or need a NZ passport. Also, everyone arriving now is going to SAY they are long term to at least avoid paying for their isolation hotel stay.

From personal experience - I know of 3 people that were "hoping to get resident visa" situation whose "highly skilled" jobs dried up, so they had to head home. 2 Chinese and one European. Gels with the figures as you state.

Is that an orificeal number?

The RBNZ needs to address two unfortunate aspects of monetary and regulatory policy action.

Cutting official interest rates in half so frequently (five times since 2008) without investigating why term government bond yields are persistently forecasting virtually nil economic growth despite central banks' best attempts to kid us otherwise.

Banks extending 60 % of their lending to one third of already wealthy households to speculate in the residential property market because the RBNZ offers them an RWA capital reduction incentive to do so.

I guess we will need to find out the hard way that simply creating more debt doesn't solve debt issues. It only kicks the can down the road.

1) 'No evidence of a positive impact of QE through the bank lending channel.'

A working paper from the Bank of England (BOE) asks:

How do banks adjust their balance sheets in response to unconventional monetary policies, and what are the implications for the real economy?

The paper's title is; Does quantitative easing boost bank lending to the real economy or cause other bank asset reallocation? The case of the UK. The authors are Simone Giansante, Mahmoud Fatouh and Steven Ongena.

The authors note the Bank of England's Monetary Policy Committee (MPC) didn’t expect "strong transmission" of its asset purchase program (APP) through the bank lending channel. Nonetheless given the Reserve Bank of New Zealand (RBNZ) is now pursuing quantitative easing (QE), the report's findings are of interest here.

We analysed the reaction of the balance sheets of UK banks to the APP of the BOE. The comparison of lending behaviour of treated or QE banks with a control group that is unaffected by the QE treatment helps uncover the mechanisms by which monetary policy operates and its potential real economy implications.

We used a unique confidential dataset of APP that identifies QE treated banks, i.e., those which received reserves injections through APP. The MPC didn’t anticipate strong transmission of APP impact through the bank lending channel. In line with that, our difference-in-differences exercise finds no evidence of a positive impact of QE through the bank lending channel.

Treated banks appear to have reacted to QE reserves injections by reallocating their assets towards those asset categories with low risk weights (government securities), promoting carry trade activity. These results are robust even when controlling for demand-side changes using loan level data and borrower firm fixed effects.

The combination of lower gilts yields, resulting at least partly from QE and risk-based capital requirements might have given capital-constrained banks the incentives to shift their portfolios into high-yielding assets with the low risk weights in an attempt to optimise the use of regulatory capital. Thus, the presence of risk-weighted capital requirements could limit the direct QE impact via the bank lending channel, as they may induce inadequately capitalised banks to substitute away from lending to the real economy. Link


Who is pulling the RBNZs strings, monetary policy is destroying the social fabric of NZ. Idle debt speculation at the behest of protecting bank profit is out of control. The even stupider house prices is one of the single greatest pressure points for all Kiwis trying to live in NZ.

Only TOP has a tax policy to directly target this stupidity. Punish speculation (land tax) and promote productive activity (lower paye).

Here's a recent picture of Grant Robertson and Adrian Orr:,...

This issue was well articulated by Mervyn King 4 years ago in his book The End of Alchemy. I quote; "The most obvious symptom of the current disequilibrium is the extraordinary low level of interest rates which, since the crisis, have fallen further. The consequences have been further rises in asset prices and a desperate search for yield". Then; "Central banks are trapped into a policy of low interest rates because of the continuing belief that the solution to weak demand is further monetary stimulus". I wonder what he would say now as ever more fuel is thrown on the fire-raging conflagration?

As the RB is well aware, a negative cash rate and direct bank funding will do little to encourage additional borrowing by business, but will further underwrite property speculation. I am one of the 'winners' with both a long held share and property portfolio, but the ever increasing wealth gap worries me. This is not healthy for long-term social cohesion.

Great post - agree. I'm not a property investor as I have moral objections to it, but I have done well out of other investments. We desperately need a debt reset of sorts otherwise we risk destroying society as we know it (have known it). Do we want to regress back to lords and serfs i.e. the dark ages? They were called dark ages for a reason but we turned into a bunch of tribal monkeys, where some people thought they were better than others because of their social/financial position. Perhaps the thinking of the great people of the enlightenment has been lost and now we start regressing again and fight over land, instead of exchanging ideas and doing what is best for the future of all people (and not just 'me and my property portfolio').

You are up to 20 posts on this article alone, it's a little OTT and you are going very deep, dark and sinister with your allegory's. No one has it in for you, breathe.

Some feel strongly about the wealth separation and social damage of excessive debt. Especially if its damaging there ability to have the emotional and financial security of owning their own home.

Words like exploitation and enslavement via debt get circulated.

Out of sincere kindness, I think he should really have a chat with a doctor
Life is about balance
Life has always been stressful, tough, and often unfair
Lots of friends, family, hobbies and interesting fulfilling activities are good

How many properties do you own? How much debt do you have?

Statistically more than most Kiwis, and that's been my life choices
Have also been homeless and lived in a van for a while too. Wealth does not make one immune to suffering
But that's irrelevant to me noticing and caring about your mental health as a fellow human

Haha pull the other one! You couldn't care less. You just don't like people calling you or other property investors out about your one sided propaganda about housing investment. Hence why you attempt to belittle or scare off anyone that threatens your views. You simply need more people to enter the ponzi so you become 'wealthier' - anything that might scare them away needs to be shut down.

As I say above, I've noticed a correlation between property investors (especially in NZ for some reason - and I've lived in multiple countries) and:

Finding it a little OTT that someone would post 20 times on an article about something this important to the wellbeing of many people in this country, are you? Then just wait and see what happens, as the very real 'deep, dark and sinister' inequality here continues to grow.

Thanks QD - property investors need people to keep buying so act like dodgy used car salesman with no ethics. Any news that might scare off buyers into the ponzi must be shutdown.

I can see a deep, dark and sinister characteristics in property investors who are gambling with debt and pushing prices to the moon - why? For selfish financial purposes. Does it help young people or the poor? No. So to me that is where the darkness is and we should keep talking about it until people can see it for what it is.

I agree. This should be front and center in every discussion about the present state and future of this country. Yet we have people belittling others, for bothering to care and comment on the need to address growing inequality. If it doesn't affect them personally, it doesn't matter. Dark indeed. Narcissism is normalized and even aspirational in our society. From your link:

"Exploits others without guilt or shame

Narcissists never develop the ability to identify with the feelings of others—to put themselves in other people’s shoes. In other words, they lack empathy. In many ways, they view the people in their lives as objects—there to serve their needs. As a consequence, they don’t think twice about taking advantage of others to achieve their own ends. Sometimes this interpersonal exploitation is malicious, but often it is simply oblivious. Narcissists simply don’t think about how their behavior affects others. And if you point it out, they still won’t truly get it. The only thing they understand is their own needs."

The people that see where this is headed and want to change the course we are on, have to keep raising awareness and continue pushing it into the light. Disconnected people are easier to control. The less we genuinely care about the wellbeing of each other as people, the less accountable the government is to us all.

Get off your moral high-horse! Not all of us are allergic to making money.

No one calls them the "Dark Ages" anymore except in Internet comment streams. They were actually pretty awesome ages. King Arthur and the round table? Viking sagas?

Okay, they weren't "dark" but we have to admit that they were quite murky. Literacy all but disappeared, no one had toilets or running water anymore and King Arthur is as yet, unverified as a historical figure. You can't look at the architecture of classical Rome, Greece, Persia or Egypt and then look at a Viking long house or Anglo Saxon thatched hut and not see that people had lost skills. The Vikings were epic seafarer's but so were the the Phoenicians and their descendants the Carthaginian. The Viking Sagas are great stories but they aren't any better than anyone else's since the Bronze Age.

I've been to Florence 4-5 times and the thinking of the renaissance always leaves a strong impression - especially in terms of understanding where we were as people as how we got to where we are - but also the risk of regressing back into tribalism and what that would mean for humanity.

In Rome you can see the marks were the barbarians attempted to pull down the marble columns of the buildings, but they didn't even have the thinking/intelligence to be able to pull them down - let alone think about how to put them up. Yet around 2000 years later, the structures still stand.

Ahh Firenze, the Ponte Vecchio and Uffizi, everyone should see them at least once.

"IO: some people thought they were better than others"

Like you thinking you are better than landlords?

See if you can spot the likeness sometime at your next property investor seminar:

I went to a few, didn't fit in. Does that make me a better or worse person for not supporting property investment because I think its morally wrong when younger people are doing it so tough? Well I'm not sure and don't really care. Mental disorders are a weakness, not a strength - so should I take pity or pleasure in that?

Rot IO, I am very humble, never mentioned anything about myself asset wise. It sounds like you want to hate property investors before you meet them. Where has anyone in the countless threads urged you to buy a property? Selfishly, I'd prefer you rent. You're trying to create a common enemy - but it's mostly just normal decent people and that will really bug you.

I'm not making you an enemy - investors are doing that themselves through their actions. Act with greed and self interest while others are struggling, the average person won't love you for that - they'll hate you. Nothing to do with me and the comments on here - its whats happening in society right now but perhaps you can't see it (hence why I keep posting). And this isn't personal - its about all investors - yet you appear to have taken it personally.

No, the average person does not hate their landlord (if the landlord is reasonable). No one is forcing you to rent, live at home or buy your own house if you feel that strongly about it. I've rented, it's a service I needed. Are house prices a problem in NZ - of course, but there are many contributing factors and you obsess with investors. Obsess with Councils making building regulations so strict, obsess with the cost of building supplies, obsess with immigration, obsess with poor transport infrastructure. Auckland and Wellington are in the process of becoming higher density - section sizes will fall as developers are buying blocks and will build medium density. This is all happening now.


The RB policy derives from models that are based on historical behaviours. When those behaviours change, or conditions move outside the historical range of conditions, then those models are no longer useful. Unfortuantely, central banks around the world have become prisoners of their own models.

who is responsible/ top dog?
Mr Orr or
Mr Robertson for having no oversight of Mr Orr.


Will we see banks eventually offer 40 year home loans to pump more debt into this? In my opinion it is clear that Auckland is going to become totally unaffordable to anyone (or extended family) who is not already in the market, unless you want to buy 50km out of the city. Potentially we are just undergoing a significant change in our country, similar to say Switzerland where ~30% of the population own property and the remainder rent, goodbye to the kiwi dream.

Happy Realiazation That RBNZ by its policy is Stimultaing Housing Bubble but may be is to cover actual businesses defaulting and job loss but I guess everyone knows that only economy in NZ is Housing Economy as house is No More a Home but specualtive product.

The real problem is not the system but the false narrative that surrounds it. That narrative being money is sound and worth saving. Bob Jones wrote books about this - assets don't appreciate, money depreciates. If you print a mountain of money, then you can expect to see that inflation go somewhere. Many people now understand this and are happy to borrow that mountain, knowing an even bigger mountain is on the way. The cat is out of the bag. The mainstream media are still clueless along with people who think the Covid borrowing needs to be paid back. Inflate, inflate, inflate. We are experiencing house price hyperinflation!


Which wouldn't necessarily be a problem if we had growth and inflation to counter the debt mountain. The problem is, that growth has been anaemic and there isn't really any reason to conclude that growth is just around the corner either.

The concept that growth is a positive attribute that must be achieved is becoming an outdated concept. Productivity growth is highly desirable, and should be embraced and suitably rewarded.

Growth that happens without productivity growth should be shunned and shamed. Debt growth should also be similarly shunned and shamed.

All pretty predictable going forward from this point onwards. Interest rates need to RISE to curb the housing market or if they FALL or even stay the same, it will continue to go gangbusters throughout 2021.People are no longer wasting large sums of money on travel and with poor returns on your TD and low rates its all going into the housing market because the general consensus up until this point in history is that prices can only go up.

Businesses and housing both clearly point at taking a break from providing more stimulus and I think the right thing to do would be to delay both the FLP and negative OCR (not take them entirely off the table) until there are actually clear signs of many businesses failing, unemployment rising substantially and house prices cooling off. Sadly I think that Mr Orr will carry on with his plans despite data telling him to do otherwise.

Agree with you Yvil - unfortunately I think the horse has bolted. Also its a race to the bottom now because of what the Fed is doing - can we devalue the NZD at the same rate as the USD?

Great article David, can you please email a copy to Adrian Orr, including the comments so that he understands both your points and the general sentiments of the populace?

Hi everyone,

I have just written to Adrian Orr and asked him to read David Hargreaves article as well as some of the comments. I invite you all to write a similar email, simply asking him to read David's article. Maybe, if he gets enough emails from us all, he will consider some of the points raised.
His email address is:

You can flick a quick reply to my post when you've done it.




I asked this in a different story last week. Where is the carnage to justify the RBNZ's super easy money policy? The government's wage subsidy has been expensive and enough.

Hello Adrian
Corruption is a form of dishonesty or criminal offense undertaken by a person or organization entrusted with a position of authority, to acquire illicit benefit or abuse power for one's private gain.

Your behaviour in recent times makes no sense . We have negative real interest rates and property investors pay the same interest as FHB. The government has raided the treasury for 64 billion of future taxpayers money so that you could keep interest rates low.

You have raided the government purse and given it to property investors.

Why? Are you perhaps a property investor?


That flawed and factually inaccurate rant should do it Jim.

Hey Kooti... factually accurate.. RBNZ cannot lower interest rates without the money printing. The money printing is paid for by the tax payer.. and property investors dont pay tax on capital gains... not much more to it pretty straight economic flows.

Talked to a friend this afternoon, he's into property. He is looking at leaving the country, doesn't want his children saddled with huge debt, thinks all assets are grossly overpriced that there are little of no business opportunities.
He thinks his only option is to sell all his investment properties and go elsewhere. He has a few places in mind and actually some pretty interesting ideas

Very interested to see what RBNZ does to try climb out of this.. I think they really need to redirect their stimulus towards industries.. As a mortgage adviser I see banks pulling back on building and development which used to be encouraged by RBNZ and focusing lending to the plump low hanging fruit.. If they let banks keep the LVRs as they are they should have minium requirements of or 'subsidised' bank lending towards building (not just land), existing security developments (payable on invoice only to weed out the cashies) and business lending to encourage growth in the sector.. So many 'shovel ready' trades can flourish without needing employees to have tertiary qualifications if funded by motivated the banks

Completely agree, have been saying this for so long it's not funny. But banks are completely obsessed by property (just look at their loan books), creating their own self fulfilling prophecy as they use their money creation powers to inflate the assets further and further. Completely not what the RBNZ or government want, but the RBNZ and government act without thinking in knee jerk reactions, simply pumping more money into a system designed to inflate assets. TARGETED assistance is what is required, NOT "pump a whole lot of money in, lower interest rates, abandon LVRs and see what happens", because it's blindingly obvious what will occur.

Well blob, in case you don't get it? - Orr is by product of OZ banks, inside he have enough of them.. he just want to put those 4 big OZ banks into OBR event to finish off their greed. nuf said - then as most of us did not realise? he wanted this country back to it's root, feed ourselves & the world, export our fresh produce, agri, fisheries, horti, viti, dairy etc etc. - Back shifting our wealth gear into that Dutch coop bank which is bigger than ANZ, yet try to get the credit for buying car, house.. from them, good luck. They are into 'real production', those been swayed into twisted RE in minds, will eventually get corrected in natural way, those that are prudent/savvy savings? you'll see them floating easily between NZ-OZ-ASEAN-ASIANS countries with the funds ready. I'll give you two example: John Key & Robert Jones.

RBNZ is full of knowledgeable personnel with regard to what is 'all about in NZ economy', thus they knew what to do here. The meteoric housing price increase has been carefully thought for, pros & cons. Soon after the FLP, most of Kiwi dream of entering into intrinsic wealth creation with peace of mind will be in full gear realisation by 2021, more QE on cards, mortgage deferral, Lab will back in with more pronounced wage subsidies. RBNZ with govt. both are ensuring Kiwis about their employment stability assurances, with that in mind? only mad persons living here in NZ Not following the current advise, sorted your Finance quickly get on to that rescue ladder it's going to be pull up soon by Helicopter, so grab your chance to survive.. jump on to it, it's long term commitment, intrinsic blah value. Don't listen to those so called forecasters, never heard any sad story at all the past 30yrs of RE investment - you're on for another long run of 30 years upwards trajectory of wealth & financial freedom. Be kind help this country moving post Covid19, your long mortgage deal will help the future wealth productivity for this country.. you know that trickle down effect $ spending etc.