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Gareth Vaughan makes 5 predictions for 2022 looking at Covid-19, climate change, bank lending, the RBNZ & rising interest rates

Public Policy / opinion
Gareth Vaughan makes 5 predictions for 2022 looking at Covid-19, climate change, bank lending, the RBNZ & rising interest rates
Masked planet

So 2021 is almost over and 2022 is just around the corner. What will the New Year bring?

In our fast changing and unpredictable world that's a very good question.

I certainly don't claim to have the power to be able to see into the future. Nevertheless in this article I've outlined five key factors I think will be key issues for the New Zealand economy, and therefore the lives of New Zealanders, next year.

1) Covid-19 is not going away.

This may be stating the obvious. However, if you turn the clock back a year there was talk that 2020 had been the year of Covid and 2021, with the rollout of vaccines, would be much better. Then in August, when Auckland was plunged into lockdown, there were claims the rest of the world was moving on and NZ was still using 2020 measures.

Yet over recent weeks parts of the world have been increasing Covid-19 restrictions once again, as New Zealand loosens them, following the emergence and rapid spread of the Omicron variant. 

This highlights a problem when battling a mutating global virus. Things can change very quickly.

The pandemic is not over because a politician has decreed that a certain date will be Freedom Day. The pandemic is more likely to wind down when enough of the world's population is vaccinated to slow or stop the emergence and spread of dangerous new variants and/or medical treatment, including vaccine booster shots and antiviral pills, are widespread and good enough to prevent hospitals being swamped when case numbers surge. 

We're not there yet and getting there will likely require greater global coordination and cooperation. So expect 2022 to once again be dominated by the pesky virus, serving as the backdrop to everything else. Also living with Covid-19 in the country likely means at least some ongoing restrictions for much of 2022.

2) We learn how serious New Zealand is about combatting climate change.

In June the Climate Change Commission handed the Government its final advice, in the form of a 400-page report, on how NZ could reduce carbon emissions to meet the requirements of the Climate Change Response (Zero Carbon) Amendment Act. 

The Government subsequently gave itself until the end of May 2022 to publish an Emissions Reduction Plan. Writing for interest.co.nz in May this year, Climate Change Commissioner Rod Carr called on politicians to act now rather than leave it to the last possible moment to make changes as their predecessors did in 1984, forcing abrupt, painful change when other options had passed by. 

So will the Government embrace this challenge? And if they do will there be cross-party support in Parliament?

3) There'll be a lending slowdown.

The Covid-19 era has seen unprecedented levels of housing lending from our banks, helping drive house prices into the stratosphere. Next year will see lending growth slow, albeit anecdotally it already is slowing.

New, more prescriptive credit contracts and consumer finance laws introduced this month will bite, and banks are also self imposing debt-to-income (DTI) ratio restrictions on borrowers while the Reserve Bank consults on potentially adding a DTI tool to its macro-prudential toolkit.

And that's not forgetting the recent tightening of high loan-to-value ratio restrictions. (Since November 1 only 10% of banks’ new lending to owner-occupiers can go to borrowers with deposits of less than 20%, down from 20% previously).

It's hard to see how this, on top of recent increases to mortgage rates, doesn't result in a slowdown in lending growth.

4) The Reserve Bank will be increasingly politicised.

Former Crown prosecutor Simon Bridges recently becoming National's Finance Spokesman combined with the idiosyncratic personality of Reserve Bank Governor Adrian Orr, ensures the central bank will be a political football in 2022.

Bridges, alongside ACT Leader David Seymour, is on record as saying he wouldn't reappoint Orr when his term's up for renewal in March 2023. (The Reserve Bank Governor is appointed by the Finance Minister). Bridges subsequently clashed with Orr at a select committee hearing last week. 

Given the aggressive nature of Bridges and Seymour, rising inflation, the wider range of powers the Reserve Bank is receiving, and its plans to fully embed climate risks into its core functions of financial stability and monetary policy and the personalities involved, our central bank is set to be a political football next year.

5) The Official Cash Rate (OCR) won't rise as much as predicted.

The Reserve Bank raised the OCR by a combined 50 basis points in its final two reviews of 2021 to 0.75%. And its latest Monetary Policy Statement predicts the OCR peaking, in its current cycle, at 2.6% in late 2023.

Inflation came in at 4.9% for the September year. I know that pushes it through the roof of the Reserve Bank's mandate of keeping future annual inflation between 1% and 3% over the medium term with a focus on keeping it near the 2% midpoint.

But with the lending squeeze mentioned above, the recent surge in mortgage rates combined with many borrowers having chunky mortgages, and the ongoing uncertainty of Covid-19, I just can't see the OCR going as high as predicted. 

On that mortgage rate surge, the average bank carded, or advertised, two-year mortgage rate has climbed to 4.2% now from 2.53% in July. Repricing loans is going to extract quite a bit more money from borrowers' pockets. And then there's the question of whether raising the OCR can combat tradable inflation pressures stemming from overseas anyway.

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152 Comments

Omicron is going to turn out to be the greatest disappointment since the sixth Labour government.

Coronavirus will be a fading memory in 2022.

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Brock,

Can you briefly explain why? In what way will Omicron be a 'disappointment'? it seems an odd choice of word. Who will be disappointed?

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Said somewhat tongue in cheek i suspect. Omicron seems far less dangerous than all of the hype. Yes Cindy and  the govt is disappointing and people are ackowledging the pitch does not match the delivery 

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Maybe you should listen to people who know what they are talking about.

For a start you would then realise there is good data about how rapidly Omicron spreads, but not enough data yet about hospitalisation and death rates with omicron to know whether Omicron is lees or more dangerous.

Except in the eyes of arm chair epidemiologists.

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People seem to be trying very hard to dismiss the data South Africa is publishing. I've heard excuses from population age profile, level of prior community transmission, lower likelyhood of patients being admitted, the timing of prior waves etc. which is all true but can be adjusted for.

Maybe there is some residual bias there within G7/20 institutions to accept data from an African country at face value.

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Some people (mostly subconsciously) don't want the pandemic to end. We are seeing the beginnings replications of SA omicron case, hospitalisation and death data in the Australia, Denmark, UK and probably others if you go looking. You can see a small uptick in hospitalisations in the SA data now but the waves peak has passed, their wave is not over yet.

The media and politicians could be choosing to be optimistic here but they have chosen not be. I guess the moment you give any indication the pandemic might be over people will stop choosing to be vaxed and to some of them that would be horrible. We get misrepresentative headlines like "No evidence Omicron is milder than Delta - study" splashed across news sites which is adsorbed and accepted and will now be repeated back in the comments section for months.

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"Some people (mostly subconsciously) don't want the pandemic to end"

That includes the covid queen PM. Politically it is highly advantageous 

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That's a deep rabbit hole your in?

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Too much talkback and Facebook, from the looks of it.

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Talkback AND Facebook? That bad huh

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Don't know about this, she seems pretty stressed and warn out. She is just clutching at ineffective solutions because that's all that the people in influence are giving here to work with. It does not help she has statist propensities but I think if you gave her a button to make it go away she would chose it. She can get back to stuff like hate speech laws and 3 waters.

It's the people with zero accountability (e.g. the stuff articles openly enjoying the oppression of the unvaxed) that can get the emotional reward to want this to continue.

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"Statist propensities"?? Well they are the government and were elected democratically. Beats the feudal propensities of the opposing parties I say. 

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And very low fax rate compared with the west

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does anyone fax any more?

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It will be a disappointment to all the covid doom and gloom merchants because it's turning out to be benign.

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Certainly looks that way, countries have been waiting for a surge in hospitalisations and deaths that just isn't coming despite the pedalling of doom scenarios. It's now certainly been too long to attribute positive outcomes to the lag between infection and presenting in hospital. You are seeing near total decoupling between cases, hospitalisations and deaths.

With new Covid-19 variant existing vaccines will get less effective. There will be a future iteration but it's unlikely mass vaccination will continue for many more years.

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Summer and winter still make a big difference as with any virus.

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maybe not the huge surge -- but better health systems than ours are under huge pressure already - its not just ICU and hospitalisation --  with huge numbers our PHO and even pharmacy wont cope --   they will run out of basic drugs  painkillers flu and anti infalmmitories     not to mention standing peopel down for two weeks --   when services are already hugely short of staff       

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"...they will run out of basic drugs  painkillers flu and anti infalmmitories ..."

Not to mention the will /ability to continue to operate at the current (or increased) level of demand....an underresourced (not just financial) industry already at breaking point.

They dont need the extra pressure

 

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Covid is not going away, but in all seriousness what is the government trying to achieve with pushing back home iso and opening boarders to countries with no covid because of Omicron?  We will forever be locked up because there will be another varient to come after Omicron and another most likely.  Also you could see the pain/time in getting people vaccinated...wait till it comes time to getting people the booster dose and then of course the winter season...meanwhile the Government has done jack with properly addressing the hospital bed issue and creating the much needed extra capacity...lets not forget there are nurses and doctors overseas wanting to get into the country but of course they had to go into the lottery draw to get into MIQ first.
If they carry on like this, tourism will be gone, then hospitality, then SME's and we will have bigger problems to deal with and the government will act once its too late then blame Covid for all this mess.

I don't see the interest rates rising being an issue in the short term next year. Its the CCCFA that is the major problem. This is not only affecting home loans but any type of finance which I think alot of people are forgetting about. Credit Cards, Motor Vehicle, Retail finance basically anything to do with borrowed money is under the microscope.
The housing market is slowing down and it can be the time of year but also its taking alot longer for the bank to process the application so people are missing out on auctions, but also people are not getting the funds they need to meet asking prices. This will create a gap between vendor and buyer so it will be interesting to see if vendors meet the market - prices dropping or will people just not sell and stay where they are.
 

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On Omicron, I would assume the MoH and government are watching other countries' experience to see what happens. E.g. Netherlands going into a new lockdown according to the Granny Herald

I see some folk out there assuming all Omicron decisions are purely political, which just looks like paranoia.

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Yes they all watch then turn around and say we are "leading the world".  It feels like they want to keep us locked up until Covid magically disappears.

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I'd hardly call not being able to go to a bar or a gym locked up. Locked up is Chinese cities controlled by compulsory cellphone GPS tracking. Locked up is Afghan refugee camps. Oh the hardships of the spoilt rotten...

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Most people are pretty happy to keep Omicron out so we can at least have a bit of a break and a holiday.

Sure it's going to get here, but it's good to watch the likes of NSW for a few weeks to see what the likely impact will be.

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I'd be far more concerned about catching Delta than Omicron to be fair. The risk of reopening is reversing in my view.

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The OCR will influence tradable inflation through its effect on exchange rates (all other things being constant). But it is the relative OCR (relative to other countries) rather than the absolute level that counts in regard to the exchange rate.
My current thinking is that the USD exchange rate may well decline given the current account deficit.
KeithW

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NZ interest rates forecast to remain and/or rise more than the US pair counterparts. - New Zealand Dollar/U.S. Dollar (^NZDUSD) forward rates.

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"Lending is already slowing" you only need to look at yesterday's Barfoot Auctions when  just 10 out of 78 of the properties auctioned sold and 50% of the auctions failed to get a bid.

Meanwhile in the "hot market" of lower hutt with an average growth of 60% over the last 2 years - 210 of the 391 properties for sale have been on the market over a month with an average 50K taken off prices since listing.

Slowing is definitely what is occurring - really rapidly.

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house price up by another 20%.

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No  chance 

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Did you say that last year too?

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Nope.

But a number of things now create a totally different context.

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Many did. But the 30-40% rise in house prices this year only makes another 20% rise less likely, by any rational assessment. If you thought that house prices couldn't rise fast this year, you should only be more confident they won't rise fast next year. 

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And the chance of the main thing that stimulated the nonsense (cuts to OCR) recurring is very low. It's going the other way, plus the other barriers to accessing finance.

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I agree - the same driver that is responsible for much of the house price rises over the last few decades. The momentum is clearly shifting and any assumption that the future will look like the past seems rather hopeful. 

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I agree, however I always think house prices are not going to rise and then they do. There is still quite a chance that we see OCR drops with new variants coming along or after the economy starts tanking. 

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Yes, and as you and other readers will know I have been bearish on OCR rises for months (nice to see Gareth picking up on this theme :))

I still think they will rise in the first half of 2022, but go no higher than 1.5 (or maybe 1.75% max). But then could reverse later in 2022 or early 2023, but if they do it will be too late for the housing market.

 

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xing,

I wonder what your opinion is on the HK elections? Does the death of democracy there sadden you at all, or do you hold the party line?

 

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Xing - Certainly not in China.

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Depends on the location. 10 to 15% increases are more likely, the momentum is/was too large. It can't turn around on the head of a pin. Takes time to turn. 

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It's already turned.

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Not sure about that. From one angle it depends on the measure, the period that you take statistics for. Maybe Jan-Dec 2022 sees 0% gain in prices for the Wellington region, but mid 2021 to mid 2022 will come out as a 10-15% rise in that case.

Separate to that it could turn abruptly - the mechanism of house price rises somewhat comes down to the cumulated effect of individual auction rooms and individual tenders where the agents succeeded in selling the hype and getting multiple desperate/loaded buyers in there. You just need a buyer to realize they are the only offer, and that similar properties have recently come in below expectations, for the extreme offers to stop. At least for a moment.

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It’s going to be tricky. The reserve bank have got a big job ahead. They will likely push on with cash rate increases as signalled . I saw the most recent interview with Adrian Orr and he’s actually gone up in my estimation. He seems to have little sympathy towards the over leveraged, it’s correct too, it should not be a concern for the RBNZ. 
Controlling inflation and financial stability … that’s it! 
Those blunders at the start of the pandemic are looking massive though. Where we would be if they waited and watched + introduced a DTI back then?? 
 

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Even just left the LVR limits in place... What a colossal far-cup.

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"Controlling stability" - it's a bit late for that. The 'over-leveraged' is now 'every aspiring FHB who bought in the last two years - how's that going to work out for financial stability if things unwind? A total collapse in discretionary spend or a generation of Kiwis resigned to leaving the country.

If 'stability' mattered, we wouldn't be in this mess in the first place. It only suddenly matters when Gen Xer civil servants on stonking pay-packets need to inflict a big of finger-wagging at young Kiwis to distract from the fact that they have failed at almost every part of their mandate to get us into this position to begin with. 

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People know the chances, houses price can go and come down. Lots of people on here have been warning if you have bought in the last 2-3 years you will be in negative equity for a number of years, and a lot of over leveraged investors will be struggling. The depths of this crash will depend on inflation and interest rates around the world. The NZ government will not have any choice in the matter and it will just follow because NZD will be wiped out, if US raise rate by 1% NZ will need to go up by 1.5% 

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I disagree. Half of people have below average intelligence and it's now unquestionable received wisdom that house prices never fall in this speshul country. And if they do of course they will quickly go back up.

The big four banks are the vampire squid wrapped around the face of New Zealand, the market only falls when it suits them.

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really? half of the people have below average intelligence? In a room full of high IQ people half of them have below average intelligence. Banks dont really care if things rise or fall, so long as theyre too big to fail as Mr Key guaranteed post  GFC

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"People know the chances" - I'd say given the RBNZ was still trying to quantify the impact of their easing approach months after they'd actually done it and kicked this all off, to suddenly put the burden of a sudden 30% increase in house prices in 12 months back on people just trying to secure stable accommodation is an extremely convenient notion of responsibility.

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I would agree regarding people under the age of 13 who gobbled up property using borrowed money.  Anyone with a waffer more life experience should have been able to see the interest rate risk (which has certainly kept me out of the market).  I don't want to socialise any losses they make now - they have indulged and can take their chances like grown-ups.  If it turns out OK for them they will certainly by gobbling the gains.

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" I don't want to socialise any losses they make now" is an interesting idea given the enormous, demographic-changing and ongoing costs of the decisions that bought us to this current point in time. Forgive me for not suddenly deciding to put the burden of understanding risk on Kiwis trying to get a family home when Central Bankers have devalued labour and politicians have wiped away their independence. 

Something like 30% of all the money that has ever existed in history has been printed in the last two years. Expecting people to act rationally or even be able to measure risk when the fact we're in this situation in the first place should be evidence enough of total financial and regulatory failure is, frankly bullshit. Direct your anger to the people who caused this mess, not those trying to get by in circumstances they had no part in creating. 

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People know the chances, houses price can go and come down.

It should be that way but people have been given every reason to believe otherwise by reserve bank and government policy over the last few years (and decades).

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Most problems have a root cause in beauacracy removing 50% of bureacrats and explaining to the remainder their future depends on supplying solutions rather than obstruction will turn the economy around quick smart - will it happen - yes once Christmas day falls on Good friday.

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Yes the DTI was urgently needed 18 months ago, we could have kept it below 6 but its way too late now.

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Don’t be fooled by what he says. Watch what he does. 
 

He has been “warning” about too much leverage for years, but when he the rubber meets the road he has shown he will prop up the bubble at all cost. 
 

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the reserve bank has a big job ahead =  we are screwed

 

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1  20,000 people die with covid.  30 die of covid.

2 NZ not serious about climate change. Solar buyback rates remains unchanged. No mandetory solar power or solar HW on new homes. 

3 Lending has already slowed. It will open up again in 2022

4  The reserve bank, and just about every other  institution is already  politicized. We are the fools if we thought otherwise.

5  Add 10c / litre onto fuel and that's probably the same as +1% on the OCR. So you could we all be right on that. 

No mention of global events. Taiwan is looking iffy, along with Ukraine. If Taiwan blows up, then bang goes shipping - again. Crypto will have a rough ride. Ireland will start process to re-combine. Saudi will have more raves (unbelievable a year ago, but happening now.). District councils loose more power when 10 new BCA's created.

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Agree re-lending - looking at what is happening then either the new laws are too restrictive on mortgage lending or banks are being over the top applying incorrectly above the intentions of the law. 

Something will have to change fast in this space as it could have surprising unforeseen consequences

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Its the new law being too restrictive, the banks hands are tied on this one unless they want to push the boundaries.  I did see the Government was waiting for this CCCFA to "bed in" before making any changes.  They tried to fix an issue when there wasn't one and now they have created one which of course they have no idea what they are doing. This will snow ball very quick, but have a guess on how quick the Government will take to react...i think we all know the answer to that.

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In what ways are they too restrictive? Transparent accounting of income and expenses results in lower lending amounts approved? Why would that be the case?

I got the impression banks were just using them as a scapegoat.

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The banks are having to look at every single transaction you make.  Alot of discretionary income has now become non discretionary income. There are enough policies/processes in place with financial lenders that protect everyone i.e stress testing at a higher % rate is just one of them. They have been doing this for years why fix something that ant broke?
If people think this is how is should be going forward then its going to cause a adjustment/correction for everyone and yes the biggest change will be seen in housing, but its just not housing this affects, its everything to do with personal lending.

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Could be time for people to budget & know what they're actually spending their money on. Us kiwis love living off a low salary & acting like we're high flyers with debt...

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The banks were already nominally looking at 3 months of transactions for a FHB. What's different, just greater accountability and transparency?

I'd be interested to see a real analysis of discretionary vs. non-discretionary as the anecdotes I've seen in articles look ...rare and potentially mistaken rather than solid and consistent. 

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NZ Bank mortgage default rate half of Australia's and CCCFA effectively means Govt & Bureacrats know more about lending risk than Banks so remind me of any sucess of Govt or their agencies in anything of value - replies on the back of a postage stamp  by 1/11/2023.

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Doesn't mean that people won't be under huge pressure when they refix onto higher rates & have mounting inflation to deal with... Mortgages have never been as high right now and have been on historically low rates - who knows how this could look going forward. Being extra prudent & checking affordabilty seems to make sense.

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Too restrictive for minor lending? My experience last week:  I went to increase my credit card limit online (ASB) and found this function no longer exists.  Phoned ASB and after 25 minutes waiting on hold, was told the bank cannot increase the limit over the phone, an internal application would need to be made, and I would have to wait until next week for a decision.  Now considering ASB has a mortgage over my property, and I have no debt with ASB, and I have a 6 figure sum in my ASB account, I would have thought a quick decision using reasonable discretion could be made.  I only needed to increase the limit to pay for an on-line purchase for Christmas.  So the new rules appear rather inflexible and inconvenient.

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Have often thought banks could offer a come & go arrangement on limits for established customers with obviously good collateral. Like you I keep my limit at a reasonably modest level as a fraud safeguard. It would be handy to be able to temporarily increase this for the odd “one off” purchase. 

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Taking that feature away without notice was a bit crap really, I too set my limit lower than I would like to prevent fraud as I was under the impression I could increase it if I ever needed to. I didn't notice it was gone until I read it here yesterday. Is it the same for all banks?

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Yep (as per previous post), I applied for a $1000 new credit card on-line the other day (for on-line purchases because of fraud risk) and they declined me (I found out it was a robot).  Real person wanted to go through the entrails of everything we spend money on. Totally ridiculous given our financial position, history and the amount requested.  I even offered to reduce the limit on our existing card but no dice.  So I gave up.

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I maintain a $500 limit on my credit card, and if I want to spend more than that for an online purchase I transfer the funds from another account just beforehand. This obviously works better if you have your funds and credit card with the same bank, as there is no lag to the transfer.

Effectively I'm treating it like a debit card with a $500 overdraft on the connected account.

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Yes that was my intent too, but nowadays because of the new legislation, they'll make you jump all sorts of hoops to get that limit in place.

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I got the runaround from ASB over a bridging loan when I had confirmed contracts several times the value of the loan request, by the time the official understood what a bridging loan was and agreed I had already arranged a work around so ASB lost out and I found a way to circumvent incompetence and delay. Will I be depositing surplus funds with ASB, two letter answers accepted. But a big thanks you to ardern/orr for stoking the property market which I have almost totally exited close to the top and being as transparent and truthful as ardern promise to vote Labour next time!!

Billy Liar

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I had a heck of a time remortgaging in July with kiwibank. I went from 10-20% LVR with a good salary. Required full quotes to be sent to them to make up the sum and was told not to come back for more in the next 3 years and that they would not relend for any of the invoiced activities as they would assume them complete. 

I did need to borrow money so I could take time off for a child due in march but was told they couldn't lend for that and we never had this conversation. Times have definitely changed.

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Agree on the limited increase to OCR - I am still in the transitory camp particularly with the high likelihood of increased restrictions.

House prices will only stall or fallback slightly because people with equity can afford other houses at similar or even higher prices - and the bottom of the market is propped up by generous Government subsidies (accommodation supplement). The fundamentals are very different to post-GFC.

The chance of this short-term, election-focused Government taking climate change seriously is slim to nil sadly. They still think that a low carbon future will simply 'emerge from the mist' - we need an actual plan not a ragtag bunch of market shaping policy instruments.  

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IMO, the 5 biggest issues of 2022 are:

Inflation, inflation, inflation, inflation & inflation. (All other aspects will be consequential to inflation) 

I see NZ's economy slowing down markedly by mid 2022

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Nice post. Agree.

What very few people are talking about is the construction sector (T Alexander is the only economist I am aware of who has talked about it in a significant way).

It's such an obvious oncoming train wreck, it's hard to fathom why it's not being considered more.

And the problems will largely derive from  inflation, directly and less directly.

Directly in the ongoing significant inflation of materials. There have been large cost increases in 2021 and this is set to continue in 2022.

Less directly in the cost of borrowing increasing  as a result of inflation. Which obviously impacts  demand for new housing, as well as the cost of finance for developers (the former much more significant than the latter).

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Hopefully Labour are sensible and prepared enough to ramp up state house building if there is a construction downturn.

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This Labour govt, 'sensible' and 'prepared'????

If they are sensible and prepared then they should be getting housing proposals consented en masse, beyond their current planned build programme, as contingency. I have no idea whether they are but I doubt it.

Once the downturn starts, you'll need to allow for (optimistically) 9-12 months from saying 'Go' to having resource and building consents approved and for a project to be shovel ready.

That will be too long for many building companies to survive.

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Yep. The way building contracts are written they get paid by meeting milestones. Too many logistical problems and cashflow goes out the door, followed by the business (Ebert anyone?). Cashflow, cashflow, cashflow.

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Do you mean EBIT (Earnings Before Interest and Taxes)?

I suspect this govt will spray money at struggling construction firms long enough to keep them alive.  They seem to have a mandate to borrow and be kind.

 

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Wasn't there a construction building company a few years back went bust?

 

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They'd be better off hiring all the people who get laid off into a new Ministry of Works. Pay them to do the work rather than shoveling money to bail out private shareholders.

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JJ, have you not heard? Labour are building 100'000 affordable homes

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Well they wouldn’t have much excuse not to during a downturn right?

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See my point above.

Construction slumps turn quickly, the only way they will be able to keep the sector afloat is if they have planned for a slump and have numerous projects, over and above BAU, consented and effectively 'shovel ready' when the slump hits, so the workforce can be redeployed rather than lost.

I hope I am wrong, but nothing I have seen gives me confidence that they are planning for it. Quite the opposite, their projections are forecasting ongoing strength in residential construction over the next few years.

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Surely Unitec is ready to go by now! Wasn't that announced in Labour's first year?  And 10k houses in Roskill and another 10k in Mangere, hopefully a fairly good percent of those are ready. 

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Don't think so, those numbers are over a multi year programme. They will be designing and consenting incrementally.

That Unitec debacle is yet another Labour debacle, often gets forgotten about. Where the hell is it at? 

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Jimbo - admire your faith & hope, father christmas will deliver you a10Kg solid gold bar on the 25th and thats a promise,

Regards

Cindy

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Great I could use it to build a new letter box, its probably cheaper than timber at the moment. 

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And the slowing down of the economy will take some heat out of inflation, reducing the need for increases to the OCR...

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Slowing (macro) economy does not have to impact ones own success. Always two sides to a coin just as those who are unemployed would have a different perspective to those fully engaged with life.

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The was no Freedom Day. It was a grotesque misuse of the word. 

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What about Russia/Ukraine Gareth? It's happening in the next 6 weeks and will be the biggest conflict since ww2

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Yes that’s a powder keg looking for a fuse. Mind you this time of the year not ideal for military manoeuvres. Adolf learnt that one the hard way.

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So did the French....  

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The French don't learn just read the shortest history book of famous French military victories - just 1 page - blank.

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Despite the French having a period of being white flag waving surrender monkeys, don't forget the famous Corsican who led France to many victories and much glory.

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Not if you're Russian.

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Indeed. The Russian military machine is basically designed to wage a winter war on the Great European plain & the Eurasian Steppe. This is where they have a comparative advantage anyway.

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Yes you are right. Should first have checked out my memory. Operation Uranus, the encirclement of Stalingrad, got underway in September & began in earnest in November with deployment of the Siberian division. Yep winter soldiers par excellence.

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My Russian mates all tell me Putin won't go after more of Ukraine because the Russian ruling class would lose too much of the assets they have built up outside Russia, much of it in Europe, due to sanctions and asset freezes.

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#6 RBNZ with increasing politicisation elects to accept inflation in order to protect their other mandate of maximum employment. Costs keep increasing, interest rates rise based on offshore funding rather than OCR directives, and as a result more businesses fail due to a lack of discretionary spending - creating the the very unemployment Adrian Orr is trying to prevent. 

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High inflation is never helpful if looking to create high employment.  Raising interest rates harms some sectors of the economy, but inflation increases the cost of everything and harms every part of the economy.  

Maybe Mr Orr will be able to work that out?  

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RBNZ with increasing politicisation elects to accept inflation in order to protect their other mandate of maximum employment. 

The relationship between central banks and govts is already political. It has been for a long time. They just tell the sheeple that the central banks are independent.  

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Prediction: Covid restrictions will tighten after Jacindas wedding.

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Bishop Tamaki will lead the Covid and climate deniers, Anti Vaxxers & Pure Bloods, Trump Supporters, Qon Supporters , Ground Swell NZ, to the promised land (for a fee of course).

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Indeed.

We now see the true motivation for the borders being closed longer.

 

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I see Luxon has been doing the rounds of Women's Weekly etc recently. Perhaps that circuit is now regarded as an important part of politicking.

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Last year I predicted a palace revolution in the Green Party, borne out of frustration of lack of cabinet say. And I was wrong. They have been astute in keeping both their powder dry & control of their wackier elements. As well Chloe has been a refreshingly brighter light with her quest for hard information rather than accepting the usual platitudes of government financial entities.  End game is obvious and is being played well. Labour will need them vitally, next election if to remain in power. 

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I think Chloe is amazing, one of the few shining lights in parliament.

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I think Chloe is amazing, one of the few shining lights in parliament.

Agreed. Articulate, smart, passionate. And dare I say it, I think she shows real empathy. Nothing fake about it. 

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She should be co leader

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She has a seat. She should be the leader of her own party. 3 mp's and balance of power in 2023. Get a couple of existing Green MP's to defect pre election. Sit on the cross benches for a few months to get profile up then run for election in 2023. Be a party that will work with either Labor or National. Would probably make Chloe even more appealing candidate in Auckland Central.

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Chloe would make a great leader for TOP. 

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If the banks & other lenders have been practising Reponsible Lending, why are they & the real estate lobby so worked up against the CCCFA?

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Ive been saying this for years. The Australian Royal Commission found the Big four were all negligent in the way they assessed borrowers. Adrian Orr declined to look at the NZ banks to see if they were doing the same, despite them being the owned by the same parent banks found to be irresponsible.

 

 

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They doth protest too much, it seems.

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1. The "mild flu-like symptoms" of Covid-19 Omicron variant indicates to me the pandemic is now ending for most people.

2. Unlikely to see much on climate change, there hasn't been budget allocation for it.

3. That's probably true, I'm trying to be exit my investment properties now. All this needs to be in context though, even if property halved in value it would only have lost a couple of years of appreciation. Also rents will continue to increase at a healthy clip as supply has been crimped by government anti-investment measures.

4. RBNZ has a more politically sensitive role now with the employment and house price mandate added. 

5. Unsure about the OCR, depends a lot on externalities.

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So the banks are tightening up on their loose lending, and we are building houses at record numbers...

Who will be buying all these houses? corporate landlords? the government? wealthy foreigners? 

Stay tuned for another exciting episode of... The rich get richer and the poor get poorer. 

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My top five predictions for 2022 

 

1 King Charles the third will become king

2 China will invade Taiwan 

3 House prices will rise 

4 bitcoin will crash and become worthless 

5 National party will get a new leader 

Can I see everyone else's predictions? 

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1) After the 2022 Olympics China plants military resources on one of Taiwan's outlying islands and waits to see what Taiwan does apart from protest

2) Immigration to NZ greatly exceeds emigration in the second half of 2022, supporting house prices

3) Everything (including prediction 2) gets thrown at Housing Ponzi and it holds up well through 2022 in most parts of NZ, correcting quickly after minor drops as some investors re-enter and interest rates stop increasing (see prediction 5)

4) By the end of 2022, govt and employers are still crucifying those who don't take boosters, but by then we can see we have made a good start on herd immunity from Omicron and many of us can't see the point of boosters except for the sicklies.

5) Inflation peaks and falls back as confidence, demand and growth drops, and interest rates follow the down trend.  NZ OCR finishes the year at 1.25%

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No mention of the world political scene? 

A professor Barbara Walter, who was interviewed on CNN has stated that by the same measures the CIA uses to monitor the stability of other countries, the US is the one in the world most likely to degenerate into civil war. She goes so far as to state the US is no longer a functioning democracy, referring to it as an "inocracy" (never heard of it before and it may be misspelt) which is neither a democracy nor an autocracy. 

Combine that bombshell with the manipulations of Putin and Xi and 2022 has all the makings of a very interesting year indeed!

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A corporatocracy that thought it was a good idea to dumb its population down with Facebook and cable news propaganda to keep them from asking for a fair deal, now looking unstable.

Should be a red flag to leaders who think inflating assets and devaluing work is the right way to go, too.

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1. I will get Upsilon COVID after my third booster.

2. House prices will drop back to approx 50% of 2021 CV's.

3. Adrian Orr will retire and all mention of him will be deleted from historical records.

4. Jacinda will pass the leadership to Robbo.

5. All able bodied young kiwis without criminal convictions will leave these shores.

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Saw this comment y'day directed towards professional expats locked out of NZ:

""Wait until the mass exodus happens as people flee Ardernistan once they can. You guys are literally gonna be begged to return. The main question you'll have to ask is, why?"

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Ardernistan.

Haha love it.

Aroha.

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Yep that's a keeper.

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Depends. Most seem to be leaving because house prices are too high thanks to the entitlement mentality that keeps seeing policy hold them up. A fall of 50% might see more younger Kiwis consider NZ as a long term viable prospect. 

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Gareth - 10/10 for being brave enough to make any predictions but I do not agree with #5 - RBNZ and others think they are the signalman and pulling a lever moves points and trains change to their desired direction failing to note that international market engineers disconnected the levers and the train will continue to travel in the direction the market dictates. In other words if interest rates internationally move so will NZ's. If inflation is not transitory then interest rates will rise and all bets are off as we enter the unknowable void.

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But central banks the world over are being very slow to raise their OCR's higher. There is some skepticism that the Fed will, and look at Aus and the UK. 

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PREDICTIONS

1.   my invitation to the wedding of the Queen of Kindness and the TV host will get lost in the mail.

2.   interest rates will rise substantially

3.   Joke Biden will do nothing if China invades Taiwan and Putin invades Ukraine

4.   Democrats will get a thrashing in the mid terms

5.   My house will provide me with a shelter from the weather and criminals and not be considered a bank.

 

 

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“The Official Cash Rate (OCR) won't rise as much as predicted.”

Gareth, your first 4 predictions are in line with my thinking but I think there is much more upside in the OCR than downside as forecasted by the Reserve Bank.

Keith Woodward says “inflation has become a wicked problem. He commented that tradeable inflation has now taken off (5.7% year-on-year) from a position of almost zero inflation over the previous 5 years..Internally generated non-tradeable inflation has also been increasing & is now 4.5% year-on-year.

OCR rates are still way below long-term averages so the access to cheap money is still there.

As Keith Woodford highlighted the problem won’t be fixed until after-tax interest on deposits at banks exceed inflation because people will continue to invest in assets rather than bank deposits.

In today’s Herald Richard Prebble highlighted that NZ with 4.9% CPI inflation was 2nd highest in the OECD behind USA at printing money. Guess what, USA has the highest inflation at 6.8%. In the latest ANZ survey 89% of companies are expecting higher costs. 65% are intending to increase their prices.

Richard Prebble says that “On top of that inflation fire, the Government is going to spray the kerosene of an extra $6 billion of spending.

Gareth if you are right & the Reserve Bank doesn’t increase the OCR as fast as predicted, then it looks like inflation will indeed cause an extended amount of pain because minimal increases in OCR are unlikely to stop CPI and asset inflation.

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I trust Prebble's ACT party would not give tax cuts either to spray the kerosene? In fact would a tax increase be a good idea right now, pay off some debt and take some pesky money out of people's wallets. 

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Yeah, he doesn't sound particularly serious. Points out the problem is money printing then laments fiscal spending instead.

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He's a yesterday's man clinging to his old neoliberal doctrines. 

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My predictions for the new year

1. For some reason which is totally opposed to all logic and current bank lending practices property prices in NZ will go upwards again and I will wonder how on earth that happened.

2. Putin will bypass Mariupol and take a strip of coastal land to make a land bridge connecting the Donbass region with the Crimea.

3. Borders will be incrementally opened and closed to various classes of travellers for Covid reasons but also because govts realise that this is a good way to restrict capital flows and needed workers from leaving their countries.

4. Biden will win through and the US will be the primary source of aggregate demand in the world while everywhere else will be average to sad.

5. The Chinese will realise, possibly too late that if you want to decrease a housing bubble gradually you need to reduce credit very gradually and occasionally reinject liquidity or else the whole house of cards might just collapse. See this point 5 as a possible reason for a re-infation of credit worldwide and point 1. above.

 

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Predictions for 2022.

1. House prices continue to increase but very slowly, flat to 5% gains.

2. OCR will rise, inflation keeps going, rates keep rising. Orr quits.

3. Omicron will be worse than people think due to the rapid spread and to many to handle at once in the healthcare system. Its already happening in the USA.

4. People will finally work out they have been sucked in by the Vaxx program. Expect to get jabbed every 3 to 4 months with boosters. Your arms going to look like a heroin addict, may as well get an IV line and just leave the needle in. Expect to see more pissed off people on the streets of Auckland as essentially a lockdown continues.

5. China wants Taiwan but they cannot have it. I seriously doubt that Biden would do anything to protect it however, its just to close to China and it basically is China. Its in the to hard basket for another year. The whole world would be in a bigger mess than Covid if China goes in and smashes up the place, just about all the worlds semiconductors come out of Taiwan. As your iPhone is a POS and only lasts 12 months your going to be in trouble if Taiwan goes boom.

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Yes, plenty to watch & digest over the holidays. I think Putin will call out Biden knowing that if he bites, then Mr Xi will also go. Biden wouldn't know the way out of his own front door, let alone how to fight on two fronts at the same time. My guess, & I sincerely hope I'm wrong, is that if something like this plays out, then America will get its pants kicked. And that's a real game changer.

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I agree, the USA would get is ass kicked. Pretty sure Putin and Xi are just testing the waters with Biden. China doesn't want a war, they are winning without one.

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Lending down

No mention of recession

No forecast on house prices

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"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

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Covid strains keep NZ from opening up again in a meaningful manner.

CCCFA continues to bite hard and DTi is introduced. Orr has warned the debt junkies after all.

Banks refuse to role over loans on interest only, and renew older over leveraged position.

Houses prices drop back a good chunk of 2021 gains as no one can afford them as banks demand equity.

Educated working youth resume migration to becoming Aussie taxpayers.

Uneducated WOFTAM remain in NZ or are deported back from Aussie and demand more tax payer funding.

 

 

 

 

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Lots of interesting predictions in the comments - many don't align with my own but still look perfectly reasonable to me.  Reflects such a period of rapid change and uncertainty.

I'll store this URL and calendar to drag it out late 2022 for the amusement of those of us still here.

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I share your sentiment. look fwd to revisiting this. It will be amusing at least, fun for most and frustrating all the same.

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My predictions for 2022 

1) Huge pay increases across the board - due to many factors such as staff retention issues, cost of living increases in food, rent, and mortgage interest, staff leaving for Aus, harder mortgage finance being limited by incomes 

2) People: Arise, Sir Adrian Orr for achieving the RB mandates during a pandemic

Jacinda Gayford continues, Chris Luxon gets National more united

3) Capitalism questioned - as only the top 5% flourish without input to the community with the rest finding it hard to get ahead

4) Min of health start a 'steps to health' programme aiming to get fitness up, obesity down and improve respiratory issues as Covid becomes present 

5) House prices -5% in the first half of year with a massive turnover drop due to lending but an 8% gain in the second half of year result in a +3% gain for 2022. 

Lets use our small or large leadership influence to make NZ a better place in 2022

Best wishes

 

 

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What makes you see such a turnaround in house prices in the second half of the year? Lending frees up again?

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Yes House mouse my prediction of a -5% drop in house prices for 6 months then a +8% increase for a +3% increase for the year is due to what I think will happen in the lending space.

Salary increases, more clarity of applying lending rules and a prediction that a bank loses a privacy case against them for delving into personal finances to the nth degree too much, makes which makes them change to more of a big picture approach.

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The 6th prediction : There will be a White Swan in 2022. And I expect it to be in the Covid sphere. A Magic Bullet from one of the Pharma Companies to cure all easily with a Pill. 

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What about game-played simulations heralding possible future events in 2022?

https://www.nasdaq.com/articles/exclusive-imf-10-countries-simulate-cyb…

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