Policymakers at the Reserve Bank (RBNZ) have slashed half a percentage point from the Official Cash Rate (OCR) and claimed victory in achieving its inflation mandate.
The seven person Monetary Policy Committee chose to cut the benchmark interest rate from 5.25% to 4.75% after meeting on Wednesday. In a statement, they said annual inflation was now within the target range and was "converging on the 2% midpoint".
"The New Zealand economy is now in a position of excess capacity, encouraging price- and wage-setting to adjust to a low-inflation economy. Lower import prices have assisted the disinflation," the media release said.
"The Committee agreed that it is appropriate to cut the OCR by 50 basis points to achieve and maintain low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate".
This move follows a 25 point cut at its previous meeting in August when high frequency data showed the economy was faltering faster than RBNZ had forecast in May.
Economists and financial markets mostly expected the 50 basis point cut on Wednesday afternoon, despite the central bank having signalled it would only cut 25 basis points.
In reaction to the OCR cut, New Zealand’s benchmark stock index climbed almost half a percentage point after the announcement, while the Kiwi dollar dropped 0.4% against the US and Aussie dollars. According to Westpac economists, in the financial markets, the two-year swap rate was down 7 basis points to 3.64% and the 10-year rate was down 6bps to 3.96% within a quarter of an hour of the announcement.
A recent survey of businesses found pricing intentions had dropped to pre-Covid levels, and headline annual inflation for September is forecast to be on target, when released next week.
Meanwhile, economic activity and labour market data have continued to weaken, prompting concerns that unemployment could hit 6% and the economy could experience deflation.
In a note published last week, ANZ’s chief economist Sharon Zollner said it was likely the RBNZ would be confident it had done enough to stamp out inflation.
Economists at ASB said they were increasingly concerned that interest rates were still very restrictive even though inflation and capacity pressures had already normalised.
In August, RBNZ projected it would gradually ease rates towards 3% over the next 18-months as long as pricing behaviour remained consistent with a low inflation environment.
Near-term surprises
The RBNZ Monetary Policy Committee said on Wednesday that the economy had evolved largely as expected in the past two months and the economy was running below its potential.
"Members agreed that increasing excess capacity is leading to lower inflationary pressure in the New Zealand economy. Economic growth is weak, in part because of low productivity growth, but mostly due to weak consumer spending and business investment."
The committee was confident next week’s consumer price index release for the September quarter would show annual inflation not just in the 1%-3% target range but almost at the 2% midpoint.
“Recent business visits suggest that weak demand is restricting the pass-through of increased input costs to prices faced by consumers. This is consistent with business surveys, which show a declining share of businesses intending to increase prices”.
Policymakers discussed both 25-basis point and 50-basis point cuts and ultimately reached a consensus that the larger cut would better avoid economic instability.
While the central bank’s price stability mandate has been simplified—removing a secondary target of full employment—it is still tasked with avoiding “unnecessary instability in output, employment, interest rates, and the exchange rate”.
The committee said the economic outlook was broadly consistent with its August assessment and an OCR of 4.75% was restrictive enough to "deal with any near-term surprises".
It said future changes to the OCR "would depend on its evolving assessment of the economy".
248 Comments
Its so tip top the RBNZ has to do 50bps cuts.
Houses can only go up in such a crap economy, which now fears outright deflation and worsening labour market.
This is a situation so bad that house prices will surely fall further, as always in a bad recessionary environment.
Not one of these Spruikers called for falling house prices at the start of 2024... not one
But here I was
-10% Dec 2023 to Dec 2024
Calling a person a ‘renter’ as a property investor is used as a derogatory slur despite the renter being the property investors customer and payer of their bills/mortgage on said investment.
Not sure if I know of any less professional trade - or is it a hobby for ‘Mum and Dads’? Hard to say. It’s a business when it suits (tax) and then it’s also not when it doesn’t (professional standards/business lending rates).
Negative in the past year I have proactively encouraged all people on the site to stop calling one another spruiker and DGMs as it is pointless and detracts from the quality of exchange of ideas.
And I encouraged anyone to call me out if they catch me using the term spruiker to belittle anyone.
Flapping like a pigeon can be added to that list 😛
That troll account really spooked him with talking about 10% interest rates. Iceman is overleveraged, 10% interest rates is not something he wants to hear or believe.
The lingering possibility and unresolved tension makes him highly irritable and that's why he can be aggressive/thuggish to others who also hold the view of higher rates. Probably cheered for joy like the winning try on a Super Rugby game, he couldn't wait to come online and bask in vindication, ready to tell everyone, "I told you so".
Dumbledorf, all I can say is you risk coming across as a total tool with your wild assumption, my investment properties are cashflow positive.
You lot don’t like hearing the truth and can’t face the reality that all your predictions were total nonsense. Sorry if you’re having a bad day, but carry on with your assumptions.
Thank you, stjohn.
This needs to get out far, far more often so Kiwis understand exactly just how bad RBNZ policy has been over the last 4 years.
Just a small correction ... The RBNZ was talking about a negative OCR rate and not retail interest rates.
In any event ... Keep getting these facts out there!
It puts into context so much that that the bulk of us have been forced endure - through no fault of our own.
Still too soon I'd feel, maybe outside of increased investor activity.
Think it would need guaranteed another 50 BPS in November. I do think that will happen, but certainly isn't guaranteed.
Feel like neutral for current prices and economy is around 4.49 for one year mortgage rates.
Local swap markets, but the Fed too (with a significant correlation between the two, with the Fed calling the shots). The lack of credibility of the current RBNZ Governor does also play a part - the RBNZ's predictions and statements are perceived by markets as something of little value now.
As expected by most. It's a reasonable assumption that any real "lift off" in activity won't be in play till say 6-9 months after neutral rate of 3% is reached. The delay effect is very real and unemployment and general job insecurity is still rising.
This post will no doubt make the impatient debt addicts reach.
The last published neutral OCR rate from the RBNZ I read was 2.75%. It's always a very slow moving target and an educated guess.
But 3% is within range of a neutral OCR.
My most recent calcs & model simulations, done yesterday, have reversed and say it is now less. I.e. a neither contractionary, nor stimulatory, OCR neutral rate is probably below the RBNZ's 2.75%.
"...notably the DTI being tightened."
Agreed.
One notes that retail banks are still stress testing mortgage applicants at 9% which achieves the same thing ... for now. But the RBNZ must pull finger on this one real soon - like next MPS.
Will they? I doubt it ... based on past performance.
You are so wrong mate, everyone who has a mortgage rolling over is going 6 months and most people are already on this so the flow on into the property market will happen over this summer. Like I have been saying for over a month, now is the time to buy, how big do you need the sign to be ? More drops in the OCR to come.....
@ SomeKiwiFounder - Renting homes to those who cannot elsewise afford to buy is NZs most essential and most productive business. They not only add to the economy, bit it's now blatantly obvious that they are in fact a large portion of our economy.
For they provide 80% of the rentals accross the country for nearly half the entire population. They certainly don't do this out of charity. All governments past and present recognize this, hence they cannot afford to be without private landlords. For without them, the government's emergancy social housing wait list increases even more than the 548% under the last 6 years of the last government. Our country simply cannot afford more than the current 25,000 families homeless that are currently awaiting 5 years for government accomodation.
Investors also don't outbid price raise against FHBs, as the rental yield return just wouldnt stack up. Its FHBs competing against themselves, putting forward emotive offers, based on nothing other than a maximum pre approval amount served by the bank itself, for maximum lending capability. It is the FHB that clearly over extends their ridiculous offers on properties with no context at all as to the relevance of the approval amount vs the actual value of the home. Want to be angry at someone? Try deflect that anger to FHBs who do little to no research on the property or its value before they offer. Fear of missing out to other FHBs is ultimately what keeps FHBs paying more than they really should for a property. There's a high price to pay for emotive purchasing. That ain't on the property investors at all, no matter which way you try swing it. Good try though.
Rents aren’t productive, they’re no different to barons charging you for simply existing, it’s a tax. If every scalper quit buying concert tickets, the same number of people would attend the concert. If every landlord quit buying housing… almost everyone seeking a house to live in would still live in one. It is not remotely NZs most productive business, if enough people think that then we’re going to hurtle towards a pretty shit country as we squabble over who own what while our NZD buys less and less from the global economy.
Building houses is productive. Renovating a house is productive. These are things you too can contribute to the economy if you go learn a trade. But becoming a little baron lording over your peasants and raising their taxes (rents) from 20% to 25% to 30% to now 40-45% of their incomes is not and will never be productive. Land is a monopoly.
I bought my first home this year and when I was out and about I saw plenty of what I call “monkeys in top hats”. People with no intellectual capacity to actually understand investing or economics or the effects of policy incentives on our country yet who wish so badly to be seen as being so. They want to appear to be the high rolling intelligent businessman but couldn’t spot an opportunity to solve real problems that real people have if it fell in their lap. So they get out and put in their top hat and boy do they love the idea of being able to boss around and lord over some renters (or peasants in their eyes).
I wonder if we crossed paths…
SKF
@ SomeKiwiFounder - Rents aren't productive? Maybe nit to tenants they aren't, but they are nesasary. Everyone pay their way, tenants included. Just as owners require to pay their mortgage to the bank each week or face repossession of the house, tenants require to also pay their way and pay their rent to the landlord, or face eviction out to the government's emergancy social housing wait list. Where in the book of life did it ever say that tenants shouldn't be expected to pay their own way? Tenants have two choices they can either get busy finding ways to eventually build their empire, or they can spend the rest of their life helping to pay for someone else's. It's that simple. The entitlement runs rife with this one, expecting tenants should get a free ride because they have less. Part of the handout labour crowd.
"If every Landlord quits buying houses..." So you want charity from landlords to givenup their financial position, just so that others can have an easier time of it? That's socialism, and it's closely followed by dictatorship - by where people are told what they can & can't do with their own personal finances & life choices. You may find better solace in places like N Korea & China, who actively practise the methods you preach. It's not a landlords job to look out for and after the financial wellbeing of a tenant, that's the tenants job. The landlords job is to provide a roof over one's head in exchange for a fee. Just 6% of NZrs are landlords, and of that, 80% own just 1 rental property. Hardly the "hoardes of property" that socialist left wing activists bang on about. If 96% of people are not standing in the way of home ownership for tenants, it's far likely that it is an issue with a tenants own financial position and likely lack of financial restraint, than it is of the 6%.
You may not like it, but both governments past & present are in admission that they cannot rid the country of landlords, who rent to 80% of the country, as the government has proven they cannot house those that house themselves. Even if their was am abundance of houses, there's no guarantee a tenant could save the 20% minimum deposit required, tenants would still habe to pay someone something to live somewhere. Where do you suppose these tenants live while they save their house deposit? Some tenants have bad credit, that would prevent them from obtaining a mortgage. That's certainly not the fault of a landlord. Blaming "the greedy landlord" is just another easy cop out for tenants who don't want to take personal financial accountability. Scapegoating to every other entity but themselves is also not a very well thought out argument. either.
Again, why would Rents be the only cost that doesn't raise with inflation and ill thought out government policy? One does not gett cheaper Rents but increasing both the cost & risk to operate - labours fantasy socialists mantras decieved you. What you advocate for is landlords to become a charity. Unfortunately for you they are not. Landlords operate a business. Basic business & economics - increased costs & risk to operate = increased Rents. Get it yet? Rents may not fall if deflation occurs, but they certainly won't rise be as fast or by as much.
You paint property investors as unintelligent based on what? Only 6% of the country are landlords for a start. Expecting out of entitlement that ones landlord should rent tenants houses out of charity because otherwise it's hard to buy a house is far more unintelligent and quite frankly incoherent waffle from the envy crowd. Do what's required to personally sacrafice to own one's own property, or rent for life and make someone else wealthy. At the end of the day, those are the two choices available to tenants - One can be a victim for life, expecting constant handouts from landlords & government, or one can be a Victor and use delayed gratification with a little pain for long term gain of ownership. Choice is yours. We all know which one you advocate for. We voted that out last election.
Monkey in a top hat.
Apply every argument you made to concert ticket scalping, do you do that on the side too? Do you rush to buy tickets to a Taylor swift concert so that you can make her fans pay you a premium for doing nothing that benefits them? Unfortunately for you my economics knowledge is a bit above basic, so you might not be able to understand it.
Rents have been high in the past (just before WW1 it was a major political issue), and then they became low. There’s a reason for it. And no, it’s not as simple as “war good.”
If you have less people trying to buy the same number of houses, the houses will come down in price. Landlords are fuelling their greed to buy houses by increasing the total rents on individual people, so people are paying more only to get the exact same thing with a new landlord.
Are you able to comprehend where that leads to? How much can landlords take from people before they break? 50% of their pay? 80%? What happens when people do not earn enough to live? Hint, history tells us it gets pretty bloody pretty quick.
Want to know how you solve this without pushing the average Joe to the breaking point? Government policy. The same policy that was enacted when rents use to be far too high and was revoked when rents and housing was affordable. You tax land. You tax the wealthy. And you put those dollars into everyone’s back pocket. Levelling the playing field is necessary for the continued survival of capitalism.
You cry wolf when you say this is socialist. But this is exactly what we use to have. This is what most of the western world use to have. Capital Gains Taxes exist in almost every “free” country you can waggle a finger at, but not here. I challenge you to find me a single instance of a successful country that doesn’t tax the rich and provide welfare for the poor, that doesn’t level the playing field. The only one I can think of is a Monarchy where women are property and can’t drive.
You’re only thinking about the now. You have to be able to think about what would happen in the future if landlords were faced with more pain. They would still want to make money, but instead of going into houses they would put their money elsewhere, where it could be used to start businesses that actually make people’s lives better.
I have cast pearls before swine…
SKF
Love this - someone with real intellect that actually understands what is going on.
We are signing from the same sheet of music SKF. It’s been a lonely battle at times.
I’ve also been labelled a socialist of Marxist on here on a number of occasions and yet I’m not that at all - it’s used as a threatening slur by the selfish who want everything their on way for their own unrestricted gain - even if that gain risks destroying the entire fabric of the financial system and social stability.
You then realise you are dealing with fools as they would happily destroy the system as a whole for more themselves - ie they believe their own unrestricted gains are more important than keeping the financial and social system stable as a whole.
The type of guys (or girls) who would intentionally lose the game for the entire team if it made themselves look good - ie self is more important than team (or well functioning society).
You'll always get lambasted by those who stand to make 'not as much money' if effective policy was enacted to do as yourself and SKF have already alluded to: tax the wealthy and allow the middle class to prosper as was done in the early 1900's.
You then realise you are dealing with fools as they would happily destroy the system as a whole for more themselves
This
As it says in the bible wingman it’s easier getting a camel through the eye of a needle than for a rich man to enter into heaven.
But good luck going straight at the gate and narrow on your way in the days you have left on this earth. The powers that be are judging us on how we treat those who have less than ourselves and couldn’t give a shot about your housing gains - nor will you on your deathbed- unless of course you are a complete psychopath who values money over any other human treasure (non financial).
@ Independent Observer - You misinterpret this Bible verse as anyone who is considered rich cannot get into heaven - but this is incorrect.
First, you assume that every property investor is of course "rich", when 80% of property investors in NZ owns just 1 rental property & profits just 14k p.a - If that's your definition of "rich", it's far fetched from almost any other definition of rich - which the global definition of "rich" is usually defined by either having a net worth, not gross worth, of over 1M in assets (one would have to have at least 1 if not two completly mortgage free homes to accomplish this - over 60% of people in NZ over the age of 65yo still have a mortgage), or to earn 500k per year in post tax income - politicians, bankers ect. Your 14k per year little side hustle that most average NZ property investors make doesn't even scratch the surface or come even remotely close to the definition of "rich".
Second, the Bible teaches plenty about investing, disencourages envy, scorn, entitlement & self pity. Although the Bible talks on the worship of money being the root of all evil, it does not say money in itself is evil. To work 5 days a week, every week, for 45 years of one's life just to accumulate money is far more worshiping of money than investing money to make it eventually work for you.
The bible is also very clear about greed, selfishness, ignorance, use of debt, loving thy neighbour (not turning them into your rent slave for your own financial gain).
You are painting our property investment as a very poor option given the cash flows you state - and yet all the property investors on here go on and on about how it’s by far the best investment ever - so which one is it? The best when you want to gloat, then the worse when you want salvation for your greedy ambition? You can’t have it both ways unless you are a hypocrite or a liar - and the bible is also quite clear about these sins also.
@ Independant Observer - You acknowledge that loving thy neighbour is important, which includes loving thy property imvestor & those who are more financially fluid than oneself. Perhaps a little less preaching and a little more practicing on what one preaches is needed. Property investors risk 100s of thousands of dollars to purchase & rent out a home for people who can't afford to buy a home themselves, despite the fact that tenants now have more rights to a home they don't own, than the owners themselves. That's about as selfless as one can get.
The issue you seem to have with this of course, is that you believe that these indivuals should risk all this for nothing but charity. The world doesn't work that way. One does not get free or cheap rent because one is worse off financially than others. What you ask for is that businesses operate out of charity & kindness. This is typical left wing socialist waffle. They believe business should exist by offering their services for free or at best heavily discounted. If all businesses operated with left wing fantasy ideology, with smiles & rainbows and charity and kindness, there would be no businesses, there would be no jobs, there would be no income.
As for property investment being a very poor option, compared to what? An additional 14knper year of passive income to add to one's kiwisaver retirement fund or pension will certainly make all the difference between a struggling pensioner & one that has a few more options. But yes I do actually agree with you, property investment is a very poor option - except that what other options do people have to invest in? Businesses? We know how that went during covid times - government mandates shutdown these businesses for months on end, the gov subsidy only paid employees to remain employed during this time, it did not covet a businesses projected Los of profit. Considering 98% of small start up businesses fail within the first 2 years, starting a business is too risky. Stocks? Bonds? Mutual funds, reits, crypto? None of which can gain access to credit from banks, one would be laughed out of a bank if one tried. All those markets are also far too volatile for investors to make a consistent return, particularly an eventual passive income for retirement.
If one wishes to reduce interest in property investing, you incentivize other investment options to take ones interest elsewhere, not attempt to try penalize certain disfavoured investments. You want to blame someone, blame the banks, the banks appetite only lends to property investing, they will not lend money for most other forms of investments. 14k per year on average through property investing is the best we.got currently. One is highly unlikely to even make type of return consistently through almost any other type of investment. Sure you'll get one.guy that'll tell you he made 300% return on crypto, but won't he womt tell you is it was on 2k of his own savings, or that it was a once.off event. He womt.tell you how much he actually lost before he finally made his one and likely only gain. Property is not like that, unlike crypto, property values do not have the potential to lose over half their value in a single day. That's why people invest in property, despite how bleack the return.
when 80% of property investors in NZ owns just 1 rental property & profits just 14k p.a -
What an absolute crap roi, it's a shit business and kiwis keep on piling in because.... they are idiots ? Can't think for themselves ?
God forbid they are in it for the tax free capital gains.
IO is there a heaven? You already assume there is with no facts. Strange how people I know say to me when they find out I have brought another house. Why do you want to be the wealthiest guy in the cemetery. Yet in the next breath they say either they are or there kids are heading to Aus to make some real money. There was a quote on interest the other day. Money dosnt buy you happiness but neither being poor. If you are poor you can't do/help anyone, yourself or family. And let's face it the Catholic church as an example will gladly take any money you leave them the more the better and that goes for any church
Some of us didn’t spin the roulette wheel like a brain dead leech, they went out and built a productive business with very little capital investment or debt to begin with.
Something I suspect is far too complex for a title squatter who watches on as the ponzi crumbles, despite any rate cut theatrics.
I quit a 375k (roughly, half was in USD stocks) per year job after buying my first home and I’m launching a startup. My stock portfolio has a 59.41% return this year thanks to margin + leveraged ETFs (and luck on NVIDIA). I would caution you against making assumptions about my risk appetite…
SKF
The difference is that I’m a patriot, I care a lot about our country being the best it can be for our fellow countrymen. Buying housing to landlord with or speculate on is destroying our country, it has created a class of leeches that scoff at the idea of paying their fair share of taxes. The cost is that many of our best are leaving the country, and those who stay are suffering from stress as housing eats more and more of their take home pay. The cost is that people are having less kids because the rentier class have claimed your entire 20’s now and are eating away at your 30’s before you can save enough to escape them. The cost is that most money flows into competing for the same stock of bricks and mortar rather than flowing into new businesses that could actually make something that leaves the customer better off or existing businesses to increase the money they make per employee (surprise, that productivity problem we have is more strongly related to our lower R&D + Capex spend than it is to “lazy workers”).
I don’t give two shits about its risk profile, I care because it’s ruining the social fabric of society.
SKF
by Independent_Observer | 9th Oct 24, 5:48pm
Wingman and his ilk don’t care about the financial and social stability of the nation as a whole - it’s about ‘me’ and my ‘net worth’ and how much $$$ can I extract from a dysfunctional housing market for my own gain - regardless of the costs to anyone else
Couldn't agree more - you’ve totally nailed it IO! We’re getting closer to the point where more Kiwis will realise the so-called altruism is actually driven by greed. Some claim homeowners don’t want house prices to drop, and while that’s true for some, I’d bet a larger percentage wouldn’t mind as they see the damage this greed is doing to our social fabric. It’s not just about property values; it’s about the broader impact on society.
@ SomeKiwiFounder - Your not a patriot, the country is not under attack, and requires no rescuing. Your a socialist, which of course follows Marxism & dictatorship style.governing very closely. You want to tell people what they can and can't spend their money on, you want constant hand outs for the deemed poor and constant penalties for the deemed rich, you listen to the cheesy socialist mantras of previous governments and parrot back similar ideologies. At its core you best represent the woke culture infiltrating our country - that is worthy of being a patriot against and defending our country for. I bet you still think governments have our best interests at heart. It's cute, nieve, but cute.
What’s cute is how intelligent you want to be while making such blatant spelling errors, and how you thumbs up yourself every time.
I voted for TOP, TOP, and NZ First last 3 elections I have also voted for Labour electorate MPs and The Internet Party way back when.
You don’t know what you’re talking about and it sounds like your brain is rotten from social media. Are you aware of how much money Russia and China have been spending to convince people in western countries (like ours) to hate on “wokeism” and be divided within our own country? You should talk to people in real life to understand the politics of kiwis, and understand that big emotions at simple ideas are a sign that you’ve consumed propaganda.
Oh and for the record I am a liberal capitalist :)
SKF
Well if people like me hadn't provided accommodation, (which I don't anymore, but did for decades), who's going to provide it?
Certainly not the owners of 40,000 empty houses in Auckland.
Did you know NVIDIA (a company you own) is being investigated for unfair practises and exploitation? That can't possibly be true, since you're so particular about tenants rights?
Correct?
Why do you keep repeating the 40,000 homes point? It’s an outdated and incorrect number. Many of the unoccupied houses are “owner away” aka on vacation. The ones that are ‘vacant’ are also included vacant houses for sale, which there are plenty of.
If you hadn’t scalped the tickets who would have bought them? Well we do need some landlords yes, but my point is there’s too many making too much so we ought to tax some pain into them so they quit it. Landlords don’t build houses, builders do. If we had less landlords then house prices would be lower and more people would own the home they live in. I understand that you struggle to accept the notion that you were a leech on society (assuming you bought housing stock and didn’t build new stock), it can be hard to accept facts you don’t like.
I have no ethical concerns with NVIDIA’s practices, unsurprising seeing as I own it…
SKF
You've got no ethical concerns about exploitation and unfair practices by a company you own?
You should be ashamed of yourself. But you won't be.
https://www.rnz.co.nz/news/national/529755/ghost-houses-100-000-dwellin…
Can you actually read? Or do you just choose to only read headlines and lean into confirmation bias?
Genuinely empty homes had gone from 8 percent in 2013 to 5.3 percent in 2023, he said.
"It's hard to know if they are 'ghost houses'," he said. "Given the amount of house building that has gone on in the last couple of years it's not impossible to think some of these are newly build and people haven't moved in yet.
"You can't say there are 100,000 homes that for some stupid reason are sitting empty while no one does anything with them. There will be various reasons, but I wouldn't say these are homes that no one would notice if you plonked a bunch of people to live in them."
While I dont agree with de-risking debt, I know a number of people that will be somewhat relieved that Orr has taken this seriously. The guy that said he was going to manufacture a recession has done so and he could have kept going.
House price increases won’t increase until employment picks up and I would pick that as being a while away.
Because they're speculating on who can take on more debt when. And so the "NZ economy will continue to tank for another 6+ months", with lasting impact - long term our capacity to pay back debt is permanently impaired and we're simply relying on fools to take on more debt than they can ever pay back in order to keep this thing alive.
House prices may stabilise and rise as you say, my pick at the start of the year was stable all of 2024. But given the term of loans, who is looking as far as 2040 to 2050 and thinking "yep, LGTM"?
Average rate on mortgages is going to continue to go up for another few months and then reduce painfully slowly. So, while some people will see $ back in their pocket, disposable income in aggregate will not change really for a year or so. Certainly not enough to offset the impact of govt funding cuts and a low net flow of bank credit.
Nevermind decades of data Jfoe, my bank has offered me a few points less... so cuts will flow thru quickly.
I always struggle with the whole 'here's one little piece of barely relevant data, now, how long a bow can I draw from it'.
Here's what happened last time we crashed rates - tell me why it will several times faster this time?
I was going to reply and say exactly this JFoe but realised it would fall on deaf ears. When you view the economy through your ‘self’ instead of viewing it as a whole (and all the interactions that occur) you only see part of the greater picture.
I stand by to be abused!
Those that have been enjoying high interest rates on their TDs will suffer. Could they have saved any it given cost of living increases?
Alas, many are retired and even small drops in fixed incomes are hard to absorb.
It is going to get a lot tougher all round.
I guess when you have egotists in central banking positions ... boom / bust, keeps them on the front page.
Sorry, I forget, did we vote for this RBNZ leadership? I can't remember ... ;-)
High Rates on Term Deposit's?
Seriously, anyone who has money in TD’s is losing money, they are generally for people who want somewhere to put their savings and do not really care if they are not even keeping up with inflation.
The people who invest wisely are those that buy property right and add value and actually do much of the work on the properties!
These are the people that many on Interest.co should be talking to if they want to improve their financial position.
The reality is that many on here arent willing to improve things and find it easier to just continue to moan and groan and say how unfair life is!
"These are the people that many on Interest.co should be talking to if they want to improve their financial position"
Or they should be talking to people like Sluggy who run a business, employ people, likely pay high rates of personal tax, pay company tax, their employees pay tax, they support other businesses eg. buy stationery, fuel, perhaps use freight companies etc.
A lot of wishful thinking in these comments. Only thing slowing the housing market decline is vendors ability to wait. I see many spruikers are watching the OCR vs unemployment race here and betting on OCR winning, whether they’re aware of it or not. If unemployment rockets up then vendors will flinch…
SKF
Ridiculous decision. We took the sugar hit and now we got to live with the hangover. No one has ever found a cure for hangovers and for good reason. Same should apply here. All the NIMBY's applauding this should take a good hard look at themselves. We're so indebted to the ponzi, it's become a self fulfilling prophecy. Pathetic. Sad.
- Chubbs.
The reference will be to the fact that due to FOMO and loose interest rate settings, house prices escalated well beyond incomes remain massively inflated, and the entire NZ market is only propped up by the belief that the next chump will pay more than you did, by a staggering degree.
The Ponzi refers to people using housing as a get rich quick scheme. That’s mostly speculators and landlords (at least the ones that don’t build the houses themselves). It is not an attack on owning one’s own home, rather attacking it seeks to make homes more affordable for those that want to own their own one by making it less attractive for leeches to try and use them to ‘get rich quick’
SKF
@SKF - as per stats NZ more first home buyers are owning homes than in the history of NZ - your comment above seems to serve you not the community? Its just plainly incorrect. I rented for years thank goodness I could find a room to rent. When flooding in Auckland people were desperate to rent - Do you think a 20 year old wants to buy in papatoetoe and be saddled with a mortgage or rent a room in Ponsonby? Your ideology is really over simplified. PS straight up question have you ever stayed in an AirBNB? Or does that now count?
Nuance is usually like tossing pearls before swine. I’ll bite. There is a necessary function of market making in landlordship, however the current configuration has seen it become the target of non-productive rent seeking behaviour. That’s behaviour that seeks to extract more value than it creates. It’s what you can colloquially call leeching off of our country.
The total number of people per dwellings in this country is function unchanged from 1991 (stats NZ), yet the prices of houses have far outpaced incomes, this means you must work for more years to pay off the same thing. Additionally home ownership rates as listed by stats NZ shows us as barely increasing our rates since 2018, yet we are noticeably below 1991. That statistic is also biased high as it counts all boarders (flatmates and/or family living with the owner) as living in “their own home” as it’s an “owner occupied property.” I’m not exactly sure where you’re getting the stat that more people are owning their own homes than anytime In history.
The fix is to use government policy to change the incentives on buying existing houses to be worse, you can make this better for everyone else by making it a tax and using it to fund public services or tax cuts. But in any case, there are far too many people who are priced out of owning their own home despite wanting to for there to be a rational case that we should make landlording easier / better. Labour had it right in incentivising landlords driving demand for new builds while pulling taxes out of the leeches to fund things like ferries and hospitals.
SKF
@ SKF its a OK argument and however its not the only game in town - there is a place for landlords - as i said before the amount of people on benefit applying for renting my house (Govt pays) in Te Atatu South outweighs working people - so I can assure you above comment is OK however please don't be willfully blind = however I wish you the best.
I thought SKF was just reading direct from the labour/green playbook. Tax those who work hard and save for a passive investment whilst providing a home for someone. Meanwhile the real leeches sit in wellington spending our hard earned tax dollars on fancy morning teas delivering nothing for society. It wouldn't surprise me if SKF was one of them
Strongly disagree. The fundamental fix is to revert to sensible (higher) interest rates, which for some time have been distorted by the state (rbnz acting in accordance with the law made by parliament). As well as dropping the price of assets habitually bought with borrowed money (eg houses) this would ensure money available for productive investment was invested more prudently (or at least reduce imprudent investment).
Too little too late.
Does anyone really believe that the economy will jump into life, and property prices will rocket up again over night>
It will take months and well into next year for any benefits to be felt. In the meantime, businesses will still close, workers will be sacked, and existing high interest rates will continue to drag the economy down.
Don't breakout the champagne.
There are too many domestic and international uncertainties to play out just yet..
Also likely that hesitant would be Vendors ,will take this as a positive signal to List,and the over-supplied market ,will get more over - supplied over the next 9 months,at an accelerating rate. Trademe ,ALL of NZ listings ,end of August was 40786, 5 weeks later, 42460 . Could easily hit 50 k listings by June 2025.
That alone would depress average selling prices further.
I think this will happen too. There are a lot of people who have put their houses into the short or long term rental pools (esp those who have left the country), because they couldnt sell them. Now they will think its finally a better time to sell, and that stock will hit the market again. I think vendors will be feeling more relief than buyers as they try to escape the noose round their necks.
"Members agreed that an OCR of 4.75 percent is still restrictive and leaves monetary policy well-placed to deal with any near-term surprises."
Damn right it is! ... And no - I do not accept your reasons for leaving it at restrictive and contractionary level.
If, as the MPC states, inflation is within band and about the 2% target, then we should be close to neutral and NOT still in a restrictive and contractionary mode.
They're simply using weasel words to avoid having to issue a formal mea culpa that is now way overdue.
ICU Auckland lost another 17 nurses to Australia. Every week this happens and by next year there will be a scramble to replace the trained staff when another health crisis develops. All five of the graduants interviewed were told no they wouldn't get a place. New Zealand trained and not employed.
But this Govt will claim more jobs for construction! An economy is the people. It isn't just access to housing, and transport, it is often more basic like childcare and good health. So no improved hospital for the South where it should be, the hinterland feeding into Dunedin. Does this Govt think a private hospital in Queenstown will met the needs of the South?
All the while the RBNZ gives a div to the Govt.
There are thousands of recently arrived experienced foreign trained nurses in NZ right now. They are all begging for jobs as nurses and can't get them.. Suits all of the vested interests that want to suppress nurses pay. New graduates in NZ will be cannon fodder.
A jerking knee can do a lot of damage if it hits in the right place.
Nursing numbers have actually increased by 10k June 23 - June 24. I think that's a record? (and there are actually large numbers of unemployed nurses?).
chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.nursingcouncil.org.nz/common/Uploaded%20files/Nursing%20Cou…
https://newsroom.co.nz/2024/07/24/unexpected-success-in-hiring-nurses-d…
Nursing numbers haven't gone up anywhere near that much on a net basis Health NZ Financial Reporting from FY 2023/24 – Health New Zealand | Te Whatu Ora
From that report. "Many internationally qualified nurses apply for registration, are registered, and gain an APC while they are overseas; this allows them to begin nursing as soon as they arrive in the country."
But because of oversupply the end up working in menial jobs when they arrive if they can get a job at all. Public and private sector has no budget right now to employ them as nurses.
"Looks like RBNZ has learnt their lessons on reacting too slow. "
You're not serious, are you?
Oh. You are. [sad face. very sad face.]
So let's not talk about the fact that we've been in a recession, or going nowhere, for the last two years, nor how the RBNZ fueled a rampant bout of inflation (over which they really had no control), nor how .... OMG
No. ... I'm not repeating the facts again. It is too exhausting. Time to let morons, post moronic stuff. (No offence John. You are in a company of 000's)
Inflation tamed! I dont think so
The world economy can no longer function on "higher" interest rates so its impossible to raise them & keep them raised .... but
Ongoing cost pressures will continue to force businesses to raise prices (eventually to non viable levels) ... so we will keep seeing closures/job losses and the inevitable re-imergence of "transitory"(!!) inflation as Govts desperately ramp up the deficit spending to prop things up ...
At some point we can expect a Lehmans on steroids as something goes snap
Irrelevant, because interest rates are set by lenders based on their perceived risk of the investment. If lenders think property is more risky then they will increase interest rates. Currently they think that property is less risky than other businesses - and judging by the amount of business shutting down it seems they are correct on average.
But as property has become more risky (selling price vs incomes eg leverage level) banks have been dropping rates even further, not raising them (with the exception of the past 2 years compared to the previous 20) - something I’ve been repeatedly pointing out on this site.
Risk goes up - so they drop interest rates even further so even more risk can be created.
eg right now housing risk is going up because the economy is getting worse and unemployment is rising. Under the laws of finance interest rates should now be going up not down to reflect that increased risk of mortgage default. But instead they are going down so the banks can create even more risk.
In August, RBNZ projected it would gradually ease rates towards 3% over the next 18-months as long as pricing behaviour remained consistent with a low inflation environment.
The RBNZ Monetary Policy Committee said on Wednesday that the economy had evolved largely as expected in the past two months and the economy was running below its potential.
The committee was confident next week’s consumer price index release for the September quarter would show annual inflation not just in the 1%-3% target range but almost at the 2% midpoint.
It said future changes to the OCR "would depend on its evolving assessment of the economy".
There seems to be a few contradictions in their statements unless it's usual jawboning to make it look like they've got it all under control.
They expect the last quarters inflation to be bang on 2% yet have rates at a restrictive 1.75% over a predicted 3% neutral rate? Isn't that going to end up with quite a bit of overshoot to the downside? They claim credit for predicting how the economy was going to behave in the last couple of months (wasn't that great when they were expecting more rate increases not long ago) yet don't seem to know what's going to happen in the next few months domestically?
Things will get worse in the economy, CPI could go a ways below 2%, rates will still be restrictive for 6 months or so(?) and the RBNZ will still try and claim by then that "the economy had evolved largely as expected"?
That's awesome, isn't it?
We are so pleased he did what he said.
Now, please explain why it was necessary, HughJorgan.
Was it perhaps the same person fueled an inflation bonfire?
Look back a year or so before that.
Who set the OCR at 0.25%, dumped LVRs, and threw the cheap money at retail banks that started the issues you refer too?
By golly - was it the same guy that then said he needed a Recession to control the bonfire he started? By golly - It was !!!
Yep I found that out recently buying another house. I can get 5.5% for 2/3/4/5years, but they are test at +3% for a total of 8.5%. We will see test rates start to drop, as we all know the OCR -> swap rates -> test rates are interlinked. Even if they drop -0.5 to 8% there is still a lot of fat there to protect the banks, but most importantly FHB overpaying for sh*tboxes.
And that is EXACTLY why our woefully inept Reserve Bank (RBNZ) should grow some and use LVRs and DTIs to restrict lending on RESIDENTIAL HOUSES !!!
Government may chose to support FHBs - that is their remit. Long term thinking and leveling the playing field. (but cherry picking winners to help their donors? not so much.)
Tony A spookily sounding like me:
https://www.oneroof.co.nz/news/tony-alexander-what-the-ocr-cut-means-fo…
"The decision was driven by a number of things, including the deteriorating outlook for the world economy."
Why is the 'world economy' relevant to NZ at this juncture? It's his 2nd paragraph. The RBNZ used it too.
IMO it is smokescreen to hide their failure.
But yes - Sadly, I think you're right and the 2nd half of 2025 is when NZ inc. will start - very, very slowly - to recover.
For the property market? A bull trap awaits.
Interest factoid here ...
For people who are 2/3 the way through their 20-30 year mortgage and/or are already paying more principal than they pay in interest each repayment ... this cut makes bugger all difference. Why? Because most of their mortgage payments will be principal.
But for those in the first 1-10 years of their 20-30 mortgage ... It helps a lot.
Check for yourselves ... https://www.interest.co.nz/calculators/full-function-mortgage-calculator ... scroll down for the graphs.
This will be a test for the government's commitment to increasing house supply to equal demand.
Injuridictions with their housing policy shit together have low interest rates and median income to house multiples around 3 to 4x.
Both are possible and are the norm. in many places.
The Govt. has plenty of supply ammunition on standby, plus let's see how the DTIs control the bank's enthusiasm to overegg the market.
Will be an interesting watch over the next 6 months, but I am hoping that any volume increase will not see a price increase.
Walking through the capital today and seeing all the vacant shops, homeless, beggars and redundancies still to play out, these cuts will be good news for some, but might be too little too late for others. I wonder if Adrian has walked down Lambton Quay to Kent Terrace lately?
Excellent article on Chris ( let them eat cake) Luxon and his view on the have not (houses) https://www.stuff.co.nz/politics/350445277/verity-johnson-unlike-luxon-…
They are too far behind, needed to go 0.75-1% drop. They are about to be 2% inflation and OCR 2.75% above that. November might be a doozy and drop 1%.
So as usual, too slow to react, so will see us all suffer unnecessarily. But they will claim they were right, because they mark their own exam and have never done anything wrong, so they say.
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