Finance Minister Grant Robertson has long talked of the ‘transition’ the New Zealand economy needs to go through – Jason Walls says Thursday’s MPS marked an important part of that transition

Finance Minister Grant Robertson has long talked of the ‘transition’ the New Zealand economy needs to go through – Jason Walls says Thursday’s MPS marked an important part of that transition
Adrian Orr

By Jason Walls

Finance Minister Grant Robertson has been talking about “transitioning the economy” for some time now.

This has been his go-to line whenever he’s asked about negative economic data.

Rising unemployment? “We’re in a transition period.”

Lower economic growth expectations? “It’s part of the transition.”

Plummeting business confidence? You guessed it – “transition.”

“We are going to transition away from an economy that even the member's former leader is now acknowledging was built on population growth and housing speculation,” he said earlier this month in response to National’s Amy Adams in the House.

This week, the effects of this transition were on full display.

The Reserve Bank’s Monetary Policy Statement (MPS) and subsequent press conference were blockbuster events for economy watchers.

Governor Adrian Orr pushed out any expected movements to the Official Cash Rate (OCR) by an entire year.

The dollar dropped like a sack of flour as the market reacted to, what one economist described as a “stridently dovish” MPS.

The “shock and Orr” factor of the dramatic change in the OCR track, as Kiwibank put it, grabbed the headlines but the Governor’s comments on economic growth were equally fascinating.

He is so sure the economy will continue growing above 3% in the coming years, he promised to cut the OCR to 0.75% if GDP growth falls below, and stays under, 3% starting next year.

This is a big call – north of 3% growth is a very healthy and enviable position for many OECD economies.

Fiscal and monetary stimulus take the wheel

The Governor was not shy in pointing out where he thinks this growth will be coming from either.

“Fiscal and monetary stimulus underpin this growth outlook,” Orr says.

Essentially, the combination of the Government’s spending plans – through the Families Package and KiwiBuild – as well as the Reserve Bank keeping the OCR at record low levels for another two years, will keep New Zealand’s economy growing strongly.

In other words, we can thank the Government and the Governor for the strong levels of expected growth.

The retail banks immediately snapped into action to adjust their forecasts. Kiwibank Chief Economist Jarrod Kerr says the lion’s share of his forecast lift in economic growth comes from the fiscal stimulus.

As well as stimulating economic growth through keeping the OCR lower for a lot longer, Orr also had another trick up his sleeve – the dollar.

The markedly dovish statement sent the Kiwi to a two-year low against the greenback.

Orr was clearly chuffed to see the dollar drop so dramatically, saying he was “very pleased with the performance of the currency. It’s as close to fair value as it gets.” 

A lower dollar is better for our exporters, it means they can sell more and help lift the economy in the process.

Speaking to MPs at the Finance and Expenditure Select Committee, Reserve Bank Head of Economics John McDermott underscored how important exporters will be for growth over the coming years.

But the MPS document made it clear that some of the factors New Zealand had leaned on so heavily to bolster economic growth, such as immigration and housing, have well and truly taken a back seat.

Fiscal and monetary stimulus appears to have taken their place, at least for now.

Not everyone is convinced this is good – National’s Finance Spokeswoman Amy Adams says the stimulus is masking the underlying picture of the economy.

But Robertson is undeterred.

Making his way to the House on Thursday, he was stopped by media and asked for his reaction to the MPS.

“It’s all part,” he said with a smile, “of New Zealand’s economic transition.”  

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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We’re transitioning from an economy based “housing speculation and immigration” to one based on government spending (kiwibuild & families package)? Lovely.

I like Orr - he has a good track record from previous roles and earlier in the week did a good a job of jawboning his way to what he wanted. I don’t however trust Robertson as far as I can throw him. That chubby little excuse machine is making it up as he goes along and I get very nervous when he starts using bold words like “transition”.

I initially wondered what you were smoking then I thought about the likely prices for those 100 apartments and townhouses. I would be surprised if they were less than $1.5 million and a more likely $2.0 million for something with enough room for long term occupation. A lot of money to be cooped up with little apart from restaurants and the beach to attract you. We won’t be buying there, but I could see the attraction for Asians used to small homes.

BuyLowSellHigh, essentially the Finance Minister is telling us that easy gains on housing are now in the rear vision mirror. They'll now prioritize assistance to those who innovate, build factories and employ people. If you're having difficulties understanding what this all means, its possible you've put to many eggs in one basket.

http://www.mbie.govt.nz/info-services/science-innovation/international-o...

Lower dollar = happy exporters.
Lower dollar = unhappy overseas based owners of empty NZ houses.

You took all of that from “it’s part of the transition”?

MBIEs innovation projects and the Productivity Commission were around long before this Labour govt came along.

yes - true that. Thankfully, the Coalition threw the serious money behind it :) ;http://www.mbie.govt.nz/info-services/science-innovation/agencies-polici...

DUH!

Yes, this is money well spent. But do you think that increasing an existing innovation budget by 26% is the transformative policy that Robertson is referring to? I doubt this will transition the economy in any meaningful way.

Capital gains are still alive and well by the way - sunny Pāpāmoa gifted me $1,100 per day last month.

Eeerrr -um, is the alleged $1100 per day pinned to your fridge or already banked?

Fridge. As I’ve said previously, I don’t sell property.

I actually care more about rents (which are going up) and interest rates (which are going down).

BuyLowSellHigh, your priceless valuation comment jogged my memory about the following article; https://thespinoff.co.nz/business/07-02-2018/faded-dream-is-boomtown-tau...

Currently there is 222 for sale in Papamoa alone on realestate.co.nz. There's certainly no shortage!

As an observation, it seems contradictory labelling yourself a long term investor when you monitor the spot valuation of your property. Its weird. I'm debt free in the family home of 20 plus years and I couldn't care a less what is worth. Try and enjoy the rest of your weekend :)

The Spinoff?!!! That site will give you brain cancer poppy, don’t go near it.

Immigration is still high, and plenty of Aucklanders are still moving down. Besides this, it has excellent fundamentals - very competitive port, airport, thriving horticulture industries, great weather and beaches, increasingly younger demographic, part of the golden triangle, good schools, good service sector. These are the reasons that property prices are high in Tauranga.

Pāpāmoa is Tauranga’s largest suburb - there are usually plenty of houses for sale. Pāpāmoa Beach is going to do particularly well - Coastal property is running out fast. Mostly auctions at the moment due to high demand.

Buylowsellhigh, I totally understand that you're proud of your recent Papamoa purchase and you will say just about anything to justify it.

The following could be another factor behind the many homes for sale in Papamoa - a proposed Airbnb tax; https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=120...

"The number of Tauranga listings marketed on the international site had risen from 34 in 2013 to more than 1000 this year"

Like you, many other financially proud Aucklanders have leveraged their family homes on similar hyped values. This has been one of the drivers behind the late cycle strength of the regions. Who knows, history might be your kind guide and it will pay off or you and many other Aucklanders, or post another GFC, it could all end in tears. At the moment, are you part of the 10% club who own 40% of the debt? If so, the Reserve Bank is concerned about you too. Like I've said on previous occasions, the bank is your Landlord.

In these times of developing global risk, best be prepared.

The Reserve Bank has been pointing out the supposed risks associated with Auckland’s housing market for quite some time. I’m pretty sure they are forecasting slightly positive growth for the next few years though. At some point in the future they will go down, but there will be more ups than downs, as has been the case since the first house was built. You only lose out if you sell while prices are down. Since I don’t sell, this is of little concern.

There aren’t that many homes for sale in Papamoa in relation to buyers. When you actually try and buy one, particularly in the western part of Papamoa Beach, you quickly discover that the competition is tough.

My purchase in Papamoa wasn’t that recent, and I didn’t leverage the family home technically.

You’d be much happier in Papamoa with all the other retirees. Sunshine might even change your gloomy outlook.

BuyLowsellhigh, do you think the RBNZ would benefit by moving their headquarters to "sunny Papamoa" too?

What kind of dire scenarios did RBNZ have in mind when they made the media release containing the comment "the risks of needing to deploy unconventional tools as being the highest in history"? https://www.interest.co.nz/news/93891/rbnz-says-possibility-needing-unco...

Knowing how much the economy depends on house market buoyancy, the last thing the RBNZ wants to see is a housing market collapse. Are they also "gloomy" when they again talk of possible scenarios whereas OCR would be reduced to 0.75? The Reserve Bank stands ready to act. The whole lot is on a knife edge and highly vulnerable to an adverse event of unknown chemistry.

I think the Papamoa sun has blinded you buddy. Anyway, it's been reinforcing for me and my "gloomy" beliefs to once again converse with a blinded spruiker from boomtown :)

You are going to have to change your name soon to Buyhigh sell low after you just purchased that Papamoa property at the peak of the market. ha ha

Been reading your responses on here and it sounds like you are reading off a Property investment course script about the market starting to rise again in 21/22.

We will be in the thick of the next downturn storm by then and unfortunately the property clock many investor gurus speak of won't be telling the same timeline again in the future. The entire environment is completely different this time as apposed to the last two cycles.

The word economy is now in transition, there are more raising rates than in the last decade

Rates will rise internationally and there will be a slowdown. We are overdue. This is the second longest period of economic recovery without a slowdown. Upward phase will begin in 2021/22 and you’ll probably still be claiming prices to fall through it all.

Prices have nearly doubled in Auckland since you declared PropertyPrices2Fall - you should reassess your world view, as your current one has been giving you the wrong answers.

Thanks for your useless advice.. when there is a slowdown, that will include property, don't think you realise that

You’re welcome.

There already is a slowdown in some respects. Auckland’s started 2016 - that was basically the peak.

So you plan to wait until there is a crash before you get back on the housing market? Reality is that if prices drop you’ll say you don’t want to catch a falling knife and then when prices start to rise you’ll say that it’s unsustainable and prices are going to fall.

If you’ve been so severely wrong for so long, why not reassess your viewpoint to reflect what data and history’ lessons are telling you?

Why are you so paranoid?

Not sure why you're so concerned about I having to wait.. it's my life, maybe you're so nervous of what lies ahead that you're being so forceful

I just feel so sorry for you

The problem with the finance Minister isn't about what he says, the difficulty is that he lacks credibility. So he can say the right things, which is great , and a real step forward, but he is more than likely to stuff up everything he touches.

What I find really interesting though, is how often good things are done by mistake. So, whilst canning oil and gas exploration is a really, really stupid thing to do, it does send a message that Foreign Munny Can Bugger Off. This is generally a good thing. So, whilst we jeopardise our energy future and make electricity more expensive (it's always the poor what pays for socialism), we stand to gain more financial sovereignty. I'm all for New Zealand being mainly owned by the people who live here, although in general I'd rather it was in the hands of well meaning, competent private owners with real skin in the game rather than parasitic, pass the blame, government types.

Interestingly, John Key made a similar mistake with Solid Energy. When the business was profitable he loaded it with debt and so when the coal price collapsed it went bust. Classic irresponsible ownership. However, he then actually let it go bust and made the foreign banks lose money, rather than bailing them out. This completely changed the relationship between international banks and joint ventures with future New Zealand governments. This was potentially a masterstroke, as it cripples the ability of future governments, of right or left, from excessive borrowing for uncommercial joint ventures.

Well said

So, whilst canning oil and gas exploration is a really, really stupid thing to do,

Why? NZ has a shortage of neither. Do you think NZ can be an energy supplier? To which countries?

It’s not about exports - even self-sufficiency comes to mind. This industry is known to spend heaps on wages, CAPEX, maintenance, royalties etc. and hires workers from the top tier of skills - engineers, technicians, geologists, plus providing employment opportunities to accountants, financiers and lawyers who deal in oil on their behalf.
Moreover, regional investment in oil and gas is closely followed by heavy investment in other associated infrastructure that hires thousands of workers for roads, ports, refineries, pipeline and urban infrastructure.

As much good comes from chaos as come from order, and a well ordered society may also be an unproductive society, or at least suboptimal.
A jail is a well ordered society but does it contribute much good?
Unfortunately academics rather like order, makes their day easier, but our society may benefit from discussing the advantages chaos has in terms of opportunity.

Lower dollar = happy exporters.
Lower dollar = unhappy overseas based owners of empty NZ houses.
Lower dollar = higher tradables inflation, higher interest rates = unhappy NZ home mortgage borrowers

BLSH
I agree.
Robertson and Orr remind me of Mork and Mindy.
For those too young to have been about Mork was an excitable, not too bright / not practical full of hopeless ideas little alien with a bemused smile who didn't really understand the real world (played by Robin Williams) and Mindy was the serious sound rational earthling that was a reassuring, steady problem solving influence that got Mork out of all sorts of difficulties (played by Pam Dawber).

Has Robertson transitioned his personal economy to a zero carbon one free of oil, gas. coal and carbon? Or is he just another well paid chicken little hypocrite more than happy to sacrifice NZ workers jobs on the altar of global warming?

You are getting muddled with the Ideological purity as defined by the example setting right.
True, you have got to admire the Seymores,Hides and Brashs of the world steadfastly refusing to use the inefficient socialist networks they despise, roads, water infrastucture oh and the court system ,libertarians are loath to use the court system .

What nonsense. There is no policy in place to move to a zero road, infrastructure and court economy - though going by historical socialist systems that is the fastest way to get there. Venezuela being the latest example.

There certainly are plenty of libertarians (aka loons) that think the govt should have nothing to do with roading or most other infrastructure. Courts however seem to be needed (although I believe they want them funded either voluntarily or user pays) in their delusional fantasy world.

Nice vent Praggers - though I'm not sure what it has to do with the Finance Minister and his zero carbon delusional fantasy world.

I was commenting on your delusional fantasy world, not his :)

Why has the shape of the Finance minister and the word transition, left you lacking in confidence?
Did you not think your business plan through -beyond buy low, sell high?

What a vacuous comment.

The shape of the finance minister doesn’t concern me in the slightest - this is simply an observation.

I get concerned when, in the face of most key economic performance indicators heading in the wrong direction, the best response he can muster is to repetitively claim that “it’s all just part of the transition”. Transition to what? Government spending programs?

It’s not the word “transition” that i find concerning - it’s the fact that it is being banded about by a seemingly clueless person in a powerful position.

Apologies for taking your comments literally.
I wont make that mistake again.

No need to apologise - your lack of comprehension skills is no fault of your own. Your misrepresentation of my comment was due to you misunderstanding it, and I can’t hold that against you.

You're a nasty little excuse for a property bull aren't you.

But please, don't misunderstand my comment.

Exactly the sort of insightful and relevant comment I’d expect from a brain-dead zombi.

Again you seem quite paranoid, hope you're alright.. property prices will keep falling,

With your top notch track record of predicting the market, your acumen and intilect are proven and I’m sure you’ll make the right choices going forward.

If you haven’t realised by now that facts don’t care about your feelings, you probably never will. You may feel like you want prices to be falling, but that doesn’t make it true. Auckland flat, nationally still growing. You really should check the data before you make that sort of claim. https://www.interest.co.nz/charts/real-estate/median-price-reinz

Good luck.

You must be quite excited about the foreign buyer ban? It will further boost the market.... downwards

Again, the facts have eluded you. David Chaston did a good article looking at the data maybe a month or so ago. Foreign buyers were only close to noteworthy in some central Auckland suburbs and Queenstown. Negligible outside of those areas. Very substantial portion of those were Australians, who aren’t affected by the ban.

David Parker said the bill would be passed last month - I called nonsense in the comments section when it was mentioned in an article here, and sure enough it has yet to arrive.

I like it when the DGM and the CoL supporters jump at you and change subjects whenever it doesn't suit them ...

just noise and absolute lack of info and substance ... that is what this CoLs want, people who repeat nonsense with little thinking space., ;et alone tit-for-tat petty stuff.

Yes, they’re an emotional bunch aren’t they.

I agree with you on this one. I believe the NZ economy is in desperate need of transition out of housing and migration led growth, I don’t think this government has the capability to lead us into that innovative future.

Forget the capability, I don’t even think the government knows what a future state of this economy should look like. Why else would they ban a highly productive industry such as hydrocarbon extraction and try to make up for it with parks and museums for those in Taranaki.
Moreover, the talks of transition didn’t begin until the coalition realised that business confidence is going down the drain. That’s how committed they are to this transition.

" A lower dollar is better for our exporters " is so often accepted uncritically. If a weaker currency is all that is needed it would jump out at me on a chart. It does not. What does jump out is that we lost control of an asset market, our housing market is now teetering on stall speed, both in volume and price .The inevitable reversal of the wealth effects generated by stagnant if not declining prices will be far more difficult to manage .

The domestic economy grows when the housing market is healthy. Theres no need to worry about a reversal of wealth, the governor isn't touching the brake of either the economy or housing and he sounds to me that he has his set the cruise control with the possibility of a bit of gas to come if needed with the promise of a one percent drop in the OCR.

All those who talked here about dire consequences for housing and property in general would have had a very depressing a week. The wisdom and relevance of buying a first home sooner not later still abounds and congratulations to those who did what their head told them and did so. There is no better decision than to buy and own your own home
House works.

A one percent drop is absolutely nothing in a sustained world wide economic crisis.

I don't see "world-wide economic crisis" happening right now. Unless the trumpster starts sonething. Do you believe that is a possibility?

I don't know about "dire" consequences but this week has absolutely reinforced for me that risks are to the downside for New Zealand property. No doubt about it.

Firstly, OCR cuts aren't necessarily passed on the by the banks (see Australia). Secondly, bank credit is likely to tighten if house prices are falling. Thirdly, an OCR cut by 1% would signal an economy in horrible shape (rising unemployment, lower immigration). A low interest rate is great IF you can convince your bank to lend to you. The US would be a good example.....record low interest rates did not halt a falling market.

If the market shows strength over the next few months with the introduction of a foreign buyer ban and dollop of Spring inventory that will be quite impressive I think. For anyone with cash offshore, NZ house prices are currently in freefall (relative to say USD).

Andrewj, this is a really good read. I like the quote "bears are sneaky animals. Their victims seldom see them coming"

Japan

This is the definition of a time bomb.

Persistent stagnation through debt accumulation. The slow decline into decadence of a great nation consumed by low productivity demand-side policies.

This is not a Keynesian success, it’s the evidence of Keynesian failure.
Daniel Lacalle

https://pbs.twimg.com/media/DkURPoMXoAAScKE.jpg

The debt is in yen. The BOJ has yen galore uses this power to finance the functional deficits the country needs to tick along. Japan is one of the best functioning, civil, safe and orderly places I have ever seen with the kind of public services such as transport and school meals that are the envy of the world. Nz could learn a lot. What was betting against JGBs called again? The widow maker I believe....

Sorry for the information overload Poppy, I get a bit excited when I think there is a chance someone might just, 'get it'.

You are making an assumption that you actually "get it" and your view is "correct". Seems these days everyone has an opinion but no one seems to say anything that can be pinned down as "correct". The world is awash with detritus - the interweb especially. Apparently it takes multiple studies to disprove an "accepted" thesis - even then it will still be quoted even if thoroughly debunked.

I'm not trying to say I have the answer, I'm just saying don't ignore the 100 trillion dollar elephant in the room. I accept it's incredibly complex.
The eurodollar /shadow banking empire is outside the control of central banks, making monetary policy appear to be ineffective.
Yet we know that the growth in Euro dollars funded much of the world we have known since the early 70,s, those ledger liabilities.
I think it's time perhaps to admit the way to grow the economy is through increased disposable incomes.

"Markets in which lending is based on collateral (secured lending) played an
essential role in the development of the shadow banking system in the run-up
to the financial crisis. Collateral reduces counterparty risk, enabling non-bank
parties to enter into transactions that would otherwise be effected through banks,
for example repo transactions and securities lending. Government bonds or shares
may be used as collateral in these transactions, but so may securitised loans, for
example. Use of collateral thus facilitates financial intermediation outside the
banking system, with the security offered by the collateral forming a substitute
for supervision and safety net schemes. The opportunities for this are exploited by
using the same collateral several times over. One example is rehypothecation, in
which institutions reuse the collateral received for loans they have granted to fund
their own operations. "
https://www.dnb.nl/en/binaries/DNB_OS_10-05_uk_tcm47-281218.pdf

I really enjoy your links Andrew, keep them coming. Charles Gave is a wonderful chap. Unfortunately he was obviously sober when he wrote that article. I am sure he would be much more entertaining after a little wine.

Andrewj, dito, keep those links coming. There is now an abundance of hard evidence the world is rife with risk and short of answers to address this risk. It's increasingly hard for spruikers to counter the building evidence with substantive opposing arguments. It's becoming increasingly likely we will soon experience another major event.

I think it's time perhaps to admit the way to grow the economy is through increased disposable incomes.

And if we had the large multinationals paying tax then sovereign states would be able to do so much more toward achieving that type of labour value led economy.

Whether or not the predictions of others you posted turns out to be true Andrewj, it does at least present a rational and cohesive explanation of their viewpoint, which is unfortunately rare.
Neither housing nor stocks looks particularly attractive here in NZ at the moment. Grabbing falling knives seems more logical than grasping bubbles. At least you end up with a knife for your efforts, even if you do get hurt.

"The factors New Zealand had leaned on so heavily to bolster economic growth, such as immigration and housing, have well and truly taken a back seat."

Housing and immigration are not out of the picture. Immigration is at a high level even after the recent fall. And housing will be supported by an ocr that's lower for longer, nz's QE, and we know what happens to asset prices when interest rates are low. Banks will temper demand by restricting finance true but they do not want a stalled housing market since its bad for business.

I would like to see more emphasis on r&d incentives. Nz comes up with some great innovations but we are slipping down the technology ladder. Key and co did not do enough to encourage and grow r&d.

To help tech companies thrive in NZ as they usually need to set up in the city areas. We also need to stop 'Overseas Speculative Investors' from massively pushing up land and house prices which as we've seen can send the cost of living spiraling upwards which also mean that business have to inflate wages to keep up. Not an easy thing to do with stiff competition in a global economy particularly in the IT sector.

So we need the foreign buyers ban to come in to effect as well. Here's some articles from around the world that point out why:-

Observer article: Study: Silicon Valley Housing Prices Baffle Google, Facebook Engineers
Quote: "You know something is wrong with an area’s real estate market when the one of the highest-paid groups is struggling to afford a piece of land".

http://observer.com/2018/02/google-facebook-engineers-cannot-afford-sili...

Better Dwelling: Vancouver’s Tech Scene Shows Just How F**ked Up The City’s Real Estate Is
https://betterdwelling.com/city/vancouver/vancouver-tech-scene-shows-jus...

Toronto’s “Well Paid” Tech Workers Need 24 Years To Save A Condo Down Payment
https://betterdwelling.com/city/toronto/torontos-well-paid-tech-workers-...

In my opinion the basis for the first article of tech engineers can't afford to buy, is laughable. I calculate their figures are based on a single income and no upfront deposit.

Yes folks it's high time to stop relying on the false economy that National helped to foster. So we can build an actual working economy!

And if you're not sure what a false economy means then let me spell it out for you:-

National's false economy; Hugely attracted overseas Speculative Investors buying up NZ property and land, pushed up the NZD and prospered the RE's and sell out Boomers. Massively over inflated house prices and rents and needed high wages and high amounts of immigration to sustain high rents and living costs.
In turn this killed off legitimate business (Due to high cost of living) and harmed our exports (Due to over inflating NZD). This 'false economy' is now collapsing due to it being unsustainable in the first place along with China turning off their Speculative Investment tap.

Now we have to rebuild a sustainable economic model where legitimate business can flourish particularly in exports and IT though to do that we need to bring down the cost of living in our larger cities.

GDP is not driven entirely by immigration. This is more biased used of no statistics. Write up your economic paper and submit it. It should take you at least a years research. Comments on this forum are mostly just off the cuff hot air vents of frustration.

The largest component of GDP is consumer spending (approx 65% in NZ). Immigration has a strong influence on GDP, whether it be new arrivals settling in for the long term; students staying for the medium term; or short-term visitors like tourists.

@cj099 House prices in nz have been rising since a monetary system was first introduced 200 years ago and now inflation and cycles are firmly established. It isn't something you can ban although a stupid govt may try. You cannot blame entirely foreigners for pushing up prices, I remember there was negative net migration a few decades ago yet house prices went up. And how do you explain house price inflation outside Auckland and Queenstown? So it isn't just foreign fuelled demand. A further question would be why do so many foreigners want to come to nz? By the way, there was also high immigration under previous govts when conditions were right. It is a peaceful country, a long way from the rest of the world's troubles. I hope you are not saying the back door entry to Aust, nz itself has things to offer that foreigners value. Maybe we should see our own country's opportunities with open eyes.

I think you're not following recent events HW. And I can actually prove that foreign buyers are largely responsible for pushing up NZ cities house prices and particularly the epicenter of Auckland.

You have to follow what happened, the article below will shed light on this and there's a hundred more that I could throw your way to prove it much further.

Ok so Auckland started to rapidly increase from 2010 to end of 2016 and didn't start to taper off until a certain nutter got voted in in the US called Mr Trump, who started to threaten trade tariffs at China.

China (One of the main global foreign buyers of property) reacted by gradually blocking their capital flight which happened towards the end of 2016 to mid 2017. Since then Auckland and a lot of other China dependent cities have started fall in their property market since then. Have you not noticed the pattern yet?

Btw this isn't about immigration this is about Overseas Speculative Investors! The only steps that National took was to restrict resident Landlords/Investors in Auckland by adding mortgage restrictions on them (end of 2015), which pushed them out of Auckland to places such as Queenstown, Hamilton etc..

Remember all National can do is sell NZ off to the highest bidder thy are piss poor at doing anything else!

Better Dwelling: China’s Massive International Real Estate Buying Spree Is Officially Dead
https://betterdwelling.com/chinas-massive-international-real-estate-buyi...

perfectly put HW - some here are locked into a very short sighted & narrow spectrum of thinking -- they just talked themselves into believing that higher housing costs are the Main or Major reason why we are here now.

And, of course its all the previous Gov's fault, just oblivious of the boom periods in the previous cycles under the watch of their Mates.

Time and again, quoting examples from other countries is proof of ill studied and out of context noise for self conviction and justification of failure.

BTW, NZ is ranked the second safest country in the world after Iceland as per the safety index indicator 2018 , go figure.

Last note, housing and immigration did not stop under the CoL, they cannot do much about it and don't really want to -

GR can sing about transition as he likes but he loves the income from immigration, investments, and tourism and just cannot afford shutting that down

Asian investments toped $7B and are looking to expand - GR sent his mates to beg for money to be invested in Infrastructure and Housing .. so far no plans and nothing but disappointment and BS galore !!

Still full of hot air with no substance aren't you Birdy. Where's is you're evidence that National didn't have a hand in allowing our property market to over inflate creating a false economy?

One day, when you stop feeding out of that Canadian stupid trough and get some sense into your head you will know that National Is indeed responsible for a True economy of which this CoL are spending left right and centre from and bragging shamelessly about ... and yes they have allowed prices to inflate because that is what happens as a result of building confidence and allowing investments to flow. But losers like yourself cannot stomach that ...!

How can a biased person see any evidence when he is Blind ?

Keep repeating the same song CJ ... that will not bring your properties back, you thought you were smart and would beat the market , but you were not

the more you repeat the same crap, the more nauseous you make us .... keep claiming what is obvious to all and sundry like the sun in the sky ...keep making a fool of yourself, well done !! :)

@accounting software. See comment to HW. This isn't about immigration is is about selling off NZ to rich overseas Speculative Investors, and yeah don't forget all the money laundering that's been going on.

CJ099 - problem is, short of platitudes, I can't see a plan or a single thing they're doing that's going to foster that change - get rid of the stuff that works, be it arguably short-term, and replace it with nothing - it will be fairer though,we'll be more equally sharing a shrinking pie

the transitional economy equals a reduction in exchange rate (good for exporters) and reduced demand for domestic economy.

Then to prop up domestic economy the government steps in to plug the gap by borrowing to fund infrastructure, social welfare. etc. the rbnz has to cut interest rates to prop up the economy as inflation dwindles and the economy risks stalling.

This sounds like we are teetering on recession to me.

If the world economy does in fact tank the Crown, and RBNZ have virtually no more levers to pull. This in my mind is very very dangerous place to be.

QE is the next lever... this is what happens when you don't have an economic plan to deliver in hard copy to business.... labour is very good at social policy from finland but has no idea about creating business and stream lining the economy...

the propaganda by the minister of finance that the economic growth of the country was driven by immigration and housing alone is a joke. It not a joke its SAD....hes not telling the truth...

Any evidence? Otherwise your comment is probably just a "mostly just off the cuff hot air vent of frustration" as you refer to above.

I thought the JB Were research showing zero productivity growth over several years was very good evidence New Zealand was running on immigration and housing alone. But keen to hear alternative evidence.

With no stats to support my argument I would put immigration and housing as the two main features of NZ economy since I arrived 15 years ago. But also add failure to meaningfully invest in apprenticeships. Our university mafia has taken over training but really only on the job training makes sense for plumbers, electricians, welders, car mechanics, etc - the death knell of NZ's No8 wire mentality. 30 years ago meeting a Kiwi working abroad meant meeting a hard working pragmatic professional - they seem to be rarer these days (or maybe I'm just getting older and grumpier). NZ govt's have been using immigration in the wrong way - too often cheap, low wage, low skill - ffor every shortage an immigrant not a trainee. It is just an attack on the working class Kiwi and why Labour went along with it and still goes along with it is a massive puzzle - too many graduates in politics.

Too many kiwis refuse to work as you know so I wouldn't feel too sorry for the unemployed.

Why does Robertson not articulate this "transitioning ? strategy more clearly .

What is the desired outcome ?
How is it going to impact on us ?
How is it going to impact on the productive sector ?
What is the long-run intention?
How is he going to pay for it ?

Robertson should go into business for 1 year , just to see how bloody hard it is

We spend many days each month doing tax forms and returns , we dare not get sick and miss a day from work , we carry way too much debt in our businesses .

Robertson has it easy , $200k a year g'teed and he actually has no idea how it was made , except that it comes from taxes

YOU HAVE BEEN WARNED .

Turkey could trigger the next GFC , it could trigger defaults in many EMERGING MARKETS

If it happens we could call in the EMERGING MARKET CRISIS OF 2018

Right now there is a rout unfolding in Turkey which could lead to a default and serious losses by European Banks triggering another Banking crisis akin the the Asian Banking crisis of 1987

The contagion effect could see all sorts of EMERGING MARKET defaults , in places like Argentina , Brazil , Mexico , Greece , Italy and Spain and possibly currencies collapsing in places like Russia , India ,China (maybe) , South Africa , Chile , Peru , etc .

Maybe our Reserve Bank Governor had some info we did not have last week ?

I will be surprised if that doesn't have any impact here

Lower Dollar = unhappy importers.
Lower Dollar = higher prices, in particular petrol
Lower Dollar = more expensive foreign holidays
Lower Dollar = weakened confidence in NZ being a place to invest

End result.. lower dollar = falling property prices

Not necessarily.

New immigrants now have more money with which to outbid the locals.

Stuart Pessimist Mason, the lower dollar makes holidays TO nz cheaper. And exports FROM nz more profitable. Overseas tourist numbers are increasing and have momentum, this coming tourist season starting Sept/Oct will be a good one for local operators I believe. It may just help to turn sentiment around for the struggling coalition govt.

We are all poorer when the dollar is weak.

But happier when the economy is humming ;) have a good afternoon

if the economy was humming we would have a strong dollar.

We don't have out of range inflation and consequently rising interest rates such as in the usa. Besides the nzd has been too high for too long. Exporters and tourism operators will benefit the slightly lower dollar. How low do you see the dollar dropping or is this It?

I don't have an opinion on the dollar, I don't think it's as important as the distortions in our economy. To much debt on non productive assets, housing should never be a speculative asset with leverage available to the average joe.

The dairy industry has expanded on marginal land, Landcorp went from 1800 cows in 2000 to 70,000 by 2008, all on marginal land.

We lower interest rates, but I notice no one is stopping the Aussie banks from repatriating 5 billion a year. Banks are not taking a hit on that dairy land, or not if they don't have to. Land needs to reflect earnings and thats a world of pain.

That 5 billion belongs in our economy but low interest rates like giving alcohol to an alcoholic have given unearned untaxed capital gains to those with leverage in the housing market at the cost of ever increasing debt. Low interest rates = more debt.

The question should probably be,' how high will the US$ go'?

But then again these graphs tell a sad story

https://pbs.twimg.com/media/DkVw6cEW4AAQAUo.jpg

https://pbs.twimg.com/media/DkVyy6PXgAAWSxa.jpg

With all our debt, if we collapse the dollar someone somewhere is going to want to put it right, interest rates will rise to support the dollar.

Then again, you are asking advice from a sheep farmer.

I should add that I think government spending is too high, %36 of dodgy a Gdp figure is too high. We have to get money back in people pockets so they can spend, instead we have everyone maxed out paying the mortgage or the rent.

"housing should never be a speculative asset with leverage available to the average joe"
Do you suggest that investors lvr should be tougher so to restrict finance and therefore cool the housing market?
If so there could be less rentals available. A lot of rentals are multi-unit blocks on a single title owned by one investor. You have more than one dwelling even up to 30 or more units on a single title. I hope I explained that ok. Restricting finance to investors buying such properties would possibly bring down their prices but then have no effect on owner-occupied housing values. Even if multi-unit properties dropped in value rents would not drop and the benefit would not be to the tenant but would give better owner yields. To benefit tenants the govt should facilitate these properties of which there are tens of thousands to be cut up.

By the way, I have heard sheep farmers lamb prices are going through the roof right now? $8 A kg. You seem to have a lot of time for interest.co today Andrew, so you can't be lambing yet :)

No my wife got a job, it's just me and the dog for a few weeks. Only have lambs on deck and it's looking good, I just don't know why.

Did you see tonight's cc Andrew, really interesting, industrious family. We are city based but I enjoy getting an insight into the rural life :)

i must confess, I don't have TV.

We don't have imported chicken in NZ. It's protected from competition, part of that deal is the industry is very clean, you don't need to buy organic chicken in NZ, it's all to a very high standard.

Yes, it acts as a big wage cut. Imagine if the government mandated a 20% wage cut for everyone, there would be riots. Yet, the fall from 88c to 67c is a 24% cut, according to my calculator anyway. However, it makes export facing businesses more profitable which generates the profits to fund expansion and investment in new machinery. People underestimate the importance of profits. They are the business equivalent of saving. If you don't have them you are trapped. All up, it's bad short term and good long term.

the problem is the dollar is falling because those exporting businesses are facing serious headwinds. In my business the biggest obstacle is non-tradable inflation.
In the future it will be inflation in non discretionary items like fuel, fertiliser, any advantage from low dollar will soon disappear due to the fact our costs are such a huge percent of gross incomes.

yeah only for those in the export business. for everyone else it equates to wealth destruction. great for overseas companies buying up all our capital.

Some good stuff here boys & girls. Lots to consider and take into account. Remember we are the cork, not the bottle. Bottles are recycled where-as corks are dispensed with. This particular version of 'government' is both clueless & leaderless as the 100 committees testify to. That also explains their 9 years in opposition that could probably not be aired on pay TV if the truth were told. Now they have the power, what are they doing with it? If you knew, you'd be the first one, because I can promise you they don't. The committees are yet to report back. Mmm back! Perhaps that's a clue?

LJM - Very Very well put I so tire of RP and his gang of Muppets hanging out for a bad thing to happen

Seymour is the only one with the cojones to write it the way I see it.

From the Herald

‘The most original feature of Seymour's conference speech was his attack on Jacinda Ardern in a most carefully calibrated manoeuvre to prod her halo.

She is genuinely one of the nicest MPs, Seymour said, and we wish her well in motherhood.

But she was not a real Prime Minister he said. No one was scared of her. She was not tough like Helen Clark or John Key. She was a show Prime Minister, said Seymour (coming close to using a term Ardern hates - being described as a "show pony.")

"The economy could go straight over a cliff and Jacinda will go on smiling as it crashes all around her."’

The above nails it for me. We have a Labrador in leadership thats barks at random cars like Oil & Gas and Refugees. I’d rather have a Kelpie that engenders respect.

https://www.scmp.com/comment/insight-opinion/united-states/article/21588...

"It’s the antithesis of the pre-crisis eurodollar system, where then these institutions believed no risk was too great because there would only be reward, but today global banking has been turned totally around to all risk with no reward." Snider

Social Unrest Breaks Out In China After "Panic" Bank Run On Peer-2-Peer Lenders
https://www.zerohedge.com/news/2018-08-12/social-unrest-breaks-out-china...