By Eric Frykberg
The National Party says the latest decision on the Official Cash Rate (OCR) will be tough news for anyone with a mortgage.
And this trouble could have been avoided if the Government had been more disciplined with its own spending, says the party's finance spokesperson Nicola Willis.
Her comments come in the wake of a 25 point rise in the OCR to 5.50%.
The RBNZ's Monetary Policy Committee (MPC) said that while inflation is expected to continue to slip, core inflation pressures will remain until capacity constraints ease further. The MPC said the OCR will need to remain at a restrictive level for the foreseeable future, to bring price rises back to the desired band of 1% to 3% annually.
But Willis says the Government played a role in this development, saying the MPC warned everyone in February that risks to inflation from fiscal policy were ‘skewed to the upside’.
"Since then, [Finance Minister] Grant Robertson has only poured more fuel on the fire," she says.
“Now Kiwis are facing the consequences. Today’s hike in interest rates means an additional $1250 a year for a family with a $500,000 mortgage.
“Kiwis deserve a government with a plan to fix the economy and get New Zealand back on track.
The Act Party has a similar view, blaming the problem on a "reckless and Irresponsible" Finance Minister Robertson.
This echoed National's line that high Government spending carried some of the blame for high inflation.
"Even if you’re lucky enough to get the goodies from last week’s budget, any benefits will be eaten up by inflation and interest rate increases in no time," the party leader David Seymour says.
"If you didn’t get the goodies, it’s higher prices and higher government debt for you."
Seymour argues Robertson's inability or unwillingness to find savings to offset his increases in spending are going to hurt the average person far more than last week's budget increases will help them.
“This latest increase in interest rates will go on mortgages, rents, business loans and rates, as councils look to offset increases in their borrowing costs.
"We’ll see the impact in more people losing their homes, higher grocery prices, further falls in the housing market and in jobs, as employers look to cut back to save costs."
The Green Party is not commenting on the RBNZ decision specifically. And it suggests the Reserve Bank should not be the main player in this story anyway.
Instead, it is calling on the Government to take action on inflation by taxing wealth rather than leaving the Reserve Bank to continue hiking the OCR.
“Instead of relying on the Reserve Bank to use blunt economic tools to reduce demand, the Government can achieve far fairer outcomes by taxing wealth,” says Green Party revenue spokesperson Chlöe Swarbrick.
“Last year the Reserve Bank admitted they were engineering a recession. These decisions are not happening in a vacuum, but in response to Government policy that is not taking deflationary taxation measures."
Swarbrick insists the Government has a clear political choice about whether to tax wealth or not, and it is not doing so.
Te Pati Maori could not be reached for comment.
7 Comments
What I find strange are these proclamations that the government being slightly less of a miser than it usually is going to be inflationary. The announced spending pales in comparison to the amount of credit creation we had during peak fomo in 2021.
It seems to me the mainstream discourse is unable to consider that maybe the banks lit the fire and we have a serious problem with our private debt burden. So we need to find a way to pay it down or reduce the burden, but no one in our institutions believes that it matters enough to do anything about.
To make matters worse, the government on both sides seems committed to acting like that old guy you know that's never had a $500 credit card in his life because debt = bad, while in the same breath encouraging his mates to take out 7x their incomes. So infrastructure is underinvested in and everyone is stressed. It really does sound like our country right now.
I honestly don't know how we fix this, save for some fundamental change in the economic philosophy of our politicians.
(Inappropriate comment deleted, Ed. Please see our commenting policy here - https://www.interest.co.nz/news/65027/here-are-results-our-commenting-p…).
Wow. The Ponzi Property Party complains when interest rates go up. It really highlights why they are unelectable. Putting mega bank profits ahead of the average kiwi ability to survive in NZ without the endless yoke of property debt around their neck is just not an option.
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