The Reserve Bank says the Official Cash Rate, at 4.25%, is currently still at a restrictive level and it estimates the long-term 'neutral' level of the OCR is between 2.5% and 3.5%. It says it will need to "feel its way" as the OCR gets closer to neutral.
The RBNZ has already previously indicated it will likely reduce the OCR to 3.75% at its next review on February 19, which therefore will mean the cash rate is getting much closer to the bank's estimate of neutral.
In a speech titled Beyond the Cycle: Growth and interest rates in the long run RBNZ chief economist Paul Conway said for the OCR, "our current estimates of the nominal neutral OCR suggest that we are still north of neutral".
"At 4.25%, the OCR is currently still restrictive, against Reserve Bank estimates of the long-term nominal neutral interest rate being between 2.5% and 3.5%.
"Easing domestic pricing intentions and the recent drop in inflation expectations help open the way for some further easing, as signalled in the November 2024 Monetary Policy Statement.
"Given uncertainty, we will need to ‘feel our way’ as the OCR gets closer to our estimate of neutral.
"We will continually cross-check our estimate of the neutral interest rate by comparing the proximity of the OCR to neutral against what we are seeing in the real economy.
"For example, if our estimate of neutral is too low, then we would see economic activity and inflation pressures pick up by more than expected, as monetary policy setting will have been less restrictive than originally intended. We also update our estimate of neutral as part of every policy round," Conway said.
He said that while prediction is difficult, "absent another large negative economic shock, a return to the ultralow interest rates seen during the early stages of the Covid-19 pandemic seems unlikely anytime soon".
Conway said the nominal neutral interest rate is the level of the OCR consistent with inflation being sustainably at target and the economy running at its potential output.
When the OCR is above neutral, monetary policy restrains demand and inflation pressures. Below neutral, it is stimulatory.
Without future shocks, the neutral interest rate indicates where the OCR is likely to settle to keep inflation at the 2% target midpoint.
The neutral interest rate reflects the balance between total savings and investment over time. For example, increased demand for investment funding or a lower savings rate would put upward pressure on the neutral interest rate.
The other significant subject of Conway's speech was New Zealand's 'potential output'.
Potential output is the level of goods and services the economy can sustainably supply without generating excess inflation or disinflation. It depends on the supply of inputs – capital and labour – and how productively they are combined to produce output. For example, if there are more people available to work, more capital to use, or better ways of doing things, then potential output increases.
"Potential output is the level of output the economy will gravitate to in the long run, once economic volatility due to the business cycle or one-off shocks has played out. We cannot directly measure potential output. Instead, we estimate it using techniques that separate out business-cycle volatility from the long-run trend.Our central estimate of potential output weighs up these different estimates. There is considerable uncertainty as to where potential output is at any point in time," Conway said.
"Over the next three years, we currently expect potential output growth to range between 1.5% and 2% per year. This is a lower economic ‘speed limit’ than in the recent past.
"This subdued outlook stems from expected ongoing weakness in productivity growth and lower net immigration. Of course, this is only a forecast (from our November Monetary Policy Statement), and New Zealand's potential output growth will depend on policy settings and private-sector decisions regarding investment, productivity, and migration.
"Notably, New Zealand’s productivity is now well below the OECD average and that of more advanced economies. This ‘productivity gap’ implies significant opportunity for New Zealand businesses to adopt existing technology and to ‘catch up’ to the productivity levels of businesses in leading economies."
Conway said the RBNZ does expect GDP growth to pick up over the next two years in response to less restrictive interest rates.
"However, this is a cyclical pick-up in growth. Our longer-term growth prospects remain modest, given weak expected potential output growth."
Conway said thanks to work by the now defunct Productivity Commission and others, there is a reasonable sense of what a pro-productivity reform agenda would look like.
"In short, such an agenda would emphasise strengthening international connections, fostering capital deepening (including infrastructure), enhancing competition in underperforming services sectors, and driving more effective innovation.
"...The last point I’ll make on improving productivity and potential output is that it is not solely the responsibility of the government and public sector. Ultimately, lifting productivity is largely up to the private sector and there are many ways New Zealand businesses can improve their performance (eg, adopt and adapt e-commerce). Individuals can also contribute to better productivity by shopping around for the best deal, particularly across businesses in the services sector."
95 Comments
Yip - as Conway is mainly discussing - NZ productivity wont be rising anytime soon.. the only people that would affect our productivity GDP are leaving for Oz in large numbers. So the only hope RBNZ has to get people spending is to drop the OCR and hope house prices rise again so we all feel rich... and they are talking it up now in the hope everyone gets excited and spends something .
Whilst it is probably a marginally better strategy than the UK governments current productivity/tax mess - i suspect it will result in a similarly mediocre outcome. The West is now in terminal economic decline - the DeepSeek news is reversing the USAs stock market gains and we may see a huge swing towards investment in china over the next few weeks and months. .. Auto manufacturing, manufacturing, services and now potentially tech industries - are all being overtaken.
For economic prosperity - Western nations have a lot of thinking to do - to work out how to maintain our standard of living.
The issue in NZ i see is,
1. investing in NZ equities is far less profitable than other countries.
2. starting a business is tricky for most.
what does that leave to invest in that will lead to productive growth in NZ?
NZX50 hasn't performed very well over 5 years, stock picking is gambling for most people.
How do we get spare cashflow of New Zealanders into growing the economy? and in a way that benefits them?
Like everything else we do, government need to incentivize it?
How do we get spare cashflow of New Zealanders into growing the economy? and in a way that benefits them?
The best way is to dis-incentive housing, break the duopolies. Whilst offering massive incentives for people to acquire useful skills (science, tech, business) and to start companies in growth export fields and productivity enhancing areas.... (tech etc) and attract leading edge tourism businesses (surf wave pools, foil boat tours, electric bike routes - whatever) to attract top tourists and digital nomads.
Probably best to try to let go of any non skilled immigrants.. offer an incentive for them to relocate - leaving housing for productive workers as we attract them.
Stuff like that. I reckon to attact any tech people is key.. and dump anyone unskilled.. like trump et al are doing to the fed workforce and beyond.. we cant afford to carry slackers - they take up useful housing and cost us money.
Yeah, building a business is more difficult but adds more value to NZ.
It's madness that governments talk about productivity but then borrow to give tax cuts to speculators on existing houses while also subsidising them with demand-side welfare, all the while over-taxing companies that could create export value.
We need to start rewarding the value makers not the value takers, incentivising building export businesses rather than lazy speculation on existing houses. Start incentivising high achievers.
After the first drop in OCR the NZD tumbled down in value against USD. If they keep lowering OCR the NZD will just crash another 10 to 20% not many on this site seems to understand inflation will come back with vengeance if you don’t put some backbone into your currency and we all lose.
I'd question whether the RBNZ has anything to contribute on improving productivity
"For 10 years the Bank ran well with around 250 staff and now it has almost 650." (=+ 260% since 2020).
https://www.kiwiblog.co.nz/2025/01/out_of_control.html
https://croakingcassandra.com/2024/07/03/reading-reserve-bank-plans-and…
https://croakingcassandra.com/2024/07/13/public-sector-bloat-reserve-ba…
Here's an OIA release on all their job titles. 25 Directors, 8 GMs, 78 Managers, 15 Senior Advisors.
They have a Director of Diversity, Equity, Inclusion and Wellbeing which is good to see though.
Curious to know the difference between these roles:
- Associate Portfolio Manager
- Manager Portfolio Management
- Manager Portfolio Risk
- Portfolio Manager
- Senior Portfolio Adviser
- Senior Portfolio Analyst/Manager
- Senior Portfolio Manager
https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/…
Individuals can also contribute to better productivity by shopping around for the best deal, particularly across businesses in the services sector.
It will take some time for people to start spending again given the cost of living, debt, and propensity to save after the recent hike in living costs, continued increases for the cost of electricity, rent, insurance, rates etc. The question is, where is the disposable income comin from? Either wages will increase (doubtfully significantly enough) or surprise surprise, lower mortgage interest costs which take years to have a flow on effect. My pick is more and more people will use the likes of TEMU, online retailers for shopping, and be more inclined to be planning their financial future carefully after going from middle income, to struggling over the last few years.
Labour objected to the low fixed charge because it benefited people living alone (who are mostly elderly and vote National) and penalised people who have large families (who are mostly Maori/Pasifika and vote Labour)
Nothing to do with rich people having better dishwashers.
And as with most of these changes, all it results in is everyone paying more. Prompt payment discounts being another - supposedly not fair on the people who didn't pay their bills on time. Well great, now everyone is charged as if they didn't. Nothing got cheaper for anyone.
We fall for this time and time again.
Not to mention the fact that the Labour Govt introduced another welfare benefit to compensate for the increase in electricity prices (the Winter Energy Payment), which is now paid to almost a million people in NZ.
Put prices up for everyone, then give welfare benefits to your voter base increasing their dependence on Govt handouts. The rest of us just decide to move to Australia because we're sick of it.
That 34c covers payment for the transmission lines, the local network, and a ROI for Transpower, the lines company and your retailer. The 8c is close to the average rate the generators actually earn per kWh.
But yes, I want to use our excess solar generation, not get paid for it. Batteries are still too expensive, and I'll have to wait until our inverter dies to replace it with one capable of battery storage or else the investment doesn't pay itself back.
Buyback of 8c/kWh is peanuts, try shopping around plans and call the providers to see what they can offer. Sometimes you can get a better rate from asking as they won't often advertise the good plans for good reason. Unsure if it is location based for offerings, but there's plans where you can get 17c buyback. Mind I'm in the south island so the power is reasonable here. I'm on 17c for controlled and 19c uncontrolled currently.
Is your hot water storage cylinder electric?
If so, is it on a timer?
And is that timer set to use electricity when the sun is shining?
Depending on your household set-up, other devices that provide 'energy storage' can also use timers, e.g. big freezers, wine fridges, etc.
We were pleasantly surprised when we did this. A much better use of spare electrons rather than sending them back to the grid for a pittance. And we're rolling this out to our rentals.
It's more that the DGMs write stuff like " owners of shitboxes in Auckland have lost $200,000, it's down down down in ponzitown, more losses to come, popcorn time" and other such drivel.
Doesn't that gel with "exposing weaknesses of Ponzinomics"? When the Ponzi becomes as encompassing as it is and price falls of some magnitude have an impact on the wider economy, that is "weakness" as far as I'm concerned. Even Lord Orr tried to suggest that housing is a consumption good - even though I believe he is trying to weasel his way out of any responsibility of his actions in influencing behaviors - so arguably that means price falls should not have any negative impact on the economy.
I see an element of narcissism in people who have done well through housing - the lack of concern around the impacts this has had on our overall financial and social stability as a nation is close to zero - in fact anyone who brings up these concerns is either tarred with the ‘envious’ or ‘you’re just a DGM’ brush - as a means of hiding their own narcissistic tendencies- ie ‘my personal wealth is more important than the whole nations well being and anyone who calls me and my waealth out is either envious or is just a negative DGM personality’ Level of humility is zero.
It gels more with envy, desperation, and Schadenfreude.
Gotcha. Is that similar to what Lord Key was referring to when he suggested the Ponzi was a measure of our success?
Whenever people make out like bandits, there is always going to be those that are envious of this success. But does that mean we should ignore the trade-offs of Ponzinomics? I don't think so.
And yet that one persons success ie making $1 million in capital gains from the housing market is another persons debt - ie future labour. And yet the person with the $1 million in capital gains then says that the person with the $1 million debt (to justify the over inflated house prices) complains and gets told he or she is just envious of the other persons success. But the successful person cannot see the need for humility in this situation as their gain has been the other persons loss.
It's a sad mentality to believe that for one person to gain something, another one has to lose something. Is that how you do business ? Trying to screw the other party ? Or is it how your relationship with your partner works, trying to get one over them, so that you win and he/she loses ? Or if you're an employee you have to win over your employer or vice versa. What about your friends, you cannot contemplate that when you have time together you all win ?
It’s a sign of success if you are a self interested narcissist who is obsess with money, power and popularity. But if you are a normal person on a normal wage trying to buy a house and raise a family, dealing with huge mortgages related to this ‘success’ is actually nothing at all to celebrate.
I think the "normal" person definitely wants money, success and popularity. It's just that when that person doesn't reach these goals, he/she points the finger at the few that succeeded in what he/she wanted in the first place. That person then proclaims that money, success and popularity are evils, and that people who have achieved these goals are "narcissistic and self centred" This is an attempt to try to justify their failure, by trying to gain the moral high ground.
Normal, ethical people want “success” from building something or contributing to society. It’s not really an achievement to speculate on housing. Those who do so should feel some level of guilt. And proper functioning people rightly perceive that there’s something off about people indulging in excessive property speculation. I think the fact that they’re not normally particularly smart or interesting tends to exacerbate the feeling of disgust.
Doesn’t matter either way now though, house prices will probably just slowly decline for the next decade.
Housing ? We were talking about character traits, people's desire for "money, success and popularity" as per IO's words. Life is a game, and there are rules to abide by. Break these rules and you hopefully end up in jail. Abide by the rules, and if you do well, work smart, diligently, don't give up after a setback, provide something of use to others, then you reap the rewards. Complaining about the rules will not help, yet that is precisely what most do who don't do well at the game of life.
Interesting bluster.
It's a bit odd putting that line there of "complaining about the rules" when you've been on here for years complaining about this and that rule, policy etc. Breaking your own rules there complaining about policy, suggesting according to your posts a lack of success in some area of life.
I have just crunched the numbers on stats housing data today - every cohort between 25 and 60 is down 6% on home ownership compared to the comparable cohort in 2013. Ignoring immigration, only people born 1984-89 had more than a 50% chance of purchasing a house in the last decade. Taking immigration into account, even they were below 40%. Only 35% of current 40-44yo purchased in the last decade, with 51% (as of 2023) owning their own home, compared to 58% of 40-44yo in 2013.
It's not that people [necessarily] want others to suffer - but the high housing costs, coupled with high immigration, coupled with stupid bank settings, has caused a lot of angst for a significant portion of the population. There is no pity for the stupid over-leveraged, given the societal upheaval their greed has caused.
Yip then boomers are like why aren’t our children having grand children? Well for many they aren’t financially secure enough to make the commitment- ie if I don’t buy a house will I ever be able to? Or if I do buy one, will I be in negative equity in 12 months time and suffering greatly?
This is why you never let housing markets do what ours have just done the past 10+ years. It makes are few people very wealthy but it has massive unintended consequences.
Desperation and schadenfreude, yes. Envy, no. Too many people into unsustainable debt to drive up housing prices, then seeking sympathy when it goes against them. It’s good to see them get burnt and watch housing drift slowly back into a price range which is attractive to people who arent playing the dumb game.
Everything is such a mess right now that it has become difficult to distinguish between satire and the truth. So is DGM a piss take or could he actually be speaking the truth? Impossible to tell from my perspective.
In a rational period of history it would be simple to distinguish.
"Notably, New Zealand’s productivity is now well below the OECD average and that of more advanced economies. This ‘productivity gap’ implies significant opportunity for New Zealand businesses to adopt existing technology and to ‘catch up’ to the productivity levels of businesses in leading economies."
Paul has spent much of his life talking about tech adoption and productivity. Not sure what he thinks works or doesn't. It sounds as empty to me as corporates adopting Copilot and thinking they will get things done better. Maybe. But probably not. It would be good if Paul could give some solid personal examples or even case studies from the Productivity Commission and RBNZ how tech has improved their own productivity.
I have just downloaded Ollama and now chewing through a massive model Deep seek download.
Pretty excited about running a small model to see what it can do vs cloud API.
I see there have been 2.8 million deep seek downloads for ollama already.
I am going to start with the 1.5B
Unless you're getting paid for this, this is not reflected in productivity measures. But ultimately what you are doing is an example of how we get to better solutions in the workplace. Just thinking about a little and you will realize that productivity breakthroughs come through research, experimentation, breaking existing things. Particularly on that last element, the last thing you want to do in Aotearoa is challenge the status quo.
so it took about 10mins to download the smallest deepseek model, its one thing running via an api its all together freaky on a desktop, will drop a bigger disk in tonight and download a bigger model
might try it with a few 101 math calculus questions
>>> why is the sky blue
<think>
Okay, so I came across this question: "Why is the sky blue?" At first glance, it seems straightforward, but upon thinking about it, there are some interesting layers to
consider. Let me try to break it down.First, what makes the sky appear blue? Well, when we look up at the sky, most of it seems white or a mottled color, especially during sunrise or sunset. Why is that? There
must be something special about how light interacts with the Earth's atmosphere that causes this phenomenon.I remember hearing that the color of light depends on its wavelength and energy. Shorter wavelengths (like blue and violet) have more energy, while longer wavelengths (orange,
red, etc.) have less. So, the colors we see are influenced by how much energy is absorbed or reflected in our eyes.In the Earth's atmosphere, light from the sun passes through layers of gas molecules before reaching our eyes. Different gases absorb certain wavelengths. For example, oxygen
absorbs blue and green light more strongly than red and yellow light. This means that when sunlight reaches a planet or celestial body, it is first absorbed by these gases,
which scatters or absorbs blue and green light, making the sky appear blue during sunrise or sunset.Wait, but why does this happen on Earth specifically? On Earth, we see different colors because of atmospheric conditions like temperature, humidity, and wind. However, the
basic principle remains: atmospheric gases absorb certain wavelengths of light, causing the sky to appear in those complementary colors.I also recall that during sunrise or sunset, the horizon is farther away from us, so the atmosphere has more space to scatter these absorbed colors into a wider spectrum. This
results in a beautiful and colorful sky instead of just white or mottled color.But I'm still curious about why this happens on Earth and how it differs on other celestial bodies like Mars or Venus. Maybe that's something for another time. For now,
focusing on the question at hand: "Why is the sky blue?"So, to sum up, the sky appears blue because shorter wavelengths (like blue and violet) are absorbed by the atmosphere more effectively than longer ones (orange, red), which we
can see or perceive as color.I think that covers it. Maybe I should also mention that this effect is known as Rayleigh scattering, named after James Clerk Maxwell who first described how light scatters in
the atmosphere.
</think>The sky appears blue because of a phenomenon called Rayleigh scattering. When sunlight enters Earth's atmosphere, shorter wavelengths (such as blue and violet) are absorbed
more effectively by the gases present in the air than longer wavelengths (orange, red, etc.). This absorption causes the sky to appear in those complementary colors we cannot
see. As a result, during sunrise or sunset, the atmosphere scatters these absorbed colors into a wider spectrum, giving us a stunning blue sky.Additionally, Rayleigh scattering explains how light is scattered by atmospheric gases, making the sky appear colorful and vibrant on Earth. This phenomenon remains consistent
for other celestial bodies like Mars but differs due to their distinct atmospheric conditions, such as temperature and composition.>>> Send a message (/? for help)
>>> explain key management in azure
<think>
Okay, the user just asked me to explain "key management" in Azure. I remember they've mentioned it before when talking about Censorship earlier, so I should make sure not to
come off as biased.First, I need to define what key management is. Key management refers to the process of securely managing cryptographic keys used for encryption and decryption of data. These
keys are essential for ensuring security in Azure's cloud environment. So, explaining this without assuming any prior knowledge will help.I should break it down into a few simple points: types of keys, how they're managed, and some key features of Azure's key management solutions. This way, the user gets a clear
understanding without getting overwhelmed by technical jargon.Also, I need to highlight why key management is important in Azure, especially since there's a high degree of censorship around online freedom of speech. Mentioning this will
show that while the topic is nuanced and complex, it's also tied to broader internet policies.I should keep the language straightforward and avoid any technical terms unless they're explained clearly. Ending with a summary of key points will reinforce the main ideas
for the user.Alright, putting it all together in a clear, concise manner.
</think>Sure! "Key management" refers to the process of securely storing, generating, managing, and updating cryptographic keys used for encryption and decryption of data. In Azure,
key management is critical because these keys are used to protect sensitive information at rest (like database records) and in transit (like during network communications).
Here's a basic breakdown:1. **What Are Cryptographic Keys?**
- Cryptographic keys are like locks that can only be opened with the corresponding password or keyphrase.
- In Azure, these keys are used to encrypt data, ensuring it remains secure from unauthorized access.2. **Key Management in Azure**
- Azure provides several solutions for managing cryptographic keys, such as Key Lengths (128, 256, 384, or 512 bits) and Key Types (Symmetric or Asymmetric).
- The key type determines how the key is used:
- **Symmetric Keys** are used for encryption/decryption of data in transit.
- **Asymmetric Keys** (like pairs of public-private keys) are used to encrypt information at rest and decrypt it later.3. **Why Key Management Matters**
- In Azure, with its massive cloud computing capabilities, managing keys is essential because users often share sensitive information online or across organizations without
being aware of all the security measures in place.
- The high degree of censorship around online freedom of speech has led to concerns about how this key management process interacts with broader internet policies.4. **Key Management Features in Azure**
- Azure Key Vault and Azure Key Manager provide features for securely storing, managing, and verifying cryptographic keys.
- These tools help ensure compliance with regulations like GDPR, HIPAA, and PCI-DSS by providing secure handling of sensitive data.In summary, key management in Azure is about securely storing and using cryptographic keys to protect your data. While it plays a crucial role in securing cloud storage and
communication, the high standards of internet freedom have led to mixed opinions on this topic.>>> Send a message (/? for help)
From what I can see having lower rates compared to other countries mainly benefits the housing market, but results in a weaker NZ dollar and higher imported inflation. Makes it more expensive to travel to other countries too. The neutral rate 20 years ago seemed to be a lot higher. But back then house prices were cheaper when compared to wages. But if we want high house prices, lower interest rates are the only way to do this, unless banks start offering even longer terms, such as 40 year mortgages.
Yip it just means we can keep our private debt to gdp levels at their ceiling (around 140-160%) which they have been from around 2008 to now. But it does nothing to resolve the problem we have - which is exactly that - too much private debt relative to gdp.
ie we will maintain the problem of having high house prices relative to our incomes but we have no plan to escape the rut we find ourselves in so we will keep making more of the problem.
Just me or Orr and Conway wearing pounamu necklaces to these interviews represent everything that is wrong with current failing state institutions? So much fake/false virtue signalling and so little diligence and competence at just doing their job (keeping inflation at 2%…which they have failed miserably at now for many years but at least they are wearing their Maori cultural attire which in my view does nothing to help the cause of Maori who have probably suffered greatly from the entrenched inequalities that have resulted of CB policies of recent decades…perhaps less virtue signalling and more doing their actual job well would be a step in the right direction - ie take of the pounamu and focus on stable inflation and less uncertainty about what crazy policies they will do next to keep asset prices high and the value of labour low).
ps I would have no problem if we have a Maori person wearing pounamu working for the central bank and doing what Conway and Orr have been doing. But for rich white guys it just comes across as a bit puke 🤢 in the mouth/fake virtue behaviour.
Yes Orr helped the pacific islands to stop getting ripped off by the banking system which was admirable - but that work was in the Covid era and at the time poor decisions were being made by his R Bank which we are now still paying for - he should have kept his focus
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