By Bernard Hickey
The Reserve Bank has hiked the Official Cash Rate for a fourth time in five months as widely expected, but it has also signalled a pause in its rate hikes to assess how the tightening was affecting the economy.
"Encouragingly, the economy appears to be adjusting to the monetary policy tightening that has taken place since the start of the year," Reserve Bank Governor Graeme Wheeler said.
"It is prudent that there now be a period of assessment before interest rates adjust further towards a more-neutral level," he said.
Economists had forecast the 0.25% rise to 3.5%, and had said the Reserve Bank could now pause the rate hiking cycle until December at the earliest, and possibly into early next year. The Reserve Bank has previously forecast another 1.25% of hikes through late 2014 and the 2015 year as it drags the OCR up to around its view of a 'neutral' level of 4.5%. This would imply floating mortgage rates well over 7% and headed for 8%.
Economists said after the announcement the pause could last until March and that the Reserve Bank has opened the door towards currency intervention if the New Zealand stayed high.
ANZ Chief Economist Cameron Bagrie said the Reserve Bank's statement was about as dovish it could be without moving completely into netural.
"Clearly the RBNZ is more comfortable with where the economy is headed on the inflation front, the risk profile is more nuanced (a bit more downside has been opened up), and the currency is still problematic. So in the words of David Lange, we’re stopping for a cup of tea," Bagrie said, adding he now expected the OCR to remain on hold until March 12.
The Reserve Bank's seven-paragraph statement was broadly as expected, although it talked particularly tough on the high New Zealand dollar.
"Over recent months, export prices for dairy and timber have fallen, and these will reduce primary sector incomes over the coming year," Wheeler said.
"With the exchange rate yet to adjust to weakening commodity prices, the level of the New Zealand dollar is unjustified and unsustainable and there is potential for a significant fall," he said.
The New Zealand dollar fell sharply immediately after the statement. It fell almost a cent to 86.1 USc by 9.20 am. Economists said the option of intervention to push the currency down was now open to the Reserve Bank.
The bank said the economy was expected to grow at an annual pace of 3.7% in calendar 2014, with global financial conditions very accommodating.
Growth among New Zealand's main trading partners had eased slightly, but for temporary reasons, it said. Construction in Canterbury was growing strongly, while migration was adding to housing and household demand, although the bank noted house price inflation had moderated.
"Inflation remains moderate, but strong growth in output has been absorbing spare capacity. This is expected to add to non-tradables inflation," Wheeler said.
"Wage inflation is subdued, reflecting recent low inflation outcomes, increased labour force participation, and strong net immigration," he said.
"It is important that inflation expectations remain contained. Today’s move will help keep future average inflation near the 2 percent target mid-point and ensure that the economic expansion can be sustained."
The Governor repeated his previous comments that the speed and extent of further tightening depended on the "assessment of the impact of the tightening in monetary policy to date, and the implications of future economic and financial data for inflationary pressures."
Economist reaction
BNZ Head of Research Stephen Toplis said he had left his forecast of a resumption in hikes on December 11, a cash rate of 4.75% by the end of 2015 and a peak of 5%.
"It should have come as no surprise that the RBNZ pushed ahead with today’s adjustment, despite the rising clamor from lobby groups for it not to do so. In this regard, it was notable that the RBNZ highlighted that it was forecasting growth of 3.7% this year – well above its 2.8% speed limit," Toplis said.
He said the Reserve Bank could not have been more aggressive with its comments on the currency if it had tried.
"The RBNZ must have been overjoyed by the market’s response to these comments and the OCR review more generally: the NZD has fallen three quarters of a cent; a 50/50 chance of a rate hike is priced in for December and, while there has been a modest decline in swap yields, a firm upward slope in the rates curve remains with the ten year swap sitting at 4.71%," he said.
ANZ Chief Economist Cameron Bagrie said he now expected the Reserve Bank to wait until March before next increasing the OCR.
"The currency rhetoric has been stepped up; with the NZD is now noted to be “unjustified and unsustainable and there is potential for a significant fall”. On the face of it, “unjustified” opens the door to currency intervention," Bagrie said.
"We’re not convinced the trigger will be pulled (more likely we’ll see covert and passive action as opposed to open intervention) but we’re on notice," he said.
We expect the Bank to remain on hold until next March, and stick to our long-held view of a moderate path of policy tightening by historical standards this cycle," he said, adding that fixed mortgage rates could fall in coming weeks.
Westpac Chief Economist Dominick Stephens said he expected the current pause would last until January 29 and the Reserve was now looking at an OCR of 4.5% by June 2016, rather than the 4.75% signalled in its June forecast.
He said he interpreted the Reserve Bank's currency warning "as a direct warning that the RBNZ may intervene in foreign exchange markets by selling New Zealand dollars any day now."
"The RBNZ riled against the inconsistency between tumbling export commodity prices and the very high exchange rate by saying "the level of the New Zealand dollar is unjustified and unsustainable and there is potential for a significant fall." We interpret this choice of language as a direct warning of intervention," Stephens said.
Stephens said there was a risk markets had over-reacted to the pause signal.
"The RBNZ intends this to be a hiatus within a broader trend of a rising OCR, but markets might come to believe that the RBNZ has lost its resolve to hike at all. If markets do overreact in this way, the RBNZ will seek to correct market pricing through speeches. RBNZ watchers should be wary," he said.
ASB Chief Economist Nick Tuffley said the New Zealand dollar's drop suggested markets viewed the "unjustified" comment about the New Zealand dollar as ticking a box to justify intervention.
"We don’t expect the RBNZ to intervene despite the comments, but the statement changes should keep the NZD heavy in the near term," Tuffley said, adding his view on a pause until December and a peak of 4.5% in the second half of 2015 had not changed.
"Within the intervention criteria it is primarily the “conditions in markets must be opportune and allow intervention a reasonable chance of success” criterion that is the stumbling block," he said.
Markets are now pricing in only 50 more basis points of hikes over 2015, which is much lower than the Reserve Bank's June MPS foredcast for a 4.5% OCR by the end of 2015.
Political reaction
Labour Finance Spokesman David Parker said the interest rate rise would hit the regions and put more upward pressure on the exchange rate.
"The regions are already hit by dropping export prices for dairy products and timber prices plus they have flat housing markets from LVRs. Now they have to endure another interest rate rise which is a direct result of the Auckland housing price bubble," Parker said.
"Home owners as well as exporters are now paying the price the price for the Government's failure to control the Auckland housing crisis. LVRs, lending restrictions and now interest rates heading towards 7% are shutting out first time home buyers," he said.
"The current Government's policies are driving a wedge between Auckland and the rest of the country."
Business NZ CEO Phil O'Reilly said a pause in the rate hikes was called for.
“With interest rates in the developed world at near-zero, we need to avoid adding pressure on the New Zealand dollar," O'Reilly said.
Parsing the statement
Today's decision was accompanied by its usual 'in-between' seven paragraph statement. Decisions made with a full quarterly Monetary Policy Statements (MPS) are accompanied by a full news conference and an appearance by the Governor before Parliament's Finance and Expenditure Select Committee.
It's worth comparing this statement with the opening statement in the June 12 MPS to see how the Reserve Bank's interpretation and thinking has changed.
July 24 - The Reserve Bank today increased the Official Cash Rate (OCR) by 25 basis points to 3.5 percent. New Zealand’s economy is expected to grow at an annual pace of 3.7 percent over 2014. Global financial conditions remain very accommodative and are reflected in low interest rates, narrow risk spreads, and low financial market volatility. Economic growth among New Zealand’s trading partners has eased slightly in the first half of 2014, but this appears to be due to temporary factors.
June 12 - The Reserve Bank today increased the Official Cash Rate (OCR) by 25 basis points to 3.25 percent. New Zealand’s economic expansion has considerable momentum, with GDP estimated to have grown by around 4 percent in the year to June. Global financial conditions remain very accommodative and are reflected in low long-term interest rates and narrow risk spreads. Economic growth among New Zealand’s trading partners is gradually improving and global inflation remains low.
The difference – The difference is in the apparently lower GDP growth figure, but the time periods are different. Reserve Bank officials made clear the 3.7% figure was an annual average growth figure for the calendar 2014 year. The bank did not include a direct comparable for calendar 2014 in its June MPS, but its annual average measure for the year to March 2015 was 3.5%, suggesting an increase in the bank's view of the growth rate.
July 24 -Construction, particularly in Canterbury, is growing strongly. At the same time, strong net immigration is adding to housing and household demand, although house price inflation has moderated further since the June Statement.
June 12 - Prices for New Zealand’s export commodities remain historically high, but their recent falls will reduce farm incomes over the coming year. A continued acceleration in construction in Canterbury, and more broadly, is supporting growth, together with strong net immigration flows that are adding to housing and household demand. Business and consumer confidence remains buoyant, as do businesses’ reported intentions to invest and to hire.
The difference – The paragraphs are a little different in content, given the last OCR decision included a mention of commodity prices. The bank shuffled that mention down this time to include it with a strong comment on the currency. There isn't too much different in the rest.
July 24 - Over recent months, export prices for dairy and timber have fallen, and these will reduce primary sector incomes over the coming year. With the exchange rate yet to adjust to weakening commodity prices, the level of the New Zealand dollar is unjustified and unsustainable and there is potential for a significant fall.
June 12 - The exchange rate has not yet adjusted to weakening commodity prices, but is expected to do so. The Bank does not believe the exchange rate is sustainable at current levels.
The difference: The tone of the Reserve Bank's warning about the currency is much tougher this time around, reflecting the sharp divergence between commodity prices and the currency. Intervention is not mentioned though, unlike in a speech Wheeler gave to dairy farmers in May, where he suggested it might become an option.
July 24 - Inflation remains moderate, but strong growth in output has been absorbing spare capacity. This is expected to add to non-tradables inflation. Wage inflation is subdued, reflecting recent low inflation outcomes, increased labour force participation, and strong net immigration.
June 12 - While house price inflation remains high, the housing market has moderated since late last year when restrictions were applied to high loan-to-value ratio mortgage lending and when mortgage interest rates began rising. Fiscal consolidation continues to moderate demand growth, though by less than previously assumed.
The difference – There's more discussion about moderate wage inflation in this statement.
July 24 - It is important that inflation expectations remain contained. Today’s move will help keep future average inflation near the 2 percent target mid-point and ensure that the economic expansion can be sustained. Encouragingly, the economy appears to be adjusting to the monetary policy tightening that has taken place since the start of the year. It is prudent that there now be a period of assessment before interest rates adjust further towards a more-neutral level.
June 12 - Inflationary pressures are expected to increase. In this environment, it is important that inflation expectations remain contained and that interest rates return to a more neutral level. The speed and extent to which the OCR will need to rise will depend on future economic and financial data, and its implications for inflationary pressures.
The difference – Today's statement included the bank's first comments about how "encouragingly" the economy had begun adjusting to the tightening.
July 24 - The speed and extent to which the OCR will need to rise will depend on the assessment of the impact of the tightening in monetary policy to date, and the implications of future economic and financial data for inflationary pressures.
June 12 - By increasing the OCR as needed to keep future average inflation near the 2 percent target mid-point, the Bank is seeking to ensure that the economic expansion can be sustained.
The difference – These paragraphs aren't directly comparable anymore, given the bank wove its outlook comment into the penultimate paragraph this time.
(Updated with Parsing of the statements and NZ$ fall to 86.1 USc, Economist comments, Politicians comments)
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67 Comments
Its not gambling really, hes doing interest rate forecasts and so his jobs to stay ahead of the curve as it takes a while for the pressures they see building to result in the inflation.
With migration at such massive levels and construction at such massive levels,there definitely is the potential for inflation to rise significantly so i think quite rightly hes acted.
capital plant, transport infrastructure, carpenters, builders,metal machinists, steel furnaces, interisland freight capacity, architects, building supervisors, building surveyors, geotechnicans, joiners plumbers etc.
A lot of those migrants of cause bring their own demand for housing goods and services thus putting up wider inflation as well
Mikeyb.......if Wheeler wants to stay ahead of the Curve......maybe he should take some advice from females........we know a lot about curves inputs, outputs, yields and maturity......some curves fall gracefully, while others can be pumped up with a little intervention........haha on thinking about this....Wheeler has been seeking advice!!
"He speculates that there is inflation and consistently he has been wrong."
Mr Wheeler's decisive actions have prevented what otherwise would have been runaway inflation as borrowers contined to gorge on cheap credit.
The markets are being well served by his clear signals for all to read.
Well done, give that man a pay rise.
The borrower is the real person who is actually creating most of the credit.......as most of the money does not actually exist it comes from the money multiplyer.......
Bank deposits are not a bailment as the funds are no longer the property of the depositor !!!
The depositor gets an account i.e. savings or cheque in exchange.
http://en.wikipedia.org/wiki/Fractional_reserve_banking
The only clear signal that Wheeler is sending is that the RBNZ intends to keep playing games.....Personally I don't know how anyone at the RBNZ sleeps at night.......
Hows about Wheeler making a repititve statement:
- You the people do not own any money that you deposit in a bank
- We the RBNZ use a money multiplier
- The money mulitplyer works by you borrowing from a bank and us at the RBNZ allow the money supply to grow by flicking a switch.
- You the borrower then pays interest on large chunks of money that doesn't actually exist.....it's just a number on a computer screen.
- You the customer because you don't own your deposits anymore allows us at the RBNZ to utilise discretionary tools which we can invent like say the OBR because you deposits that you think you own are not yours...never have been.....we do state this on our website somewhere but it is up to you to find it....and even if you do find it we know that you wont believe it because it all seems very unreal.
- We at the RBNZ invented this fantastic tool we call neutral interest rates...
- It is really useful just like the money multiplyer (rubbing hands together) we miles as well throw darts onto a board of numbers and select the best of 3 for our neutral interest rate as it is not to precise as we control the data that gets fed in (big grin and hands rubbing)
- Now all this is very handy and when things get outa hand like they did in the GFC....we are very lucky as Her Majesty comes in and guarantees the banks....through her officer the Monster of Finance.
Interest rates should be left to the free market....
Ummm...who gets to set the Capital adequacy ratios? Looks to me like the regulators were asleep at the wheel.......
I can't agree on LVR's they are extremely unprincipled....if people are borrowing then that money is created out of thin air it only exists on a piece of paper.....a better question to ask is should the percentage of borrowed created money that has been leveraged off a depositors money actually incurr any interest at all???? How does created out of thin air money actually pose a risk or cost?? The created money creates revenue for banks and the RBNZ due to the interest charged on it......so we are allowing a system where no physical money is in existence and then charging interest on it. And then we are not recognising the contribution of the depositors funds in the system. The depositor is not rewarded with a higher interest rate for having the real backing behind the original loan.
The RBNZ is all about being a protected price-setter while depositing customers are unprotected price-takers. And if you look at the nuts and bolts of the system then all the people (depositors and mortgage holders) are being scammed.
notaneconomist you must not perpetuate this money multiplier myth exacting it's revenge within the banking borders of NZ .
I had occasion to post a rebuttal when a money professional claimed the same. Read it here and wish the stabilising influence of fractional reserve banking could be introduced to New Zealand by TPTB.
Nonetheless, I wholeheartedly agree with your claim that Interest rates should be left to the free market....
A debate about the efficacy of a neutral or possibly a natural interest rate is joined by Doug Noland here further down the page.
http://en.wikipedia.org/wiki/Reserve_requirement ( I would hope the NZ information near the bottom of the page is out of date.)
he most common mechanism used to measure this increase in the money supply is typically called the "money multiplier". It calculates the maximum amount of money that an initial deposit can be expanded to with a given reserve ratio. However, rather than directly limiting the money supply, central banks typically pursue an interest rate target to control bank issuance of credit.[3] The central bank simply supplies whatever amount of base money is demanded by the economy at the prevailing level of interest rates.[17]
Yes, they updated their site without fixing the links to the new location of data - nonetheless, the RBNZ does not demand banks deposit reserves with it against their assets at a set percentage rate unlike the US authorities. Even the later made the reserve requirement near redundant with the introduction of A/C sweep exemptions.
dtcarter.....take out a mortgage.......does the money exist? or is it created out of thin air with a click of a button......and for the next 30 years (if that is your mortgage term) you are paying interest on something that in reality didn't exist......so who really created the thin air transaction? you or the bank? You know who is doing the paying? And you know who is clipping the ticket?
Reading Bank disclosure documents can be very enlightening.
It's like Pooh when he took his 5 pound note to the bank.
The bank takes a legally required deposit (or issues bonds) to raise equity. eg $1,000
when the borrower shows up the bank writes them a contract with interest. eg $5,000
The bank then tells them they have $5,000 in their account.
they spend the $5,000
They also start paying the bank back the $5,000 + interest.
So where does the bank get the extra $4,000? they borrow it. With promises to pay it back as the retail borrower pays up. They sometimes buy insurance, which means the interest rate the retail borrower is paying must be enough to cover the banks borrowing cost, plus interst, plus insurance.
It's all shells and peas, with each bank taking a skim.
That's the scary bit, the bank don't need to borrow the extra 4k.
That's where the OCR comes in. The bank can issue a set amount of paper money, as long as they have a portion in holding. That's why they get accused of "creating money out of thin air", and why the regulations are so tight on who can be a bank, and how it is run.
Some loans are more risky than others, so the bank has to either hold more, or pay more to RBNZ and other lenders.
The bank also has the option of borrowing money from other banks, which gets complex because of different setups and contracts can arranged.
I doubt it will happen before then, itl all come down in my opinion as to what happens with US inflation.
If there was an immediate problem in China then that would cause a big drop off but i dont forsee that happening in the short term, more the long term as i think the long term trend for exports in China is droppping and as seen from their ghost cities the ability for them to create domestic demand is not encouraging. I
One result of Wheelers actions is that all the small to medium businesses that use their house as security for borrowing will take a hit and higher interest rates will actually see the dollar strengthen over coming weeks - forget about the quick drop this morning, that was based solely on rhetoric. This latest increase will result in many more job losses being announced, chances are that the ECB and the Australian Reserve bank will cut rates, strengthening our dollar even further and once the USA and European economies head fully back into recession Wheeler will have no choice but to slash the OCR.
I doubt anyone is going to do any furthe rate cuts. i expect once those markets indicate a return to lifting rates albeit just slowly then the NZ dollar will fall significantly, increasing inflation and if anything putting further pressure on interest rates for a further hike.
Id say the USA will be indicating this within a couple of months especially as they get concerned about the height of their sharemarket and that they are already reducing their bond purchases
Bang! There goes any chance of building thousands of "affordable" houses.
The poor folk who thought that one day they would be able to afford their own home have now seen all their dreams evaporate into thin air.
On the other hand investors who are not over geared will sit back and enjoy the prospect of steadily increasing rents.
For every action there is a reaction .
I dont think rents are going to rise, migration has being very strong and is peaking and there has being no noticeable increase in rents. I think house prices will stabilise or fall to more affordable levels as investors sell up to obtain better returns elsewhere. Currently they are the least affordable to rents in the world. I expect that will slowly be rectified as housing construction increases and The Auckland Plan is enacted. Already there are signs the Auckland market is slowing significantly, it was becoming far to far ahead of the fundamentals of rent and wages and interest rates
I envisage that it is going to become more affordable to buy as the construction of new houses heats up and the domestic economy in aussy starts responding to low interest rates. Remember their wages are significantly higher than ours so are a strong drawcard for people in nz when demand there starts to return
And if Kiwis start coming back home because there are significant disruptions (like the twin towers) that cause security issues then the housing issues will be amplified.......
People who can't afford a home of their own should be camping outside No 2 The Terrace in Wellington!!!! Take a few tarps you might need some shelter but it is undercover once you're up the steps....where you should get a good view of who's coming and going ;-)
https://www.google.co.nz/maps/place/2+The+Terrace,+Wellington,+6011/@-4…
The problem with intervention is that its effects are so shortlived , the currency may fall , but soon recovers .
The Kiwi$ is way overpriced , its really affecting red meat exports , manufacturers and tourism , not to mention Kiwi firms competing with imports .
With regards to tourism , we are now seriuosly expensive for top end tourists.
Package tourists are still okay as the costs are all incurred upofront at home , and German backpackers ( who are quite wealthy by world standards anyway) live off spam, coke and biscuits and sleep in 20 year old campervans and its still reasonable cost-wise if you travel like this
Its our economic fundamentals and the market mechanism will probably do it for us , when everyone out there is thinking the Kiwi is a one way, and then something crops up like dairy prices falling from $6,20 (to$6,50 range ) to under $6, or an external shock .
No , Spottie you are wrong ...our interest rates are a real problem in the housing market for us Kiwis.
Wealth Asians are able to borrow at 3%pa offshore and convert to KIWI $ , and we pay 6%pa for the same Dollar .
It means that a recent wealth migrant form China can afford to pay $1,0 million for an Auckland home and the Kiwi can only afford $500k for the same property .
The Kiwi homebuyer does not stand a snowballs chance in hell at an auction
It works like this :-
If you own property or other assets in HongKong or Shanghai and you go to HSBC ( HongKong and Shanghai Bank ) at number 1 Queen street Auckland , they will lend you Chinese money agaisnt your Chinese assets at seriuosly low rates . You then convert it at a fixed excahnge rate ( no currency risk) to NZ$ and off you go the a Barfoot and Thompson Auction ( less that 200 meters away from the HSBC Bank )
Its easy as, you cant miss .......... like shooting Peking ducks in a tunnel
Spottie , fair enough , you make a very valid point , but it still remains a problem for us Kiwis , kind of like playing a game of rugby on an waterlogged muddy uneven field with a 10* degree slope all one way against us with no half time .
I think its unfair for foreigners coming here with such a massive advantage over locals , and it needs to be addressed , although I have no clue as to how one would tackle this problem
Just another suggestion, on top of the stamp duty. If they want to buy a property, their first house, they have to commission and fund a new build in the outer suburbs, no closer than 60 kms to the CBD if in Auckland, otherwise 30 kms in other centres. They can then sell it and then go wherever they like. Adds to the housing stock
There's no such thing as a fixed exchange rate between the NZD and the RMB. the RMB is weighted against a 'basket of currencies" but it is widely understood in the financial world that the RMB is pegged against the USD.
Stands to reason when you think of the fact that most Chinese savings are held in USD.....
Boatman - does that Chinese migrant incur any foreign exchange risk on that housing investment? Maybe you might assist by explaining what a "fixed exchange rate" is. I assume your describing an FX swap if so can you please explain whether:
- there's a cost to that ?
- if so what cost (is it the interest rate differential between the two currencies) ?
- if no cost, please tell me where I go get this no cost foreign currency borrowing - me and several million others have an extreme interest.
Thanks
Okay , its not fixed in the absolute sense as we would understand it such as through a hedging mechanism , but the RMB is so tightly managed that its almost a fixed currency .
Its kept weak , and it seldom moves at all .
This acts as a safety net for wealthy Chinese who borrow RMB and buy Kiwi$ , becuase of the policy of keeping the RMB way below its real PPP.
The currency risk is almost not a factor in the calculation until or if the wheels come off the Chinese economy .
In any event the whole system is prejudicial to ordinary KIWIS who are being forced to remain tenants in servitude to foreign landlords , in their own land
But currency risk is a risk Boatman, and even in the last few days the Chinese are seeing a fall in the value of their NZ asset, and this is just a mild bit of market noise on the back of the RBNZ OCR comments. A risk can be a little one, but the minute you think it's that, it suddenly becomes a big one as the NZ foreign currency borrowers discovered in the 80's. And in this instance what the Chinese are doing is buying into a historically and globally over valued housing market in a 20% plus over valued currency against their own (irrelevant the stability of their own against the USD since it's a manged peg) and it isn't going to take much of a NZD fall at some point to wipe put the small 4-5% interest advantage their play incurs for them. One day they will be handing back those formerly overpriced houses and currency to its former Kiwi owners - that's the risk and I say it's a massive one, they're welcome to it as the winners will be the non leveraged guys who pick them up.
Your example is reminiscent of the 1990's asset play by BHP where it sold its OIL assets at the bottom of the OIL cycle and siumultaneously bought Magna Copper right at the top of the base metals cycle, and almost went broke
This same mistake was followed by RIO in 2007 on the eve of the GFC who bought Alcan Aluminium for $40 billion right at the top of the Aluminium cycle. Been in a lot of strife for the past 6 years. Iron ore saved it.
Which is exactly what Americans, Europeans, and Chinese are doing by buying into NZ and AU
They are selling USD (RMB) at the bottom of the cycle while simultaneously buying NZD at the very top of the cycle
That's where the comparison ends
The only people who will be hurt and puke their assets when the cycle reverses will be those who have borrowed foreign currency (RMB) on the security of their still held foreign property holdings, converted into USD, sold USD, bought NZD, bought NZ assets
Those who have liquidated foreign assets and shifted their lives and their funds out of RMB into NZD and bought NZ residency, and NZ citizenship, and NZ hard assets, probably wont care
When it does turn, I'm not expecting any sudden rush for the exits
I agree on those last two points in particular Ionoclast, the ones that have liquidated in China and moved here won't have any specific concern because they will be funding it in NZDs like the rest of us. And yes, I doubt a rush to the door by Asians, and indeed if there happens to be one by anyone, I doubt they'll be the first to go, it will be the over-leveraged Kiwi first.
Amazing to think we are still a full 100bps below the bottom rate of 4.5% where the last cycle started in early 2000's. Plenty of mortgage specials will be around for another couple of years yet. The $3k free money is equivalent to at least 25bps off your mortgage over 2 plus years, as well as helping out banks LVR's when used to pay off mortgage.
yes no wonder the RBNZ introduced the LVR, there will be a lot of financial stress inside Auckland when interest rates return to more normal tightening levels. I expect other asreas of NZ will be doing relatively well then as the nz dollar should of dropped right off
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