Roger J Kerr sees the golden run ending as the 'upcoming winter months may be somewhat tougher for the economy than most expect'

The "rock star economy" was a smoke and mirror.  the real driver for that story hasn't gone away.   You won't see a drop in OCR, just more fake stories to why it needs to stay or go higher.



I wonder if Fonterra has managed to bring home the cash from its record earnings (for payouts to suppliers)



If not, that will push the NZD up, both as F has to buy hard... that and speculators getting in quick to catch the tide.



I wonder if F. will ever let their suppliers be paid in other currency of choice to foreign bank accounts, instead of letting the government forcing them to lose on the import &exchange rates

Which would be a huge loss of credibility, if so Wheeler should resign.

ergo, they wont drop because their testicles will be in charge until that is we need 1% or more.   Of course such a drop will be "forced" on the RB by un-foreseen and substantial external events..

regards

Agree MB, we don't have the growth cushion of the Brics. Not sure if Wheeler and the gang will cut, but certainly a halt is on the cards if they start building an inverted yield curve. The US holds the key. It will all come down to their continued recovery, post QE. In the meantime there is caution, hence suppression at the longer end of the debt markets.

US banks are experiencing subdued credit demand, as we are here. See below:

 http://www.bloomberg.com/news/2014-04-27/treasuries-irresistible-to-ame…

Not so sure on a BRICS, NZ is classed as a risky currency, so I think when some real fear comes we will indeed see some BRICS effect on us.

Cuts, not so sure yet just when, picking such an event is fraught with difficulty IMHO.

What really worries me is we are raising when I see no solid recovery, ie a  clear drop and trend in unemployment.  So the RB etc is guessing that 2 years out all will be well as they predicted, meanwhile the grey swans lurk (grey as in we know thereare events out there with huge impact we just dont know when).

Interesting that after 6 years of inflation is coming we now see that the inflationaistas have switched from "its real soon and big" to " its a cert for 2 years away so we have to do it now" harder to argue against of course, which Im sure is the idea....

ie whatever the problem raising the OCR is the  cure!

regards

You are making an assumption, here, ie you have no proof that not raising will bring back the market.  For instance the LVR seems to have already turned the market, ergo until we see a firmer turned (or not) I cant say raising more makes sense, especially as the over-heating is in some areas and not overall.

Term deposits is a different issue, I mean you can take your money out and invest it in something giving a higher return, no "saved" is forced to keep in in a deposit account. Take a look at Japan, the deposit interest rate is almsot zero, just why do OAPs etc think they deserve a high interest rate while around them businesses have a hard time?

regards

There is an implication in your posting that the Reserve Bank should be run by and for the National Party. One would hope that in neither case that is true.

Houses will be more unaffordable if interest rates go up more; and also if they don't, if that caused prices to again head up. The real issues to address are supply of housing, and the capital flows that are underpinning the price growth. Labour has policies to address both these issues, (limits to foreign purchases, and direct house building, among others) such that runaway house prices under them seem unlikely. They therefore have a very plausible case to make that unless National adopts their policies, housing will be more affordable under Labour.

I imagine interest rates would remain the RBNZ's main tool of choice; where Labour's policies seem likely to work best, is to realign our interest rates with the rest of the developed world, such that there would not be a self defeating carry trade effect on our exchange rate.

As the rest of the developed world lifted, so would we, all else being equal, and savers would again see reasonable returns. In the meantime I wouldn't cry too much for asset rich people on the whole- in most cases their assets all round the world have climbed in nominal value well ahead of inflation the last few years.