Bernard Hickey says he can remember the same rhetoric from the RBNZ a decade ago about the same housing and borrowing pressures, and he fears the same 'do nothing' response. Your view?

Bernard Hickey says he can remember the same rhetoric from the RBNZ a decade ago about the same housing and borrowing pressures, and he fears the same 'do nothing' response. Your view?

By Bernard Hickey

The Reserve Bank warned this week that house price inflation could spill over into wider inflation and endanger of the stability of the banking system.

It also said the over-valued New Zealand dollar was hitting exporters and jobs.

And then it did nothing. All it did was talk.

One fund manager jokingly referred to Thursday's statement as 'Open Mouth Operations.'

Financial markets have been watching the Reserve Bank's empty warnings for a decade.

They then chuckled and pushed the New Zealand dollar up by a full cent to around 84 USc.

Later that day another exporter decided to shut its doors and put another 192 people out of work.

It's like watching an instant replay of a train wreck in slow motion.

Looking back over the last decade of Reserve Bank statements and actions is sobering.

Starting in 2002, mortgage lending growth and house price inflation were relatively modest, as was the New Zealand dollar at just over 40 USc. The Official Cash Rate was 5.75%. Then freshly minted Reserve Bank Governor Alan Bollard cut interest rates in April 2003 and the housing market began to stir.

A burst of competition between the banks and a fall in fixed mortgage rates powered by cheap foreign borrowing by banks started a fire under housing market. The foreign borrowing also started pushing up the New Zealand dollar.

It's clear that by 2004 this shift in behaviour had started changing the structure of the New Zealand economy.

The non-tradeable sector, including government, real estate and financial services, surged ahead and diverged from the tradeable sector, which includes exporters and those that compete with imports. Our current account deficit doubled between 2002 and 2008, driving a rise in our net foreign debt from 65% of GDP to 85% over the same period.

By early 2004 the Reserve Bank began to warn about the high currency and was noticing surprising strength in house prices.

It put up interest rates, which simply increased pressure on the currency.

By 2005 and into 2006 the Reserve Bank found itself painted into a corner by its single inflation target and its single tool of the Official Cash Rate (OCR). It even started investigating the use of 'Supplementary Stabilisation Instruments', including a mortgage interest levy and loan to value ratio limits.

Eventually it decided not to adopt them.

While it twiddled and stuck to the orthodoxy of the Reserve Bank Act, the housing market, the currency and foreign borrowing launched into the stratosphere. Even the Reserve Bank agrees now it missed the housing bubble and underestimated the effects on the wider economy of foreign borrowing. Yet still it stuck to the orthodoxy.

Fast forward to late 2012 and early 2013 and it is doing the same orthodox thing again under its strict new Governor, Graeme Wheeler.

Faced with a surge in bank competition, cheaper mortgages, faster borrowing and a blast higher in house prices in the second half of 2012, the Reserve Bank did what it has done for a decade - stuck to the script and read from it.

It is now looking at creating other 'macro-prudential tools' to help it break free of this Gordian knot whereby any moves to slow the housing market with the single tool of higher interest rates just hammers the rest of the economy.

These tools include limits on Loan to Value ratios for mortgages so borrowers would need bigger deposits.

It's an echo of the hunt for Supplementary Stabilisation Instruments in 2005 and 2006.

The Reserve Bank appears congenitally reluctant to try them.

A paper to the board in May even pointed to an IMF study showing countries with LVR limits had lower house price inflation and such a tool would be a useful add-on to the Official Cash Rate. Yet still the Reserve Bank dithers, saying last week it would put out a discussion paper by the end of March and was still negotiating a Memorandum of Understanding with the government. And still the Reserve Bank is reluctant to drop the orthodoxy.

Wheeler said in November and December that even if he had these extra tools such as LVR limits he would not use them because house price inflation and lending growth wasn't strong enough yet.

He also undermined the power of any of his currency warnings by saying he doesn't believe in currency intervention.

Fast forward to late January 2013 and house price inflation is at 10% again and lending growth has doubled inside 6 months. Banks are regularly offering 95% mortgages, discounting away legal fees, giving away free tablet computers and thousands of dollars of 'cash back'. The NZ dollar is near record highs. Unemployment is rising. The current account deficit is headed for 7% of GDP. Yet the orthodoxy still reigns.

As Karl Marx said: "History repeats itself, first as tragedy, second as farce." This economic policy trainwreck is nearing the farce stage.


This item was first published in the Herald on Sunday. It is used here with permission.

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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Excellent piece there Bernard. Its about time someone in the media nailed the failure of the RBNZ in the period 2000 onwards. You really do save this site from mediocrity.

The system is the problem.
A normal purchase is between two parties with the parties determining the value to be paid. In the case of mortgages it has always appeared that the bank is the 3rd party supplier of the funds so the buyer is in the position to buy the property or goods.  The banks have been able to position themselves as the 3rd party because the seller wants their money for the property they are selling now. Unfortunately the values of property have been distorted by this 3rd party.  The seller wouldn’t be able to achieve the price on the property without the banks 3rd party presence. The question that now arises is what would the  real value of property/land/houses or any mortgage instrument be if the market distortion of the banks presence hadn’t been able to take place?
What is a Bank Loan ?
“The issue which has swept down the centuries and which will have to be fought sooner or
later is the people versus the banks.” Lord Acton
Borrower Signs the Bank’s Loan Contract and Mortgage
Borrower’s Signature transforms the Loan Contract into a Financial Instrument worth the Value of the agreed Loan Amount
Bank Fails to Disclose to Borrower that the Borrower Created an Asset
Loan Contract (Financial Instrument) Asset Deposited with the Bank by Borrower
Financial Instrument remains property of Borrower since the Borrower created it
Bank Fails to Disclose the Bank’s Liability to the Borrower for the Value of the Asset
Bank Fails to Give Borrower a Receipt for Deposit of the Borrower’s Asset
New Money Credit is Created on the Bank Books credited against the Borrower’s Financial Instrument
Bank Fails to Disclose to the Borrower that the Borrower’s Signature Created New Money that is claimed by the Bank as a Loan to the Borrower
Loan Amount Credited to an Account for Borrower’s Use
Bank Deceives Borrower by Calling Credit a “Loan” when it is an Exchange for the Deposited Asset
Bank Deceives Public at large by calling this process Mortgage Lending, Loan and similar
Bank Deceives Borrower by Charging Interest and Fees when there is no value provided to the Borrower by the Bank
Bank Provides None of own Money so the Bank has No Consideration in the transaction and so no True Contract exists
Bank Deceives Borrower that the Borrower’s self-created Credit is a “Loan” from the Bank, thus there is No Full Disclosure so no True Contract exists
Borrower is the True Creditor in the Transaction. Borrower Created the Money. Bank provided no value.
Bank Deceives Borrower that Borrower is Debtor not Creditor
Bank Hides its Liability by off balance-sheet accounting and only shows its Debtor ledger in order to Deceive the Borrower and the Court
Bank Demands Borrower’s payments without Just Cause, which is Deception, Theft and Fraud
Bank Sells Borrower’s Financial Instrument to a third party for profit
Sale of the Financial Instrument confirms it has intrinsic value as an Asset yet that value is not credited to the Borrower as Creator and Depositor of the Instrument
Bank Hides truth from the Borrower, not admitting Theft, nor sharing proceeds of the sale of the Borrower’s Financial Instrument with the Borrower
The Borrower’s Financial Instrument is Converted into a Security through a Trust or similar arrangement in order to defeat restrictions on transactions of Loan Contracts
The Security including the Loan Contract is sold to investors, despite the fact that such Securitization is Illegal
Bank is not the Holder in Due Course of the Loan Contract
Only the Holder in Due Course can claim on the Loan Contract
Bank Deceives the Borrower that the Bank is Holder in Due Course of the Loan Contract
Bank makes Fraudulent Charges to Borrower for Loan payments which the Bank has no lawful right to since it is not the Holder in Due Course of the Loan Contract
Bank advanced none of own money to Borrower but only monetized Borrower’s signature
Bank Interest is Usurious based on there being No Money Provided to the Borrower by the Bank so that any interest charged at all would be Usurious
Bank Has No True Need for a Mortgage over the Borrower’s Property, since the Bank has No Consideration, No Risk and No Need for Security
Bank Exploits Borrower by demanding a Redundant and Unjust Mortgage
Bank Deceives Borrower that the Mortgage is needed as Security
Mortgage Contract is a second Financial Instrument Created by the Borrower
Deposit of the Mortgage Contract is not credited to the Borrower
Bank Sells the Borrower’s Mortgage Contract for profit without disclosure or share of proceeds to Borrower
Sale of the Mortgage Contract confirms it has intrinsic value as an Asset yet that value is not credited to the Borrower as Creator and Depositor of the Mortgage Contract
Bank Deceives Borrower that Bank is the Holder in Due Course of the Mortgage
Bank Extorts Unjust Payments from the Borrower under Duress with threat of Foreclosure
Bank Steals Borrower’s Wealth by intimidating Borrower to make Unjust Loan Payments
Bank Harasses Borrower if Borrower fails to make payments, threatening Legal Recourse
Bank Enlists Lawyers willing to Deceive Borrower and Court and Exploit Borrower
Bank Deceives Court that Bank is Holder in Due Course of Loan Contract and Mortgage
Bank’s Lawyers Deceive and Exploit Court to Defraud Borrower
Bank Steals Borrower’s Mortgaged Property with Legal Impunity
Bank Holds Borrower Liable for any outstanding balance of original Loan plus costs
Bank Profits from Loan Contract and Mortgage by Sale of the Loan Contract, Sale of the Mortgage, Principal and Interest Charges, Fees Charged, Increase of its Lending Capacity due to Borrower’s Mortgaged Asset and by Acquisition of Borrower’s Mortgaged Property in Foreclosure. Bank retains the amount of increase to the Money Supply Created by the Borrower’s Signature once the Loan Account has been closed.
Borrower is Damaged by the Bank’s Loan Contract and Mortgage by Theft of his Financial Instrument Asset, Theft of his Mortgage Asset, Being Deceived into the unjust Status of a Debt Slave, Paying Lifetime Wealth to the Bank, Paying Unjust Fees and Charges, Living in Fear of Foreclosure, and ultimately having his Family Home Stolen by the Bank.

And your point is?

Banks are totally brilliant businesses to be in , they reward themselves and their shareholders handsomely .
...... become a lender , not a borrower !

The point is,  with a minarchy we'd all be happy in a perfect la la problems, no AGW, no peak anything....all fluffy comfy.....
Bucket of valium at your door every morning.....its all rosey.....
la la la.....oops what the F*** was that....oh we are extinct.....that will certainly be a "min".....archy...

Think GBH has provided the "point" part out below. If individuals are unable to become the direct lender they can expose themselves to the profits of those who are in the lending business.  I'm sure Bill English has mentioned on more than one occasion that Kiwis need to invest offshore. He would obviously like to see some profit repatriation occuring. 

Thanks guys, the long densely packed version was too cumbersome for my tired eyes.

The wikipaedia page on Monetary circuit theory points out that transactions in a capitalist economy are tripartite, involving a seller, a buyer and a bank.
This is not a recent development in capitalism however, its probably always or nearly always been so, its certainly been around as a concept since Keynes wrote the general theory (check the references), but certainly a lot of transactions worked this way before it was conceptualised by economists. Orthodox economists (including apparantly Austrians) however don't believe this is how the economy works and money is created and express great consternation when the economy fails to work the way their models demand.

second that.
I'll add though that successive Govns from the 1980s blow up failed to address the exposure and imbalances.  The real problem is now our exporters and un-employemnt is going awol while those in the upper-middle class play find a bigger fool with housing.  Wheeler isnt a manufacturer, or employer, he's a banker FFS and overseeing him is an away from home farmer with large blue blinkers, its bound to end well..

Indeed Andyh, indeed! 
Glad to have BH back. 
And a very good comment to you, Andyh.

They then chuckled and pushed the New Zealand dollar up by a full cent to around 84 USc.

Why wouldn't they?- fund managers also see the future return potential in that which Geoff Bertram has exposed:
Kiwi power prices have increased at twice the rate of most other countries over the past three decades.
A book next month from Victoria University researcher Geoff Bertram, Evolution of Global Electricity Markets, claims New Zealand's power prices are now more than twice what they were 30 years ago, in real terms. Read NZ Herald article
Not to mention the USD influence:
“The unemployment rate, instead of drifting to 6.5 percent is drifting up to 7.9 percent,” Pacific Investment Management Co. founder Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene. “That gives space, certainly in the front end of the curve for yields to move down. It gives a little bit of hope on the long end as well.” - Read Bloomberg
The Fed will have to keep the liquidity injection pedal to the metal. 

Yes, but what you didnt mention (from within the article) is that it applies only to "consumer retail" prices, while industrial and commercial prices have remained restrained. Wouldn't Fonterra and other milk processors be HUGE industrial consumers of electricity? So, then, by derivation, the retail electricity consumer is subsidising the lifestyles of dairy farmers, via Fonterra.

Iconoclast, have I not claimed before that the average Kiwi seems to delight in being financially raped by our own entitled elites?
And you can bet that the accounting firms are offering a guiding hand.

SH: yes you have. every time one of these articles appear, the thought raises it head that we should get Hugo Chavez down on secondment before he is unavailable, or we could get Sitiveni Rambuka, coz he has just retired and is now available for secondment.


iconoclast, when 91% of all Fonterra's energy is sourced off grid, how is it retail electricity consumer is subsidising the lifestyles of dairy farmers, via Fonterra.?
Energy mix (2010):
59% coal, gas, oil
25% co-gen steam & electricity
9% grid electricity
7% diesel
Farmers are retail electricity consumers too. ;-)

Fair comment CO. I'll withdraw that un-researched comment. Was thinking of their giant driers. Thought they'd be electric. Must be very good prices on their coal, gas, oil, and diesel.

They do have their own coal company  - Glencoal. 

I scratched my head a bit about that claim the power prices have risen so much more in NZ than elsewhere. For example in the UK they have more than TREBLED in the past 30 years:

Bertram claims NZ prices have doubled in real terms not nominal as your link may suggest.
According to the RBNZ CPI calulator
A basket of goods and services that cost $1.00
in quarter 4 of 1981 would have cost $3.66 in quarter 1 of 2012

And the answer to that will no doubt be: let's privatize the energy sector so it can receive the "benefits of private sector disciplines and increased monitoring" (JK, State of the Nation speech) :-)

and also "let's privatize water......"
Corporate land grabs reveal hidden agenda - controlling water!

Bloody corporates controlling our water, the very stuff of life, no, no, no, no

Scary.  That's the essence of capitalism though and not to worry, I'm sure the markets will allocate a fair value to the transaction.

Well two factors, a) how much has the price for the last 30 years been kept down by not charging for upgrades because we didnt do any?   b) Energy has gone crazy full stop...what was oil 30 years ago? <$50? now its set to run at >$100.
Actually 3 things, Govn dividends / profit? seems the Govn expects the SOEs to give a high return, thats regressive taxation.....guess you get what you vote for.
And yes given our un-employemnt is rising dropping the OCR is essential or we will see 10%....
JK's chances of re-election, already slim will be going bye bye this year if Wheeler and co keep this up.....oh wait maybe he's a commie insurgent?

Love the pretty picture. Can't work out whether it's coming or going.

Exellent piece there Bernard.
But please research back another decade to about 1990. Don Brash was touring the country explaining his problem. "Are there any journalists in the room"? Everywhere except Auckland was depressed by high interest rates - when a special even-higher Auckland rate would have solved the issues.
Go back another decade - or even two - and same old "We must improve our productivity" line of BS was never far from their lips. 
Many business owners did historically invest - improved productivity - then lose their markets - fired the efficient staff - then liquidated to repay the bank. All because of the exchange rate movements based on others speculation.
We need some real action this time. 

Without the Chch earthquake the OCR would be higher 3.5 or 3.25% -  would that really help suppress house prices?  What would a higher OCR do for the wider economy? 

Bernard says: tools (available to the RBNZ) include limits on Loan-to-Value (LVR) ratios for mortgages so borrowers would need bigger deposits
If LVRs were applied, wouldn't that simply be a free-kick to the cashed-up hot-money cowboys?

Right on.
Hence the need to stop them AND also penalise those already bought in.
FIF regime in reverse needed here. Notional rate of return and tax accordingly.
They would soon get the message with an annual cash demand.

Loan to Valuation based on potential rental income ?

After Wheeler's statement that the NZD was overvalued I became, probably falsely, somewhat hopeful that he would do something about it. The language was not just that the exchange rate was high, or that it was hurting exporters or other similarly vague language. "Overvalued" is very clear. To the extent there is a clear implication that steps will be taken to fix it. And given that I assumed he would realise his office is best placed to do something about it, that he would proceed to do so. The report the day before that he had bought $250 million of foreign currency was also promising; as was I believe a report that he has $9 billion capacity to print and buy foreign currencies (or fund the Treasury in lieu of their foreign borrowing). So he potentially was just getting started.
Then whammo on Friday and the currency goes up another cent.
I remain, just, hopeful that it takes him at least a day to write the necessary 1s and zeros to make a dent in the overvalued exchange rate, and we might see some downwards pressure this week.
Otherwise, apart from leaving us with an even more overvalued currency with even more damage to our trading industries, he shows his own office up to be useless. And you would have thought he wouldn't want that.

I hope you are right for my brother-in law's sake - he was worried that the only way was down for the NZD/GBP cross - thus he demanded we sell his NZ$ share in his recently deceased Mother's estate.
Oh what an error - the rate last Friday lunch time was 1.89 (0.5291), inevitably the local bank stung him at 1.9120 (.5230) and now it's 1.8625 (0.5369).
I don't care much as I sold all my NZD/GBP @ 3.06 (0.3268) back in 1998 expecting a Kondriatiev cycle move to par. The arrival of Tony Blair in the UK political scene, around the same time, reinforced my decision making process.

Stephen I think you're right it is somewhere around $9bln odd isn't it. But lets take the Swiss example where they decided to fix their exchange rate to the euro through intervention as the CHF strength had been killing them. So far they've been successful with massive intervention (and massive P&L swings for the taxpayer). So how big is the SNB balance sheet now ? almost 100% of Swiss GDP i.e. three time more than when they started. They are now FULL of unwanted foreign currencies that theyre going to have to sell back to the market at some point
Of course the NZD is smaller, and much more easy for the market to take on the RBNZ on in the currency manipulation game,  so I guess the RBNZ's got to have that $9bln limit increased to around $170-180bln for starters ?  Looking forward to the Govt ok'ing that

Of course the NZD is smaller,
Yep LOL, but it is irrevocably joined to the USD as a relative priced pair - NZD/USD - and you are quite right in your assertion that it will take big bucks to influence the market depth of the senior partner of the pair. Do we want ~zero interest US TBills on A/C?

Stephen and Grant,
How much then would be required I wonder to affect the markets? I confess to being surprised to learn daily trading in the NZD amounts to ~40% of our annual GDP. See the article in here on foreign currency reserves.
So approximately $80 billion a day might be traded in the NZD, and if so, clearly only a fraction (I'm guessing well  less than 1 percent) of this is by entities who have a need for NZD to trade in real goods and services with or from NZ. And presumably the buyers one hour, or day, or week, are the sellers the next hour or day or week. There just isn't that much need for NZD. One suspects that we NZ consumers and taxpayers are supporting and paying for this playing with our currency for no real benefit to us; but that is a separate issue.
Although the $9 billion that the RB has may be small beer as a fraction of this, I would have thought the trading that is for real needs will in the end drive the value, as all the others will need to net out of their positions over time, and usually a shortish time I would have thought.
So if the RB merely enter the daily market, I can see that they may not make that much difference, although if done openly and with determination, it should give a pretty good signal to the traders that there is a real player affecting the direction.
If though they did say short circuit the Treasury's need for funds due to its deficit; which it normally funds with foreign borrowings, (or to be fair local sales of bonds); and the RB funded the foreign billions required directly; that would seem to me to really affect the natural upwards pressure on the NZD, which traders are sitting back and laughing at now.
Either way, acting seems far more preferable to not acting; whichever exact process they use.
Yes, the Swiss have a huge amount of foreign reserves; and they may one day lose on them; but they have printed the money in the first place, so are not in practice out of pocket at all. They also are trying to defend one of the world's largest current account surpluses, and the world and the traders know it.
A quick glance at our figures (including our very large current account deficit) should say to traders that the natural path is stable to down, and they would be reluctant to fight that.
Mr Wheeler should try 3-4 billion and see where we land. If nowhere, no real harm and we can work from there. 


You need a job - try Goldman if not JPM  - then you will have all the answers to your questions if you survive the first 3 mths. There is no substitute for trading and bookies don't count.

The RBNZ is not independent of govt and most certainly not of the private big banks...any action Wheeler might talk about taking, will have to be cleared by govt and by the big banks.
Since both govt and the parasites are making hay out of the property game...nobody should expect any action this side of trouble.....action will always be allowed when it is too late.

Currently, vested interests don't trade otherwise.

Speaking of useless govt .....
"New Energy Minister Simon Bridges would not comment"

Bernard, another great piece, thanx
I used to get frustrated all the time as i had the idea that "nothing changes" but of course i am completely wrong. Things have changed, these governments, govenors, bankers and so on are all exposed now. They can't hide anymore, we are ALL watching them. Thay hate the internet because it gives us power, and that power largley comes from sites like this.
We MUST keep them under the microscope and never give up. Their days are numbered.
We must also remember "the government has the power to act in these matters but chooses NOT to"
We are winning

We are winning
Do you really believe that?
The fellows operating in the shadows determining monetary policy have no shame or care for the consequences of their egregious actions.
I thought it would all be over in a matter of years as far back as 1998. - how wrong one can be.
I now think the Fed will not stop injecting liquidity, via open market opearations (POMO), until the yield on UST10's reaches, the damn near zero bound, Fed Funds rate. 

Will not? or Can't?

I guess "can't" at this juncture - but if as I believe parity in term and short rates will terminate current actions, "will not" is a possibilty prior to such an outcome.

At the next election lets kick some asses. Let's teach them a lesson they will NEVER forget.

Given that all politicians are the same it may be a waste of time kicking any ass.
Their catch cry is ; ALL FOR ONE AND THAT ONE IS ME;

yep more evidence nz is rip off. add power prices to fuel,groceries,housing,telecom etc.

Good article Bernard.  The reserve bank continues under failed neo-classical economic policies, as is obvious from Wheeler's recent speech.
I fear the same mistakes will be repeated more than the twice you point to.

Yup, a point lost on others who think its a easy and logical decision to "do something about the high NZ Dollar". I have heard zero logical/informed comment from those such as Bernard about how they will achieve it, just that they refuse to "do something about the high NZ Dollar". Not exactly useful commentary

Spot on, BH.
HOWEVER... as a first home buyer (or builder in this case), we haven`t quite got our finance sorted. We have 16% equity on our section, but the bank would prefer 20%.
No problem, we`ll get there soon enough.
But what if the LVR required jumped to say, 30%? We`d be stuck renting for god knows how long, that`s what.
 Dealing with local council consent fees, GST, and materials cost is one thing, but surely the main demographic to suffer from Central bank tinkering are the very ones who are trying to hard to get on the ladder.
On the flipside, if you`re either cashed up, or flush with equity... your competition for property just got reduced.

... but an LVR of 30% reduces the amount that people can afford to pay and eventually house prices will reduce accordingly. The increase since 2004 can be almost wholly attributed to easing of credit criteria.
The banks aren't stupid. They are well aware that credit easing pushes up prices which are then driven up further by speculation. There's a boom and bust cycle and good reason to fear it.

 Olly Newland says there is no housing “crisis”.
He makes sense when you look at it dispassionately.

“Day after day we are fed with breathless stories, that we have a “housing crisis” such as the stories like these.  There are no facts, no data. no proof whatsoever. It seems that some people  want to make an election issue out of the “crisis” and will do so no matter what.

For 95% of the population there is no “crisis”. There is a problem for one specific type of buyer -that is the first home buyer and that has always been so.

The Labour Party and Greens promise to build 100,000 “affordable” houses at $300,000 each if they get into power. Is that really necessary?

At this very moment there are over 30,000 properties for sale on Trademe at under $300,000 and if bought would provide one third of the so called affordable houses in one fell swoop . No waiting, just walk right in and start living.”

Read it here:

BigDaddy , can you stop swatting us with facts .....
...... we're having a nice old Kiwi whinge here , about the latest " drama " dreamt up by the highly skilled local journalist fraternity , and Bernard Hickey ...
We don't want the truth , we just wanna wizzle !

Didn't Olly also recently say that house prices would double in the next few years, it would seem that he has changed his mind about this, because you probably can't have both a significant supply of willing low price sellers and an impending doubling of house prices.
It has seemed more likely to me for a long time, that there is no physical shortage of houses, but only a shortage of cheap houses on the market. The primary reason for this shortage being that many sellers are not willing to lose money on their recent (last 5-10 years) high leverage purchase. In this case the main change since pre-2008 days is actually a shortage of buyers willing and able (e.g with access to credit) to leverage up, not a supply side shortage. Prior to 2008 the houses would just fly off the market, regardless of the price.

and only about 600 in Auckland, 300 of them, can't a swing a cat size, apartments... Actually only 300 two bedroom plus homes/apartments, so if you've got more than one child... Yip that many should sort out the housing issue in the Big Smoke...
I suppose one could buy house for 300k in Horowhenua, but the commute to Auckland would be a bugger!
Oh, my goodness, did I just let the facts get in the way?
Good grief!

Which is part of the problem that is there will always be some that can never afford a mortgage and many that cannot afford one were their fantasy la la land dreasm tell them they want to live.....ppl at all levels and that includes Pollies need to get real.  Otherwise before you know it we will be doing NINJA loans and then it will implode....and then with 40%+ drops aka USA we the tax payer are lumbered aka Ireland.
Commute, yes indeed, add in $3~4 a litre for petrol, tahst why so many of the outer subrubs in the USA will never be occupied/built on....huge waste.


It's time the media realise and HIGHLIGHT the corruption, self servingness and conflicts of interest the RBNZ has.
They are do NOT serve the public or have any will to to do what is right for the country. They ONLY serve their world banking masters.
As Bernard you note AGAIN........they WILL DO NOTHING! and should just be abolished as the inept and corrupted institution they have become.
Bollard should be in prison but no...........a cosy overseas job is his rewards for doing NOTHING. Wheeler is no different.

No Bernard, not the same. Look at this graph and go back to 2000:
When unemployment goes above 7.5% the gambling stops.
But what, if I'm wrong?

Currency intervention is as much an art as a science. One must understand the motivations and psychology of the participants before taking action. The scientific approach, much beloved by the psuedo-scientists of economic rationalism, went out the window years ago (i.e. who cares about underlying fundamentals in a world of unlimited credit), so one must always take aim at the heart and not the mind.
That is where fear and greed reside and one must trigger those emotions to have any success. The rationalist and empircal justifications can come later, when the blood has congealed. 

Exactly. Right now it is too easy and almost risk free to trade in NZ$. They all know NZ will do nothing to stop them (in fact, we will publicly declare this).
We need subtle ways to put them off - show they will not always make a fortune. Even a tobin tax of some kind.

its a supply issue fundamnetally. flood the market with cheap land, and cheap labour, whack in some generic pre-approved plans, ie eliminate the archictect, draftsman cost and delay, and hit the raw material suppliers with anticompeteitive behaviour and hey presto prices across the board will fall. the simple fact is the government, rbnz, building industry  is so broke, and so ingrained , and has no fortitude to achieve this . so we have the same old, same old issues race relations, etc etc..

its a supply issue fundamnetally. flood the market with cheap land, and cheap labour, whack in some generic pre-approved plans, ie eliminate the archictect, draftsman cost and delay, and hit the raw material suppliers with anticompeteitive behaviour and hey presto prices across the board will fall. the simple fact is the government, rbnz, building industry  is so broke, and so ingrained , and has no fortitude to achieve this . so we have the same old, same old issues race relations, etc etc..

With NZ house price inflation at 10%, lending growth doubling, and 95% mortgages commonplace, NZ seems to be setting itself up for the mother of all property crashes in a few years.
On average out of 55 countries house prices fell 10% during the GFC, but NZ house prices have gone up instead (see charts below)...
Australian house prices have already fallen by as much as the rest of the world (IMF data)
Even Australian house prices crashed a little bit, but NZ just slashed rates to keep the party going. This can't end well.

Too Little too Late! 

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