Journalists have a yarn about immigration settings being in flux, who will feel the pinch of tighter mortgage lending restrictions, and next Wednesday's big interest rate decision

Journalists, Bernard Hickey and Jenée Tibshraeny, discussed the news of the week on a podcast posted on Bernard's blog, The Kākā.

They discussed the Government’s decision to let horticulture and viticulture workers from Samoa, Tonga and Vanuatu into the country without quarantining, against the backdrop of its supposed immigration "reset” and a tighter-than-expected labour market.

On the one hand, the Government is signalling businesses need to rely less on low-skilled, low-paid migrant labour, but on the other hand, it’s making concessions for the Recognised Seasonal Employer (RSE) scheme.

Bernard noted how this was seeing it come under fire from businesses for being accommodative of the horticulture and viticulture sectors, not other sectors crying out for migrant labour. Jenée believed making the change would’ve been relatively easy, as the scheme is established. The Government also made the argument it provided the Pacific with economic support.  

Bernard and Jenée noted how when the Government started signalling a shift in immigration policy, unemployment was forecast to be much higher than it is now.

They were of the view that while the environment in which immigration policy is being made is evolving, people need to be given some certainty.

Bernard and Jenée also discussed the Reserve Bank’s (RBNZ) proposal to tighten loan-to-value ratio (LVR) restrictions for owner-occupiers from October 1, as well as the Government’s decision to give the RBNZ debt-to-income tools.

Jenée pointed out how Finance Minister Grant Robertson waited eight months - during which time house prices sky-rocketed even more - before giving the RBNZ the greenlight to start designing a tool to restrict mortgage lending based on someone’s ability to service debt.

Bernard noted it’s often first-home buyers who don’t have as much income compared to the debt they’re seeking, and have relatively small amounts of equity, so the restrictions will hit them from both sides.

Bernard and Jenée said the direction the Government gave the RBNZ to effectively not harm first-home buyers in the way it fulfils its financial stability role, was proving well and truly second tier to its mandate to keep the banking system stable.

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The pair talked about the RBNZ’s Monetary Policy Statement due to be released on August 18.

Bernard reiterated his view that the RBNZ should hold off raising interest rates until both consumer and wage inflation are sustained at a higher point. He was wary of the RBNZ tightening monetary conditions too soon, only to have to loosen them again - as it’s done in the past.   

Jenée questioned whether this time might be different, because the amount of monetary and fiscal stimulus provided by central banks and governments around the world, in a relatively short period of time, has been seismic.

Bernard made the point money isn’t cycling through the economy as quickly as it did in the past.

The pair also discussed an opinion piece Jenée wrote a few weeks ago, raising concerns over how the poor are to pay the price for making the wealthy wealthier.

She didn’t want to under-state the significance of the economic response to COVID-19 protecting the labour market, but worried low-income people who don’t own assets, and thus didn’t benefit directly from low interest rates, will now be hit disproportionately hard by higher consumer inflation.

Listen to the discussion in full here.