RBNZ wins gong for LVRs, hiking OCR

London-based publisher names RBNZ its central bank of the year

13th Jan 15, 10:17am by Gareth Vaughan

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The Reserve Bank of New Zealand has been named Central Bank of the Year by a London-based publisher for cracking down on banks' low equity home loans and increasing the Official Cash Rate (OCR).

Whilst both moves have been controversial domestically, Central Banking Publications, including the Central Banking Journal and CentralBanking.com, says the RBNZ has been the "standout" central bank of the year, gaining its Central Bank of the Year award for 2015, which will be dished out at a London ceremony on March 12.

"The RBNZ was chosen as Central Bank of the Year after successfully using its macro-prudential powers to cool New Zealand's housing market, while becoming the first advanced economy central bank to raise interest rates in the current cycle," Christopher Jeffery, chairman of the Central Banking Awards Committee and editor of Central Banking journal, said.

The judging panel includes members of the Central Banking editorial team, plus ex-central bank governors from the journal's advisory board.

"The 'joined-up approach to monetary and macro-prudential policy, excellence in communication and governance, updated risk management, improved supervision and upgrades to security' at the RBNZ made it the standout central bank in the past year," Jeffrey said.

RBNZ Governor Graeme Wheeler was quoted saying; "I wish sincerely to thank Central Banking. It is an honour for the Reserve Bank to receive this award and humbling to receive such recognition among peers."

"2015 is expected to be another highly challenging year for central bankers. We are likely to see more quantitative easing than at any time since 2011, with associated exchange rate pressures. Markets will closely watch how central banks respond to falling oil prices, developments in the eurozone, Russia and Greece, and the implications flowing from policy signals by the Federal Open Market Committee," added Wheeler.

Reserve Bank of India's Raghuram Rajan was named Governor of the Year in the awards.

RBNZ Chairman Rod Carr said the Reserve Bank's board considers it an honour to receive the award.

“The Bank has worked towards playing its part in steering the economy on a steady path, through recovery from the Christchurch earthquakes, strong but now moderating terms of trade, and despite house price pressures, a weak international environment, and a high New Zealand dollar. At the same time, it has implemented macro-prudential policy to moderate financial stability pressures from the housing market," Carr said.

“The Bank has also taken on broader responsibilities for prudential supervision of insurance companies, and has initiated a programme to enhance the security of New Zealand’s banknotes.”

Central Banking Publications is owned by Incisive Media and specialises in public policy and financial markets, with an emphasis on central banks, international financial institutions and financial market infrastructure and regulation. Central Banking Publications was founded in 1990. This is the second year of its awards. Last year's Central Bank of the Year award winner i was the People’s Bank of China.

The Central Bank of the Year award recognises “a central bank that has demonstrated significant resolve and authority in fulfilling its mandate. Particular attention will be paid to details of pioneering policy efforts and powerful communication supporting the central bank's position.”

The RBNZ last year increased the OCR four times - between March and July - by a combined 100 basis points to 3.5%.

Since October 1, 2013 the RBNZ has restricted banks' lending at loan-to-valuation ratios (LVRs) above 80% (where borrowers don't have a deposit or equity of at least 20%) to no more than 10% of total new mortgage lending. This 10% limit excludes high LVR loans made under Housing New Zealand’s Welcome Home Loans scheme, the refinancing of existing high-LVR loans, bridging finance or the transfer of existing high-LVR loans between properties, and new residential construction loans.

Remaining within this 10% "speed limit" is a condition of banks' banking registration, or licence, with the Reserve Bank. Banks have remained comfortably below the 10% limit. The first year of the restrictions on banks' low equity residential mortgage lending saw banks' high LVR lending fall by a net $4.8 billion.

In November Wheeler said it wasn't appropriate to ease the LVR restrictions at this time.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

79 Comments

by MortgageBelt | 13th Jan 15, 10:48am 1421099326

But he will fail buy by undershooting the 1 - 3% target. http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11385…

by Zombie ponzi | 13th Jan 15, 11:30am 1421101855

Inflation has touched 4% three times in the past decade...I'm sure you were not complaining about overshooting...

by steven | 13th Jan 15, 12:39pm 1421105947

A wee overshoot isnt as dangerous as a wee undershoot.

So 0% is way worse than 4%.

PS What ever the past said, well now post peak oil it is not the future.

by Grant A | 13th Jan 15, 4:50pm 1421121032

I agree Steven, Wheeler should have correctly forecast that $40 oil price fall like everyone else. I think he must have been fixated on the peak oil theories that it just couldn't happen ?

by Plutocracy | 13th Jan 15, 5:21pm 1421122877

Increased price volatility has always been predicted near the peak through demand destruction and reduced economic activity, and higher prices bringing expensive unconventional oil into production.

I suppose in hindsight one may have postulated a relatively brief interval when conventional oil was in decline but still producing at significant quantity and the economics where such that the unconventional resources came on line to augment the supply leading to a price crash as these new resources where added to the mix.

It is the overlap of a still relatively abundend conventional resource and the unconventional resource that most likely signals the peak (see image).

As people have said, the only thing keeping peak oil at bay for the last few years has been unconventional oil from North America. Seeing as most shale companies are in the process of going bankrupt through low oil price, we'll get to see what happens to production in a year or two.

by steven | 13th Jan 15, 7:27pm 1421130462

Conventional crude oil is actually probably past its peak from the data I am seeing. What is hiding it is the institutions lumping non-conventional into the one drum. Interesting that such a big event gets glossed over and not looked for, I guess because its the death nell of being a parasite, so the parasites dont look.

by steven | 13th Jan 15, 7:23pm 1421130201

uh huh, your outlook is quite, blinkered and so yesterday. On top of that there you go mouthing off about peak oil and not understanding it at all. Actually such things have been predicted, ie greatly increased volitility and turmoil due to peak oil. So where you get your ideas from on peak oil I guess are like your economics, la la land make believe in your head. Never mind you are not alone.

PS he should also ignore the rises and drops of energy, as I keep saying to the deaf it seems, core and not CPI.

by Grant A | 13th Jan 15, 7:45pm 1421131526

You referring to me mate, clarify please - in case it was, I didnt say that there was no such thing as peak oil, its going to happen overall sometime, and in the case of conventional oil, unless theres some massive discover, we're already passed it some years back. How do you take that from my Wheeler comment, ? Other than in the short term I think its very unlikely we're going to have $40 oil or less for very long (6-12 months?)simply because there is no such cheap oil in volume that will supply demand for other than that period. Do you think youre tha only one on this planet, ot this blog that does not understand peak oil just because you are fixated on comemnting on it ?

by steven | 13th Jan 15, 8:20pm 1421133610

"I think he must have been fixated on the peak oil theories that it just couldn't happen"

just how or where you got that from then, is an unknown then.

by Grant A | 13th Jan 15, 9:25pm 1421137553

Its called tongue in cheek Steven. Bearing in mind the conventional peak oil arguments, and the fact that the new stuff being found and developed no longer has the Saudi $20 a barrell production costs, who would have put a fall to $45 a barrell into their inflation calculator ? no one and that was my point - of course we don't know what Wheeler was thinking but I'd fully expect that the RBNZ didn't forecast $45 or lower. But these things happen, markets and politics can drive prices to unexpected levels but we still get inane comments about the likes of the RBNZ and others "failing". There were other downside pressures anyway, but what will likely cause a quarter or two at least of deflation will be oil, something that the RBNZ should and will look through as its not sustainable in the medium to long-term which is what there mandate stipulates.

by steven | 13th Jan 15, 10:53am 1421099592

Currently ignoring that when other RB's raised (aka Sweden) they buggered the economy.

****plonk**** ----> bin

by Value Added | 13th Jan 15, 11:33am 1421102038

Getting an award for blocking first home buyers from entering the market and allowing investors to easily swoop in and grab them, only to rent them back to the very people who were prevented from being able to buy.

Says a lot about the world really doesn't it.

by gordon | 13th Jan 15, 12:54pm 1421106886

Some of the FHBers block themselves VA. They are not willing to knuckle down and make a concerted effort to save for their deposit. I should know as I have two of them. The daily coffee and the breakfasts at cafes come to mind. And the overseas travel and the glossy magazines. The list could go on but we know how long it is. Life has been made to easy for many of them by their boomer parents and they are not willing to cut back.

by frazz | 13th Jan 15, 1:15pm 1421108130

NZs intergenerational theft is always loaded against Gen Xers. With so many Gen Xers fleeing NZ to pay their student loans off, Baby Boomers forever have the tyranny of the majority to ensure their cradle to grave Government subsidy will never end. -

We have so much to thank Baby Boomers for. They forced social change, increased personal freedoms and demanded accountability from Government. They protested Vietnam War, feminism, nuclear free NZ and the Springbok tour, but what they failed to protect was the very universal provision of social services that set them up so well in later life.

Gen Xers were the first use pays generation. They had to pay for their education, then save up money for a deposit on a house in a property market speculated out of their reach by baby boomers while also saving for their own retirement. In short, Gen X have been treated as poorly by boomers as Paula Bennett has treated beneficiaries. Happy to benefit from universal provision, but not happy to share it, the charmed existence of the boomer hasn’t existed for anyone but them.

-See more at: http://thedailyblog.co.nz/2014/05/08/generation-x-have-been-betrayed-by…

by rastus1 | 13th Jan 15, 1:31pm 1421109097

...you are focusing on the behaviour, you need to look at the cause. Far different world than than the one I suspect you grew up in. Back track 30 - 50 yrs - things were positive, the world was getting better all the time, world wars were over, prosperity was arriving by the day, affordable housing (for many on one income). Hard work maybe, but these were positive times..

Looking around now ...... - wheres the next blast coming from...climate change, terrorism, corrupt and broke monetary system, intergenerational theft, ever increasing ppty prices, stagnant wages, job losses accelerating with technology, Chinese domination, environmental degradation, collapsing fisheries - take your pick. The youngies are just engaging in escapism, the alternative being to go mad.

by bob dringle | 13th Jan 15, 1:32pm 1421109143

a sample size of 2 isn't big enough of give an accurate representation

by Value Added | 13th Jan 15, 2:21pm 1421112061

Sounds like your kids are twenty somethings that are just living their lives Gordon - don't begrudge them that. Buying a coffee and a magazine is hardly going to make a dent in a $100,000 - because that's what you need these days.

The problem is the system that now resides in New Zealand. As one friend told me, he gets more from the capital gain on his house than he does his full time job - and he doesn't have to pay tax on it. His deposit was half what is required these days - why is he entitled to such revenue? Revenue which isn't even taxed?

Then there is the problem of people like you, people who feel they are entilted to all the benefits you've received over the years that have been taken away from us - now you've climbed the ladder you're pulling it up. You feel entitled to the tax breaks you receive and you sit back and whinge about young people while they pay all the taxes and rents that enable your lifestyle. At the end of the day, when it comes down to it, I guarantee you will fork out for your children. You'll help them with the deposit and home ownership, while those from less fortunate families cannot - continuing to grow the inequality that so glaringly divides this once great nation.

You don't feel it do you - you don't feel any pangs of guilt, or duty or patriotism, or feeling of sadness for the young people who work for a pittance and watch the kiwi dream that they've been sold by your generation slip further and further away. Nope, you and many other thousands of kiwis could not care less, because the fact is all they care about is themselves and their money.

by gordon | 13th Jan 15, 3:57pm 1421117824

Your friend has not made anything until he sells it VA. China is slowing down so watch this space. No market goes up in a straight line.

I have never had any rentals, have retired at 58 after paying a lot of tax and do not need National Super which is due in 2020 but might not exist. The secret. Paying my house off and making provision for retirement the day I started working at the age of 28.

you sound like a very bitter XY or a sad boomer who never saved.

by Grant A | 13th Jan 15, 5:04pm 1421121885

Throughly agree with your comment Gordon, in fact what you were responding to is typical of the naivety that was around in the likes of the US & Spain pre-2008. There is an awful lot of the baby boomer generation who have never owned rentals, who made paying off their mortgage their no. 1 priortity over travel and other luxuries, and in many cases have been in the same house for a couple of decades plus from which the equity will no doubt eventually be passed down to generation X,Y,Z, who in the case of my kids, and possibly yours, have had a considerable more comfortable life style to date than I did at a similar age.

by gordon | 13th Jan 15, 5:17pm 1421122630

Grant , even though I do travel I think it is really just a very sophisticated method of hoovering large amounts of cash out of travellers pockets, many of whom come home not having had a pleasant experience. At the end of the day you have nothing to show for it but memories. Does it make us happier? Are we better people for it. We have a fantastic country that many of us have not seen. Why the need to go north and see things that are not as great as what is already here on our doorstep? They do not come South like we go north.? It is like we need to travel to come of age. Are we that inferior as a country?

by frazz | 13th Jan 15, 7:27pm 1421130451

We Baby Boomers have one final, selfish act before we go, a new study suggests. We’re not going to leave you an inheritance.

According to CBS Moneywatch today, the number of Boomers who think leaving an inheritance is important has plunged in the last year to about 46 percent. Previous surveys indicated two-thirds of Baby Boomers thought it important to leave their children and grandchildren some money.

Apparently, the oldsters are concerned you’ll just blow it. Assuming they can’t take it with them, Boomers will blow it themselves to prevent that from happening.

That’s so Boomer

by Value Added | 13th Jan 15, 6:18pm 1421126316

You started working at 28? That's not very diligent Gordon.

I am most definitely not a baby boomer. I'm an XY (call me bitter if you like - I prefer pissed off) who has worked hard since I was 15, traveled as part of my career and always saved. I returned to NZ after the 20% LVR was installed and despite having enough to buy, I was told by my bank that I couldn't get a mortgage because I'm a freelancer - come back in a year. In that year, entry level houses in Auckland went up about $50-60,000. I can't live anywhere else because my Auckland based father is ill.

I can afford to buy property in Auckland but it doesn't seem to add up. Half a million for a run down house in a dangerous suburb like Kelston or Otahuhu? I wrote my comment because I see good people struggling and I know that many of my friends will probably never get to own their own home. They're not lazy, or extravagant - they're just ordinary people, teachers, hairdressers, small business owners.

If you don't have any rentals why do you defend this system that rewards landowners and investors over ordinary kiwis?

PS I get it, you studied until you were 28, maybe a doctor etc.

by gordon | 13th Jan 15, 10:14pm 1421140487

VA you don't get it. I agree with you. I used to deal with multiple property owners. They are generally people who don' t want to work like normal people. They usually have average incomes or rather the ability to only make average incomes and therefore resort to buying rentals to get ahead. Some are also very greedy and don' t know when to stop accumulating. They have more property than they need which of course has caused shortages and market price increases. On the other hand I only said some X and Y waste the ability to save a deposit. Some not all. Overseas travel would be the worst culprit here . They cannot resist it but complain when house prices increase back home when swanning around Europe. I started as a professional at 28 after nine years of tertiary study. I travelled for the first time to Australia when I was 42. Is it not better to set yourself up first before carrying out expensive pastimes like travel?

by DMode | 13th Jan 15, 3:57pm 1421117840

They don't mind the collateral damage so long as their dynasties remain. Hopefully I can afford my gated community before the comeuppance begins. Unless the security guards turn - best pay them well

I'm gunning for 100% inheritance tax - level the playing field for all sub-18 year olds and then see who's best. Better that than giving entitlement to the placid

by Grant A | 13th Jan 15, 5:11pm 1421122307

DMode - whats the basis for you deserving some of my kids inheritance ?

by DMode | 13th Jan 15, 9:27pm 1421137620

What have they done to earn it. Was brought up that you work you get results, at least that what's they say. Instead we should teach in school the reality, you can get a windfall and not have to work for it. And too bad if you're not lucky to get a loaded parent.

by Grant A | 13th Jan 15, 9:39pm 1421138382

What have BB's done to earn their wealth you mean, you are joking ? For many of us 60-80 hour weeks for some decades - I suspect youre making gross generalisation about house price inflation. Inflation has been with us more more than 100 years and will be in the future as well - gross generalisations about any generations, including some BB's opinions about generation, X,Y&Z is absolutely pointless, but if you think 100% inheritance tax is the way, just keep voting for a party that will tax the rich 75% of their earnings to ensure redistribution, a big winner for France right ?

by raegun | 14th Jan 15, 7:52am 1421175133

I wish some people would begin to understand that the issue is not wealth distribution after the fact it is a better distribution of it before, via better wages and jobs. If less goes to the wealthy in the first place and more to those on the bottom in the form of earnings they can actually live off, then there will be little need to be putting hands into the pockets of anyone to top up the current lousy wages that many have to try to pay exhorbitant rents with as they cannot afford to buy because the wealthy have locked them out of the market.

by Grant A | 14th Jan 15, 7:57am 1421175465

I agree Raegun but the problem is that has been the commendable objective of much of society for hundreds of years. Yet despite a multitude of different political systems and experiments on both ends of the spectrum, no one has figured out how to achieve it , and unfortunately certainly won't in your or my life times.

by KH | 14th Jan 15, 9:49am 1421182161

I think that the comment of the day raegun. " Wealth distribution before.....".

Grant agrees but I am not so sure about his view that change in impossible. What has happened in the past is more in cycles. Look at the NZ land reform in the 1890s, a massive change in the ownership of agriculture. Which created wealth for us all for about a 100 years. It's being rapidly eroded now, but highly likely to come back, once we wake up politically.

by Casual Observer | 14th Jan 15, 11:25am 1421187948

KH but highly likely to come back, once we wake up politically. But will it? We didn't have globalisation on the scale we do now. What happens offshore affects NZ as much or more, than what happens here.

Against this background we now a significant societal change in which people expect the government to provide for them via a benefit if they choose not to work (multigenerational benefit families), choose to have children (multiple) with government providing their income. Back in 1890 people/families took responsiblity for themselves/each other-there was no safety net. Consumerism is now a force to be reckoned with. For many, it is about what we want rather than what we need.

The issue for NZ in the future will come when our indigenous people become outnumbered by other non Europeans and we are still processing Treaty claims which seems to be never ending. New Zealand has a changing face of cultural diversity which will has the potential to cause real ethnic tensions in the future. We are after all a very small nation, numbers wise.

I'm expecting Fonterra to drop it's milk price paid to farmers and go in to the 2015/16 season with a low advance rate (though their June announced predicted payout seems to have some political agenda so can't be taken too seriously if it is higher than expected). This will mean 18-24months of austerity for dairy farmers. So hold on to your hats NZ Inc you could be in for a rough ride - unless you are selling a house in Auckland ;-)

by KH | 14th Jan 15, 11:39am 1421188799

Casual. I guess we might not wake up politically at all, but it has happened in the distant past. The current left politicos are not up to the mark. They need to work out that it's not about jiggling tax rates.

And I can't see politicos of any brand who see the place needs to be arranged in the interests of the inhabitants.

by Plutocracy | 13th Jan 15, 5:26pm 1421123218

Talk about patronizing and out of touch with reality. Times have changed a lot since you were a kid. I agree with the sentiment of the posters above who replied to you. There is quite the generational split going on in NZ.

by Grant A | 13th Jan 15, 5:37pm 1421123858

They have changed Plutocracy, and they changed for my gernation over our parents, and will for your kids, what's new, but what part do you think is patronising out of touch?. I travel alot these days as well but not until my 40's and a mortgage pretty much paid off i.e. I managed to get through life without having done an OE - that said I encouraged my son to do one when he left uni (I was there to assist) but he preferred to get a job and establish himself. That was his call but he's now well ahead fianncially of his friends of a similar age and seemingly no less worldly.

by jamesy | 13th Jan 15, 7:12pm 1421129544

Ah, yes, these old tropes again.

If only they would stop drinking lattes and cancel Sky. Truth is, all these little gems of wisdom passed down, make a marginal difference, if any.

My partner and I are FHBs who made it into ownership.

Three years of saving, living like we worked at Maccas.

Helps that we were on a combined income of ~180k and living with parents.

I'm well aware how uncommon that is.

But that is what it takes to get into your own home these days, in this market, unless you have parents able to help out, like it seems you are able.

Wasn't even close to the same for your generation, mate, so get off your high horse, stop generalizing, and go back under the bridge.

by rjf | 14th Jan 15, 9:52am 1421182330

Well said. Thirty years ago most people, even with meagre incomes (even single incomes!) could buy in Auckland. It's a different game now, from our generation only those with exceptional incomes (or very generous parents) are able to buy.

I get tired of the old Sky/Lattes/iPhones/low interest arguments trotted out by the BB generation.

It's a cop-out, they don't want to accept that things are much, much harder now. Houses are now 8+ times the typical Auckland income, that's unprecidented.

by gordon | 14th Jan 15, 10:27am 1421184438

The trouble is some of you want to live like your parents straight away and are not prepared to look at houses in less desireable areas in Auckland. Even us BB's started off with the humble three bedroom home while on the way to better housing as we got older. If you want to live in Auckland you need to start off in an appropriate house that will probably be further out from Auckland central than you would like but that is what happens all over the world in large cities.

by Grant A | 14th Jan 15, 6:54pm 1421214855

Jamesy you'll note mate I'm the one who been saying don't generalise about the generations or individuals in those generations. Check your history and you'll find its never been easy for a FHB in NZ. Yes, income to house prices are now ridiculous especially in Akld, indeed unsustainably so in my opinion, but credit is readily available from banks (you damn near had to be Solicitor with trust funds held at a bank to get Mortgage at some points on the past), and interests rates are hugely cheaper (try 20% versus 5-6%). So it's never been easy for any generation and any FHB who got into a home generally worked and saved damn hard to do so.

by speckles | 14th Jan 15, 8:38pm 1421221124

The old boomer attitude, sure everyones circumstance are different however to compare and say it always has been hard...is simply perverse.

I'm in my early 40s, we purchased our first place together in 95 with a christmas holiday pay, not auckland but in NZ second largest city at the time...yeah it was real hard..I wish people would be fair how much harder it is today..even most NZ CEOs today would struggle to buy a good house with their holiday pay LOL.

by Mike B | 13th Jan 15, 11:48am 1421102886

Oh how the Rich, Famouse and Powerful like to wallow in thier own self gratification.

An Emmy for Central Banks. Wheel out the Oscars for bankers and more justificationj for bonuses.

Blah, Blah, Blah

by MortgageBelt | 13th Jan 15, 12:00pm 1421103642

Well, they are executing the plan beautifully: decimation of regional economies, slow/no wage growth, mega-Auckland, sale of businesses/farms to foreigners, consumer/household recession, floating mortgage rates of 6.5% in the face of global recession, increased immigration, ..... Population subjugated, World Govt Next .....

by steven | 13th Jan 15, 12:47pm 1421106424

So they get to govern a huge stinking pile of poo...that they wont be able to hold together anyway.

yes that makes sense...

;]

by Flatcap | 13th Jan 15, 12:57pm 1421107048

So an award for being the least crap? Not glowing praise

by Stephen Hulme | 13th Jan 15, 1:56pm 1421110582

What!!! - just one step ahead of the BoE?

Previously secret documents reveal how the Bank of England (BoE) was ill-prepared for the 2008 financial crisis, partly because its governing body was made up of “cheerleaders” for the governor's policies. Read more.

Has anybody undertaken a suitability test of the RBNZ directors, or is it just a case of choosing cronies of the incumbent cabinet ministers? They, at least, should be able to display an ability to create a zero coupon curve and the associated rate out to the 10 year term and thus derive the semi-annual BEY swap rate. That would be a starting point in an endeavour to reduce our banks' overweight derivative exposure, hence counterparty risk, probably beyond RBNZ resources to contain. This alone might give pause to the execution of an OBR event if an unexpected derivative counterparty liquidity/solvency issue demanded as much.

by Triple | 13th Jan 15, 4:06pm 1421118408

Hi Stephen, i have a question and you seem to be the man who knows his banking stuff.

Is there anywhere in NZ where i can park some savings which is not subject to OBR?

by steven | 13th Jan 15, 4:12pm 1421118734

cash and cash like things.

by Triple | 13th Jan 15, 4:18pm 1421119122

Thanks.

I assume that means all the banks are required to be pre-positioned for OBR?

I'm also assuming you mean - gold, silver, diamonds, etc.?

I was hoping there might be something clever i've missed...

... and that not being the Auckland housing ponzi scheme

by steven | 13th Jan 15, 7:42pm 1421131327

The banks are doing diddly mate, anything that reduces ones bonus isnt contemplated and in fact actively avoided IMHO. If there is an OBR event I cant see it being a small one, ergo no bank to my mind is safe as they are in effect a mono-culture of risk to my limited eyes.

Cash is cash. Cash like things are items described as highly liquid and can be converted quickly into cash (or say are suitable for barter). Like I said earlier if I had $s I'd be asking professional advice on how to do the above, I dont, Im a mortgage holder and debt is dangerous, to be got rid of first.

If it is your scene to buy precious items, as you think its going to be that bad, OK, I'd do it only with cash so you cannot be traced by Govn's desperate for foreign exchange. The Q is is that as paranoid as it sounds? The US govn of course did just that in the 1930s.

by Triple | 13th Jan 15, 10:02pm 1421139734

Obviously i understand what cash can be used for Steven or i would be like most people with nothing but debt.

Cash does not earn interest - and some people have savings significant enough that that alone provides enough income to live on. Safe deposit boxes dont pay interest. So if the money sits there for too long then you're losing a lot.

BTW, you talk like you really understand cash and have experience with it - have you ever gone into a bank and tried to withdraw say 250K? How do you think they respond?

by Triple | 13th Jan 15, 10:05pm 1421139905

BTW - my banking questions are directed to Stephen Hulme.

by steven | 14th Jan 15, 7:35am 1421174106

Lets look at what I understand pretty well, which is engineering, thermodynamics and some math. Our entire global economy is based a) growth, b) on fossil fuels the most important of which is conventional crude oil. The output of which per day has now almost certianly peaked. c) Uses a factor more to grow, so as an example our economy to grow at 4% uses 2.5% (ish) more energy to do so.

Since we cant get any more per day of cheap energy a nd in fact less and maybe 4%~8% less per year what does that do to our ever expanding economy?

Answer it has to cause it to shrink and seriously so. What does that do to cahs and investments?

Now consider that money, cash, gold and debt, is an IOU or proxy for work, or energy.

Next we live on a finite planet and yet have expotential growth, mathematically that is an oopsie.

So do I understand the ins and outs of finance? no not like a more few in here, but I do have no illusions about what cash really is at a fundimental level which is an IOU for energy and if there is not the energy the cash, debt, gold is worthless.

So cash where you always have inflation loses value, sure, but in a traditional deflationary environment it gains value. The Q is will is gian buying power/value in the event that is unfolding before us?

No one yet in here has been able to answer that for me, or indeed elsewhere to my satisfaction. What we are going into is an unknown. What I do expect is assets that are mostly already hugely over-priced even before peak oil and whos intereest/output is based on fossil fuel are going to be worth a lot less as there will not be the return, that signals wealth destruction on a massive scale.

So knowing how to deal with complexity of a financial system that is/was parasitic, probabaly a smoke and mirrors ponzi scheme is probably moot.

You asked a simple Q obviously now leading, but are right I should have left you to it. Or maybe the above might hint at a different path to protect your "wealth" or maybe its no more than ill gotten gains. We'll get to see.

by Stephen Hulme | 13th Jan 15, 5:09pm 1421122173

Hi Triple

You may wish to consider purchasing NZ Government debt (T Bills, Notes, etc) and register ownership at an independent repository A/C such as the NZDMO sponsored computershare example.

This procedure may necessitate opening a fixed income brokerage account unless you have one $million multiples to place NZDMO tender bids directly through a bank treasury operation.

by Triple | 13th Jan 15, 6:45pm 1421127907

Thanks Stephen, I appreciate your reply.

I'm not sure i completely understand it but i will do some research and hopefully it will make more sense. I've asked my accountant and lawyer where i can safely put dollars and they both came up with nothing. I even asked a friend who is a bank manager and she replied, "wouldn't have a clue, sorry".

OBR is something which concerns me.... many people don't seem to care (predominantly i believe because they have an abundance of debt). Do you think i am worrying over nothing? Is OBR implementation a significant risk?

by Austin Vane | 13th Jan 15, 6:55pm 1421128547

Tripple,

You can also buy Kiwi Bonds without the need for a bank or broker.

http://www.nzdmo.govt.nz/securities/kiwibonds

The bank's default is the true risk to be concernerned about.

OBR is a mechanism for enabling the RBNZ to take over a failed bank and allow depositors to make small withdrawals while it liquidates the assets.

Some small finance companies/credit unions are not subject to OBR, but if they fail then your entire account will likely be frozen until the assets have been liquidated and secured creditors paid. And you still may not get all (or any of) your money back.

by Stephen Hulme | 13th Jan 15, 7:15pm 1421129750

If you want to visit the avenue of derisory use of money rates, maybe it is better to consider Public Trust, which is government guaranted - view rates here. I think I still have around $17,000 kicking around on call to keep the account open from a former time when they were competitive deposit takers.

by Triple | 13th Jan 15, 7:24pm 1421130289

I enquired with the Public Trust in 2013. I was informed by the Orewa Manager that, "Public Trust does not have any accounts which are not subject to the OBR policy".

So that door is firmly closed.

by Stephen Hulme | 13th Jan 15, 7:40pm 1421131250

Did you not read the guarantee link?

Public Trust is a Crown entity established under the Public Trust Act 2001.

Money in your term deposit, on call account or prepaid funeral trust (where funds are invested in the Funeral Trust Cash Fund) is held in Public Trust's common fund ("Common Fund").

Capital and interest in the Common Fund is guaranteed by the New Zealand Government.

A guarantee of capital in the Common Fund is provided under section 52 of the Public Trust Act 2001 and a guarantee of interest in the Common Fund is provided under section 65ZD of the Public Finance Act 1989. Neither are time limited.

The guarantees are provided by the Crown; Public Trust is a Crown entity so is related to the guarantor.

The guarantees are unsecured and unconditional.

OBR = Open Bank Resolution

by steven | 13th Jan 15, 7:44pm 1421131472

Nice one.

by Triple | 13th Jan 15, 9:53pm 1421139191

Bite me!

by steven | 14th Jan 15, 7:11am 1421172713

There seems to be a conflict of what you have been told and what appears to be written down legally. Finding the true position is actually very important I suggest so provide some evidence please. That finding makes a huge differnce on whether your money is safer, or not.

by Triple | 13th Jan 15, 9:52pm 1421139165

Stephen Hulme i do understand what OBR stands for but thank you for your explanation.

Obviously clarification is required. In 2011 a family member died leaving an estate where the Public Trust were the executors. There were considerable funds which needed to be invested but it was not untill late 2013 when probate, litigation, etc, ended and disbursements were possible. I enquired at that time (on behalf of a family member) with the manager of the Orewa Public Trust (Angela Macpherson) regarding OBR. She replied that she apologised for the delay and needed to check with their investment team which are based in Wellington with their Corporate Office. The answer i recieved in the end was:

"Public Trust does not have any accounts which are not subject to the OBR policy."

Therefore you can read their web site links all day long (and believe it if you want to) but i got this from their head office.

Do you think you know more about the Public Trust than their Corporate Office know about their own organisation? I think not - the link is rubbish. They tried that BS on me at the beginning but when i pushed and pushed for a clear answer, thats when they came back with the above quote.

by Stephen Hulme | 13th Jan 15, 11:40pm 1421145653

Can you produce written confirmation of which you believe to be true?

by Triple | 14th Jan 15, 9:44am 1421181858

I still have the email thread on my PC if that is what you mean.

First PT said "deposits held in a Common Fund are subject to OBR, however those funds are subject to a govt guarantee viz". Then i replied with the question of "why is OBR required if the funds are govt guaranteed?"

The manager couldn't answer that question and came back with all PT accounts are subject to OBR policy.

If i am wrong then that is fantastic - but that is what PT told me via an email.

by Stephen Hulme | 14th Jan 15, 10:07am 1421183255

Thanks. As an aside the RBNZ can only impose OBR upon those institutions for which it has legal oversight - according to an RBNZ official Public Trust is an institution beyond the regulatory control exercised by the central bank.

by Triple | 14th Jan 15, 10:46am 1421185565

Could PT voluntarily offer to pre-position itself for OBR? (that's not imposed...)

Eitherway, it sounds like you may have your own contacts with PT which may provide different advice. Perhaps it's worth you also checking?

by Phil | 22nd Jan 15, 10:22am 1421875320

Hi Triple,

There's a couple of things going on here that are not well explained in the information Public Trust (PT) has given you, which you have then summarised here.

As Steven points out, only banks are required to be prepared to implement OBR, in the event of a failure. If you deposit money with a bank, then the OBR policy and haircut may be applied to it if the bank fails.

PT is not a bank. If it failed it would not apply an OBR haircut to your investment with it... but it could do a lot of other things with your investment!

However, PT doesn't just leave your investment sitting in a corner gathering dust. It "re-invests" that money in other assets like mortgages, corporate bonds, and bank deposits. Any funds PT deposits with a bank in NZ are subject to OBR, exactly the same as if you or I had deposited those funds directly ourselves.

by Triple | 22nd Jan 15, 12:07pm 1421881652

Now that's an answer that makes sense!

Good man - thank you for that explanation Phil.

by Triple | 22nd Jan 15, 12:18pm 1421882326

One other question Phil.

Do you know whether PT's 'govt guarantee' means the govt would reimburse losses (to investors) which were a result of PT depositing investors funds into a retail bank where OBR was executed?

Would the govt. compensate investors for their loss due to PT's investment choice and the subsequent OBR haircut??

by cowboy | 22nd Jan 15, 10:47am 1421876871

I'm very wary of the Public Trust

They have a very bad reputation for being bureaucratic paper babies of the worst kind.

With zero true transparency or accountability because of their government assocaiation.

by Triple | 22nd Jan 15, 12:26pm 1421882800

You're correct to be wary Cowboy.

They offer a "free Will" up front (which might seem great at the time) but the beneficiaries get a world of pain at the other end [NB. PT's free Will carries the catch that they are the estate executors]. And PT are not cheap and not fast! They gobble up a big chunk of most estates while acting as 'executors'.

Personally i think it's a rort.

by Triple | 13th Jan 15, 7:28pm 1421130491

Thanks Austin, i'll look into the Kiwi Bonds option.

by Stephen Hulme | 13th Jan 15, 1:20pm 1421108401

LOL - I suppose this is a step up from joined up writing.

by Henry_Tull | 13th Jan 15, 4:10pm 1421118605

how does this rank against the Eeromoney awards

as an aside, hats off to the Canadians, they won best web site of the year..... selfies all round by the looks....

by Stephen L | 13th Jan 15, 4:24pm 1421119499

It is not always entirely clear to me who the Reserve Bank is acting for. Is it NZ Citizens, present and or future? NZ residents- a slightly different group? NZ Financial Institutions- so really Australian banks? Investors and owners of assets in NZ, whether resident or not?Global citizens or global investors?

The point to the question is that global central bankers will likely consider global effects, and wish that all global central banks did the same.

Game theory though suggests each country's central banker will look after their own country first in a beggar thy neighbour kind of way. The QE pursued by many in the currency wars of the last few years is evidence of that, as is the QE resisted by Germany.

By this hypothesis, it is more than possible that the RBNZ is optimising our circumstances for foreign investors, but potentially at the expense of our own trading industries, or the long term wealth of our citizens.

A test would be whether those appointing central bankers in other countries would appoint a Wheeler equivalent, and the likely answer is "No", because their sovereignty would be lost.

by Champagne Charlie | 13th Jan 15, 5:29pm 1421123383

Absolutely spiffing ....say what ol' boy !! ...an award none the less for the good ol' boys down in the windy (not just climatic reasons - haw haw) city at the RB ....absolutely thoroughly well deserved ...keeps one "rolling in the clover" haw haw haw ....in more ways than one ;)

Kudos to Mr Wheeler et al .....I am squirming with delight in my King Louis XIV leather bound chair as I write this.... while the warm Pacific sun streams through the bay window at my Kaanapali villa.

A big "Mahalo" to all you mortgage serfs there "downunder" as you plebs like to call the "land of the long white cloud (of financial enslavement - haw haw) ....keep those mortgage interest payments rolling in to muah !! ...and a big "gratias ago tibi magnus" for keeping one rolling in it !!! .....haw haw ...and a double haw haw (for effect)

by offcut2 | 13th Jan 15, 6:12pm 1421125964

Cover of Time magazine next perhaps? Oh hold on wasnt that some Greenspan dude. Some maestro he turned out to be.

The damage done by Wheeler and his ilk takes time to show, but the shambles is baked in. Soooo fixing and balancing the spreadsheets aint the same as fixing and balancing the real economy. The Wheeler 'twist' is alienating the FHB. The same FHB who will be expected to be in a position to support the 'Wheeler' generation in their dotage. Or will it be robots?

by PeterPen | 13th Jan 15, 10:43pm 1421142238

I have always been saying that the RBNZ is doing a good job, so I agree with the award.

Of course, not everyone can be content. I still maintain that if the RBNZ had not intervened, FHBs would be even more priced out of the market.

The problem is much more one of government. Why is John Key not investing in the creation of modern industries that create high paying jobs for young people? Why is John Key not untangling the local government mess that makes construction and rates too expensive?

by waymad | 14th Jan 15, 9:54am 1421182444

The LG bit.

The core reason that central gubmint won't touch local gubmint is that the latter is a tar-baby.

by Halfway To Paradise | 14th Jan 15, 1:10pm 1421194244

Isn't it about time the government took back controls of managing inflation etc. We dont get to vote for the bank RBNZ managers. At least if the government manages it or mis-manages then we can vote them out.

It is the governments job to manage the economy and that includes inflation (or lack of).