An online Reserve Bank (RBNZ) survey of about a thousand Kiwi householders has found they expect inflation will fall - and house prices will start rising again.
And households are no more worried about making mortgage payments, or keeping their jobs, than they have been.
The RBNZ's latest quarterly Household Expectations Survey found that respondents do expect inflation to fall considerably, particularly in terms of in two years' time.
Westpac senior economist Satish Ranchhod said this was an encouraging sign for the RBNZ.
"New Zealand has already experienced an extended period of high inflation. And although headline inflation has been falling, it remains elevated at 6% in the year to June.
"Against that backdrop, the risk was that inflation expectations would remain high, and that could make it harder for the RBNZ to get inflation back to target. However, with expectations dropping back, the RBNZ can feel more comfortable about the outlook for domestic inflation.
"We expect the RBNZ will highlight the fall in inflation expectations in tomorrow’s Monetary Policy Statement. This would help to counter concerns about the persistence strength in domestic inflation that was evident in the June quarter inflation figures," Ranchhod said.
In terms of the survey results, on average respondents expected inflation to be 6.0% in a year's time. That's a significant improvement on the previous quarter's result, in which survey respondents reckoned year-out inflation would be 7.4%.
In terms of the expectation for inflation for two years out, households are now expecting, on average, 3.3% inflation, down from 4.5% inflation in the last survey. However, it still would put inflation (if this result were to prove correct) outside the RBNZ's target range. But, regardless, things are moving in the right direction for the RBNZ in terms of public opinion.
The significant thing about this survey is that it has a good recent track record of picking the actual inflation outcome one-year out, according to analysis the RBNZ did on surveys earlier this year. And the RBNZ has been putting much more emphasis on this survey recently - even bringing forward the timing of this release by a day so as not to clash with the August 16 Monetary Policy Statement release.
The RBNZ Household Expectations Survey was re-developed in Q1 2022 and renamed to Tara-ā-Whare - Household Expectations Survey . The word “Tara” is derived from Pakitara, or the walls, and “Whare” means a house. Tara-ā-Whare is also used to describe going to door to door, to ask questions.
While expectations of inflation are tracking in a direction, at least, that will please the RBNZ, the expectation of wage rises might not. Respondents now expect a bigger wage rise over the next 12 months (6.4%) than they did three months ago (6.0%).
Key among the RBNZ's aims with its tightening of monetary policy and interest rate hikes has been to kill 'inflationary expectations'. That's because if people expect prices to be higher in the future, then they will want higher prices for things they sell now and they will want higher wages. This fuels actual inflation.
So, these latest results offer encouragement on inflation expectations, but the wage expectations might be a bit bothersome.
Survey respondents reckon they are going to get higher wages - and they reckon their houses are going to start going up in value again too.
They see house price inflation of 1.6% in one year's time up from just 0.6% in the last quarter's survey, while in five year's time they see cumulative house price rises of 8.1% up from just 6.2% a quarter ago - a movement the RBNZ described as "significant".
In terms of employment and paying the bills, the latest survey has found respondents give just a 13.4% chance of missing a mortgage payment - and that's surprisingly (I think) down from 15.8% in the previous survey.
The chance of respondents not making rent payments has gone up slightly (though hardly significantly) to 16.3% from 15.5%.
Surprisingly, also, respondents are now giving less chance of losing their jobs in the next 12 months than they did a quarter ago. This probability, respondents reckon, has fallen to 17.2% from 18.3%.
The RBNZ itself (as of May) was forecasting unemployment to rise to 4.6% at the end of this year. As of June actual unemployment was 3.6%.
And as far as survey respondents go, they still see their chances of getting another job being pretty good, even if they do lose the one they have. They put their chances of getting another job at 51.2%, very slightly down from 51.7% in the previous quarter's survey.
44 Comments
If you're referring to his 13F then you're referencing moves that happened between 1st April and end June. He's most likely stepped out of those short positions and into something else this quarter.
The same 13F filing shows he also dropped large Chinese long investments he had only held for a short while. He's as indecisive as the rest of us.
Too right. We all expect house prices AND our own wages to skyrocket And interest rates and inflation to fall away.
So we are really saying we all want prices of everything and govt spending go up so we can all get paid more wages... and buy more stuff. Then as prices shoot up we want inflation to fall (lol) and we want interest rates to fall away at the same time so we can get back to borrowing.
So we EXPECT a never ending huge boom!! With the odd teeny dip.
it would be even funnier if it didnt mean everyone will be sad. Lol.
All fueled by migration and increasing NZs population without building the necessary infrastructure to support it. At some point someone has to pay the piper, and we all end up having to pay for the massive deferred costs. Increasing the population like we have been doing is not sustainable. IMO we should be looking at a a more static population level and increasing productivity from it. BH did a podcast discussing this sort of thing a week or so ago. I argue that NZ is not a better place to live in today, than it was 30-40 years ago with a far smaller population. A lot of unpleasant things from overseas have crept into NZ during this time
If people expect inflation to still be outside the 1-3% band in 2 years time (i.e. mid/late 2025), and they are correct on this (which is implied in the article) interest/mortgage rates aren't going anywhere downwards until 2026 (i.e. the amount of time it might take for rates to get below 3%.
But then again, I'm not dismissing the possibility of a severe recession and the risk of strong deflationary pressures that could kick in within 6 months so really everyone is guessing. But if that happens, house prices won't be going up (like people are predicting next year), but could drop another 20-30% in nominal terms (because we have deflation, not inflation).
IO - There is already talk of a double dip NZ recession - whats next - depression/deflation - latter already happening in China, you are on the right track. With house prices at $600k and 30 yr mortgages at 4.5% the cost is in excess of what a median earner in NZ can afford and still have a decent lifestyle.
What the masses think is set by repetition in the press. It literally doesnt matter what the vast majority think or say. Polls are about influencing people with their results to believe what is proposed.
There is no coherent reason for either to be the case. Inflation might be dropping on paper, but the NZD is trading sub 60c to the USD. They have to hike rates to preserve the dollar.
'Doom Gloom Merchant'
An insult from mostly property investor types towards anyone who wishes to see house prices regulate back to more affordable levels - thus providing greater levels of financial and social stability.
Isn't strange how increased financial and social stability across society as a whole looks like doom to some people?
"Oh look, young people might be able to secure their future in this country....what a doom/gloom merchant outlook those people have! It would mean my capital gains in my property portfolio are gone! And my capital gains in my property portfolio are more important that the financial and social stability of the nation as a whole - and anyone who disagrees with me is a doomster".
A survey for the Reserve Bank shows that households think inflation is going to be NEARLY back in the RBNZ's 1% to 3% target range in two years' time, while house prices will rise next year and continue to rise
Are these the same households that vote for another 3 years of labour pain as Hipkins gives birth to another Damian!
House prices will faĺl next year as the pain of inflation stays high, listings rise, bill increàse, unemploymeht rises and the tax take is low.
But but house price falls have bottomed out and interest rates will start falling next year, according to this article
https://www.squirrel.co.nz/blogs/housing-market/the-housing-market-has-…
Mortage brokers are akin to 3rd world gun runners........do no service to societal good and only out to propagate ruling over the masses.
"Independant Economists".....even worse!
TA is like a fungus infected toenail............sorry more like a reoccurring hemorrhoid.
We play group wack-a-mole with him......yet he still pops up, despite losing any shread of credibility.
Over the past fortnight we have received further information telling us that the housing market has bottomed out. But we do not have any insight into the likely strength of the price and sales upturn as yet, and history tells us that picking such things is a fool’s game at the best of times, let alone in the current unique post-pandemic environment.
Data from REINZ show that after adjusting for seasonal factors, the number of dwellings sold around the country in the June quarter was ahead almost 20% from the March quarter. We shouldn’t expect this rate of growth to continue, and it is best interpreted largely as the market moving away from the bottom with most of the driving force coming from first home buyers entering the market
The Comb ove certainly thinks " one swallow does a market maketh"
He is a glorified RE agent, spruiking the data, and using old photos when he had hair.
I don't get it.
How they justify it?
How do you get votes for that at all?
Who wants that?
I'm expecting a surprising extremism at the next elections (meaning more powers to minorities and populists), and that is what happens when the "opposition" sucks at least as the government.
Seriously, I don't see one (1!) good reason to vote for labour or national, if not for personal tradition or worse for cheerleading or (even worse) for fear.
If that doesn't happen it means that I must be definitely disconnected from reality.
Officially the word is they havent ruled it out.
Apart from securing votes from those who want house prices to rise, I really fail to see how this, or reversal of any other housing investor based taxes and policies, is going to be good for the country.
If this is the path they are heading down, he needs to get his media responses sorted, he looked extremely uncomfortable when asked why he wanted house prices to rise, especially when he bangs on about productivity, then advocates through his personal actions to pour money into unproductive assets.
Like scrapping the foreign buyers ban would make any difference - Labour are so busy handing out residency visas to every foreigner who can drive an Uber that they are now the majority of "First Home Buyers", and being given money by the Govt to buy houses through the Kainga Ora fund to boot while Kiwi's miss out.
https://www.oneroof.co.nz/news/first-home-loan-scheme-is-open-to-abuse-…
"The majority of home buyers accessing the government’s First Home Loan scheme are new arrivals to New Zealand, mortgage brokers have told OneRoof."
"RBNZ asks home owners what they want the future to hold"
They overwhelmingly want/expect/demand their home prices to go up and inflation to drop so that they can pay less for their mortgage.
Surprised Pikachu face
These expectations are why houses are not selling, the vendors are in LA-LA land expecting gains.
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