We are all still busily talking and speculating about how high the Official Cash Rate (OCR) will go.
But what happens when it hits the top?
It seems to me that there's a forming assumption that interest rates only bite while the OCR is still rising.
And then once the OCR has reached its peak in the cycle, then interest rates will soon start to subside.
Well, that's not how the Reserve Bank sees things, I'm sure.
However, it may well be how the markets and the public view matters.
Which is where it could all get pretty interesting.
I am of course jumping the gun a bit at the moment talking like this, but I see a bit of conflict potentially ahead between what the RBNZ wants and what the marketplace delivers.
In short, we could see a situation developing a bit down the track where wholesale interest rates are falling and mortgage rates start to follow suit - and the RBNZ will not be pleased.
To give this all some context, at the moment the Official Cash Rate is sitting at 4.25% having been hiked in increasingly large (last one 75 points) increments all the way up from 0.25% as of October 2021.
The RBNZ has its first review of the OCR for the year (and first since November 2022) on February 22. At its last outing in November the RBNZ was extremely 'hawkish' and it raised the OCR by the aforementioned 75 points. The reason for the hawkish mood was that November's review followed closely on from September's inflation figures, which while showing a slight decline in the rate of annual inflation to 7.2% from 7.3% previously, were much hotter than expected - particularly the domestically generated inflation, which is what the RBNZ is targeting with the OCR.
The clear indication from the RBNZ was that it would again hike the OCR by 75 points in February, taking the OCR to 5% and with a likely peak of 5.5% to be hit by the middle of the year.
Sure enough, market pricing via the wholesale interest rates moved to pretty much 'price in' a 75 point rise. But three months is a long time between OCR reviews. In the meantime December quarter inflation figures came in lower than expected (7.2% again) and unemployment, at 3.4% was higher than expected. These things plus a few other signs that steam is coming out of the economy have seen market expectations move more toward a 50 point OCR rise this month, taking it to 4.75%.
Market expectations of where the OCR peak may be have now settled to about 5.25%, while some economists are suggesting 5% will do the trick.
What this all means is that we may now be getting toward the OCR peak and possibly sooner than expected. We might possibly hit it as soon as April, which is when the next review is after the February one.
So, maybe we will have 'peak OCR' in a little under two months' time. What then?
My answer to that is that once the perceived top of the rate hiking cycle has been reached, that's when it gets quite tough for the RBNZ.
It seems to me, rightly or wrongly, that there's a perception out in the populace that the OCR is only 'working its magic' when it is being hiked. So, once it has hit the top, down it starts to come again and we all go back to where we were before, 2% to 3% mortgages and 30% annual house price inflation. The good old days.
Except I don't think the RBNZ quite sees it like that.
It might seem to be stating the obvious, but an interest rate hike is not just having an impact at the point at which it is hiked. If your mortgage payments go up $500 next month, well they'll still be that $500 higher the following month as well. And the month after that etc. The financial pressure stays on, whether overall interest rates are still rising or not.
It is not necessary for the OCR to be continually hiked in order to have a restricting impact on spending and the economy.
The RBNZ and economists like to talk about the 'neutral' interest rate, an unobservable but rather crucial thing. The neutral rate is in Goldilocks terms neither too not nor too cold, it is the interest rate level that is neither stimulatory nor restrictive.
Till recently the RBNZ has believed the 'neutral' rate to be about 2%, but indicated in mid-2022 that the rate was now likely higher. It hasn't yet come out with anything definitive on where it sees the level now - I'm rather hoping it might say something about the subject in its February Monetary Policy Statement - but the indications coming out of the bank late last year was that 'neutral' might now be equal to about 3%.
This may seem esoteric, but it is important. It all means that if the OCR is above 3% then the current monetary policy settings are restrictive. If it is below 3% then the settings are stimulatory.
Now, regardless of whether we see the neutral rate being 2% or 3%, we can therefore all agree that when the OCR was sitting on 0.25% - as it was from March 2020 to October 2021 - this was as stimulatory as hell.
With a current OCR of 4.25% monetary policy settings are most definitely restrictive, in line of course with the efforts to slow things down and curb inflation.
So, if the OCR peaks somewhere around or above 5% it will be more restrictive still and it will continue to be restrictive whether it then goes any higher or not. The OCR will only get less restrictive once it's reduced from those levels.
This needs bearing in mind.
In its last Monetary Policy Statement issued with the OCR review in November 2022, the RBNZ forecast that, yes, the peak OCR would be reached mid-2023 - but our central bank was indicating that the OCR would STILL BE ABOVE 5% in March 2025 - more than two years from now.
That's right, the RBNZ sees interest rates going up a long way - and then staying there. It doesn't see them falling quickly.
Now, I'm labouring that point because I'm not sure the markets and the public see things that way at the moment. I suspect there's a school of thought that says: "Get the peak OCR out of the way and then let's see interest rates sinking again."
Okay, you might argue that it's what happens with the OCR that's really important, not what the public and markets think. Well, yes...and...maybe no.
Ultimately the level of our mortgage rates will be set based on what the banks are having to pay for funding through the wholesale markets.
For example, mortgage rates were already well and truly on the rise by July 2021, well before the RBNZ officially began the rate hiking cycle in October of that year. The reason the mortgage rates had already risen was because the wholesale markets were rapidly rising in response to the inflation spike - and therefore the costs to the banks had already risen.
This could all happen in reverse. Quite soon. The markets love to second-guess. Once the anticipation is in the markets that peak OCR has been achieved then the speculation will immediately be about when rates are going to come down. This in turn may well lead to falling wholesale rates - and therefore the banks, for whom mortgage business is a bit quiet at the moment, will very likely start pushing mortgage rates down in competition with each other.
What we could therefore see is sometime in the not distant future - maybe the middle of the year - a situation in which the wholesale interest rate markets are effectively causing an easing of monetary conditions; before the RBNZ is good and ready for such an easing.
The problem for the RBNZ will then become: How does it convince the markets and public that it is deadly serious about keeping interest rates at high levels, if it is not actually increasing them?
From the RBNZ perspective, the efforts to get inflation under control could be mucked up if there is a general easing of monetary conditions and homeowners are getting mortgage rate relief (and therefore more cash to spend to re-inflate the economy).
This is going to be an interesting one to watch as it plays out.
We are not there yet, but I'm convinced we will see this kind of scenario develop quite soon.
How the RBNZ reacts will be pivotal. I'm sure it will want to see restrictive monetary conditions continue for two years, regardless of whether interest rates actually go much higher or not from here. But the markets might have different ideas. Something would have to give.
*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.
128 Comments
We're so reliant on tax-free capital gains for our financial well-being that we treat them like a god-given right.
Any fall in asset prices must therefore only be temporary, because the alternative would be simply unacceptable. All we have to do then is wait patiently for normality to return - don't lock in those losses! - and we will all be back on the path to prosperity once again.
Market capitalization isn’t “wealth.” It’s the latest price, times shares outstanding. Blotches of ink on paper. Flashing pixels on a screen. If a dentist in Poughkeepsie buys a single share of Apple at a price that’s 10 cents higher than the previous trade, $1.6 billion in market capitalization emerges from thin air. If a single share trades 10 cents lower, $1.6 billion evaporates just as quickly. Whatever happens, every security in existence has to be held by someone until it is retired. Ultimately, the wealth inherent in a security is the future stream of cash flows it will deliver to its holder(s) over time. Price fluctuations don’t change those underlying cash flows. They just provide opportunities for the transfer of savings between investors. High valuations favor the sellers. Low valuations favor the buyers. Investors have never paid higher prices for those future cash flows, or accepted prospective returns so low.
Put simply, the bubble hasn’t changed the wealth, and a collapse won’t change the wealth. What will change is the market cap. I suspect that the erasure of market cap in the coming years, and possibly the coming quarters, may be brutal. Still, no forecasts are required, and our own attention will remain on observable valuations, market internals, and other factors. Meanwhile, even if an investor sells at these extremes, the only thing that will change is who holds the bag. Link
That's true, but at the end of every chain of house sales (or net new investment in the markets), is someone walking away with real money, and some middlemen walking away with their cut. The vast majority of the extra $100bn we now have sat in term deposits, current accounts, and savings relative to 2016 has come from new mortgage lending exceeding mortgage repayments. There's always someone at the top of the ponzi.
But what does that "real" money buy in the already bloated asset casino?
Life at the bottom of NZ’s richest town: Buyers in tears, families at breaking point
Life at the bottom of NZ’s richest town: Buyers in tears, families at breaking point
Doesn't make much sense to me. Of course they can bus the people in the keep the town running, but this looks to be a recipe for disaster.
If at all poorly educated governments ministers didn't intervene and let wholesale markets do their job, we would never have got into this situation of 0.25% OCR and all that stimulatory conditions with it which caused inflation.
The banks got a lot of cheap money from the government and lots of people in the country received free money from the government whether they needed or not. Inflationary.. But government simply didn't own any responsibility.
If we are a free market economy, then should let banks borrow from wholesale market and we wouldn't be in this position where only the geriatric greedy rich are able to enjoy life and everyone else is struggling.
Adrian Orr sets the OCR, he is not a government minister.
What you are proposing is that the independent reserve bank should no longer be responsible for inflation and we should leave it up to the open market. Yet the RBNZ have managed to keep inflation pretty close to target for decades, the current situation is unusual and due to extreme circumstances (Covid lockdowns).
If we were to leave it to the market and inflation went nuts like in the 70s, would you be happy to wait until the market sorts it out (which it may never do).
One change that should happen is the reserve bank should not be allowed the QE rubbish. Give them the OCR and nothing else.
Most countries in the western world cut rates and now have inflation, in most countries house prices went up, but we are a winner, house prices went up compounding 20%'s each year for 2 years...... Sydney is almost back to pre covid prices. What is going to hurt NZ so much is that res building is a big employer, every related industry moved pricing up to these inflated levels and now the market will not pay as it cannot afford. We have an entire industry that is too expensive.
Chappie is confident of a win. Double speak is on overdrive.
You know the story "give a man a fish and feed him for a day", is Labour through and through. They suck you in with sweets and treats, before implementing policies you didn't know about and don't agree with
We have an entire industry that is too expensive.
The other side of that coin is we now have an expectation that everything can be produced for Kmart pricing. Construction is one of the only physical manufacturing fields of any size we have left in NZ, and quite clearly is extremely more expensive than in other places with an abundance of cheap labour.
If kiwis made everything you could buy at the shops then everyone would have way less stuff.
People have the assumption building is cheap in the States. It's cheap if you're using illegal Mexican labour and really cheap (shoddy) materials.
If you're needing to use legal workers to a compliance standard, with decent quality fittings and fixtures, it's around the same or more as NZ.
One issue with making American comparisons is it's super diverse. If you're in a more red state, then things are often cheaper because it's a bit more like the wild west, and incomes are generally lower. If you're somewhere in the States more like NZ (so the lib areas on the coasts) then you have the same sort of added bureaucracy costs that overshadow economies of scale.
The economics of scale only apply to cookie cutter houses. We’ve never really done those here, probably because there either isn’t the demand or the large flat sections. The Americans also tend to use some pretty outdated fittings as far as I can tell; horrible looking appliances, kitchens, bathrooms. Some of the stuff they have just installed looks like the kind of crap most of us are ripping out. Typical American, it’s all about size not substance.
We’ve never really done those here, probably because there either isn’t the demand or the large flat sections
Also a good point. Many of the cheaper subdivisions in the states end up being basically the same design repeated hundreds of times over. In a subdivision in NZ people like the concept of having their new subdivison house look different than the one next door.
An expensive way to look slightly different than your neighbour.
These sorts of businesses don't work because they're making the house in a factory like environment and then the install on site is a big question mark especially the further you go from the factory.
For something to really fly it needs large scale from the factory to the actual property, in a well designed way for best workflow.
You driven past Rolleston or Wigram Skies? Almost every house there is the same. Some slight variations, as allowed by the restrictive covenants, but it is obvious to the untrained eye that they all follow the same pattern. They are also as close together as possible while meeting building regulations, so if one goes up in flames, you can bet the ones either side will as well. Of course, doing it this way allowed the developers to keep the costs lower than a traditional build, so they all sold quickly.
QE is just another interest rate mechanism, it increases a commercial banks reserves but banks cannot lend out these reserves as Standard and Poors explain here.
https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/…
Yet the RBNZ have managed to keep inflation pretty close to target for decades,
Who taught you this? The ruling elite have created the narrative to suggest that inflation is within a band using a construct of their own making. It's not necessarily reprsentative of inflation, which is a black box.
In the year 2000 a liter of 91 cost around $1.20. So with 2% Per annum inflation that would now be $1.90. But we are paying $2.50 in Auckland. The price of fuel and the taxes applied feed into the price of everything else. The branches of the NZ oligarchy have had the collective discipline to take it in turns to raise prices to keep the CPI print low and their profits high. Of course these high profits feed taxes to Wellington that allow for the public sector empire building building and system of patronage to continue.
When they thought the system might go tits up they made the mistake of putting a bit of extra money in the hands of real people who would spend it. At time when there were not enough goods available to be bought. So prices increased at a rate beyond what Stats NZ could massage back into shape.
So much debt in the system It's hard to see how we will work our way out of it. I don't think the RB knows either. The oil companies massive profits explains alot. Almost everything we touch is made from the black gold, so inflation will continue while they make hay.
i now have no debt so if I choose to buy another house its pretty easy. Not sure that housing is going to be the golden goose going forward. I expect all houses will drop but the one I sold will drop so much more as it was purchased by a developer to put 3-6 houses on it, they paid above 4k per sq m.... for the land.....
With good reason too. If we get a recession (likely considering the RBNZ is trying to cause one), then that is normally followed by lower interest rates. No guarantees of course, we could also get stagflation where the RBNZ can’t lower the OCR.
I doubt we’ll get back to rates starting with a 2 though.
I can’t recall anyone saying recently that retail rates will be back around 2-3%.
I am one of a minority who expects the OCR to be cut at least 2-3 times by mid 2024, but I have never said to the extent that retail rates are 2-3%.
I think they will be back around 3.5-4% by end of 2024.
HM, you were a minority when you thought rates would start dropping May 23, I seem to remember that was your thinking. Now you've taken it out further, I few more might agree. I just think there are too many variables to predict out too far. Predicting what will happen with our OCR, is hard enough to get right, and the decision is just a few days away.
HouseMouse
Your memory is faulted . . . just to remind you and keep you honest; 2 to 3% by the end of this year or start of next year.
by HouseMouse | 16th Feb 22, 6:19pm
Mortgage rates will be back in the 2-3% range within 2 years.
Pa1nter
Its about credibility and accountability . . .
As HouseMouse is apt to say, "time will tell", so "time tells".
Make statements and then not expect it to come back and bite you . . . well read above, that's what "robust debate" is, and is welcomed on this site.
It is also about keeping a balance; HouseMouse is great at posting "as I predicted", and forgetting when he his wrong as in this and many instance. I'm sure HouseMouse wants honesty. :)
HouseMouse | 2nd Feb 23, 10:13pm
He’s too much of a wuss to commit to anything tangible
HouseMouse, what a du-fus (a foolish or inept person)
Yeah there are lot of people i talk to these days think that in 2024 we will be again at 2-3% interest rates.
I am not sure who is their source but they seem very confident. At this point, i just smile and don't say a word.
I think lots in the RE industry are floating these rumors and telling the potential buyers to not worry about interest rates as they will come down again. As i said earlier ask ChatGPT if RE agents are liars to the core.
Nguturoa
our own governor of the reserve bank is telling people to just call the bank and go interest only if they can’t make their payments
how many insolvent landlords will we have in a years time?
and households
no one can talk of the unimaginable….that land and house prices fall and some people lose their shirts
that many would be better to sell now while they can
Anyone expecting real house prices to exceed those on Nov 21 are relying on mortgages going back there and beyond, even if they don't realise it.
Everyone still holding a rental is either in denial that they missed the top or hoping that rates will be forced back down there. I don't think, rates "normalising" at 5 to 7% was anything like priced in last year when briefly had these mortgages.
So rates go from 3% to mid 6% as deductability of any of that interest moves from 100% to NONE.... and if you make any money , pay capital gains tax...... this is such an uneven playing field, you would need to be almost religious to try to borrow money to make money in this tax environment..... many say sell now and get out, who will buy? I suspect there is huge overhang of grotty shiteboxes, that are in the same condition now as they where in 2000, less deferred maintenance.
My thoughts on this: Every single housing investor who it actually in it for the money should have sold their houses by now. 5% (and probably long term 4%) rates are not priced in yet. (The best price you will get for your house for a while is what you can get get in the couple of weeks and this will be true for at least 6 months likely years.) The FHB and up traders who support the market don't care about deductibility.
Our housing market is not characterised as a ponzi scheme for nothing.
Our housing market is not characterised as a ponzi scheme for nothing.
It's the real estate equivalent of invoking godwins law.
Usually in a ponzi, if you don't participate you're out nothing. In this particular 'ponzi', if you don't participate you're sleeping under a bridge or something.
Lol, when we elect a neo-liberal government we are are giving them a mandate to force us all to participate. The ponzi is bigger than just residential real estate, it's just the most obvious part.
I can't be bothered finding examples of other people being hurt in the fallout from Ponzis but I'm sure they are easy to find if you go looking and think about it.
What's being referred to as a housing Ponzi is capitalism proliferating wealth, meeting high constrained supply, with new entrants having a higher and higher barrier to entry.
Not really, What is happening in the NZ housing ponzi is credit is being created to punt on a relatively existing stock. Not for productive purposes. Read Werner's Qty Theory of credit.
I don't need to read his theory to differentiate between an actual Ponzi, and how housing is playing out in most of the developed world that's not experiencing population decline.
There are too many people chasing too few properties and there is an inherent disadvantage to new entrants.
You can argue that credit allows for increased borrowing but the fundamentals can't change. But there's a reason more 60 year Olds own houses in Epsom than young families. Most of them already lived there, or they have 30 more years of financial history to outcompete younger workers.
Your investing into the promise that your house price will double every 10 years, that's the Ponzi. You're paying extra to get extra back but yes you are also getting something significant utility and possibly significant income as well at the same time.
Sure if you want apply strict definitions it's not a Ponzi but prices go up because it seems sound and you can't lose and then it collapses when new entrants run out of money too keep buying in, is close enough.
I though about answering this and came to the conclusion why should it matter or contribute to the discussion. I would have though the answer to this could be inferred from the way I talk about property "investors" and this topic. Are my assertions obviously unsound?
I am probably unreasonably adverse to supplying personal information on demand and try no to ask it of others.
It's not so much that. It's more I gave my opinion and the first and only thing you want know is whats my stake in the game? (I guess) Without any additional contribution.
It feels like you want to reduce what I wrote to something like "talking points" and want me to engage with that constructively. It's Yvil so I can give a little benefit of doubt. Maybe he just wanted a story of me having followed though???
"Anyone expecting real house prices to exceed those on Nov 21..."
There's no doubt that house prices will exceed 2021 prices and by double and also tenfold, the question is just when? In 5 years? 10 years? 20 years? 25 years which is the typical term of a mortgage?
‘There’s no doubt’
Hmmm
I think there’s plenty of doubt. The world has changed and is changing in many ways, in case you haven’t noticed.
I think house prices are likely to be higher than now in 5 or 10 years time, but I am far from convinced that they will be anywhere close to double, especially in real terms.
If I hazarded a total guess, I’d say they will be perhaps 5-10% higher than right now in 5 years, in real terms.
This is also accounting for the assumption that house prices have about another 10% or so to fall from right now.
In this world 10 years let alone 20 years is far too far out to even have an educated guess.
They do. And not only that, they tell you that they will.
Even in the Dark Ages, when The Bat Phone on the main desk rang (the direct line to the CB) the room would hush, and the hand signals from the Chief Dealer would silently signal to the room to Buy, Sell or Do Nothing depending on what was being said, the CB was a force to be respected.
The level of reserves is no barrier to lending.....fear of losses however is. The RBNZ does not limit the total of reserves any institution can hold...and consequently cannot limit the amount of credit the institution can create....and that also only applies to institutions that the RBNZ oversees.
As far as I can see this country’s economic outlook is royally screwed whether interest rates go up or down.
Either massively overinflated property prices continue to slide and damages the economy or the bubble reinflates to more dangerous levels and creates a divided society worse than we have now. More crime etc etc. Either way highly productive individuals want to leave, no one that’s worth a residence permit wants to come because the figures stack up way better elsewhere.
Instead we’ll import desperate bus drivers and their 5+ family members but no nurses or teachers to serve them. The divide continues with poor health care / education outcomes for those who can’t afford it, stellar outcomes for those that can (ie the asset owners).
It won't be long before the private health is preferred to the public health. I rather have a tax break and get private insurance for health than rely on this broken public health system.
Looking at the state of health and education in the country brings a tear to my eyes. My taxes are being plundered by successive governments for their own selfish agendas and average middle class working kiwi and their family is suffering and going backwards every second of the clock.
It won't be long before the private health is preferred to the public health
Huh??? private health has always been preferred to public health, unless you like a very long wait to be treated, sharing a room with five other people etc… Why do you think people pay extra for private health, because it's less good than public health ???
Like the little boy who cried wolf, Lowe over at the RBA is trying to tell the Market rates will stay high for a long time, after telling the same market in 2021 that he would not raise rates until 2024.... people need to look past the comments and ask themselves what the central banks need to do to at least get inflation back to 4%..... and hold it there.
They say the ocr is stimulatory or restrictive if its below or above what the RBNZ determine to be neutral
Nothing was mentioned about bank margins and the retail mortgage rates that are set by the trading banks
Recently, the bank that puts the W back in banking, ANZ, reduced their mortgage interest rates by up to 0.5 percent. Yet they are still above other banks interest rates. Yes there is some competitive pricing happening. Sweet FA
I find it amazing that we are here tottering on the edge of an almighty slump and we're still pondering what RBNZ will be adjusting the OCR by in mid-2023! This month we will slip into negative growth in total loans. Govt stimulus (spending - tax) is nearing zero. This has happened a few times in the lat 30 years - most recently in March 2020 (when very rapid Govt fiscal stimulus + a later mortgage frenzy saved the day), and for a sustained period in 2009, which was a bit serious apparently.
Yes, which on its own will do next to nothing as employment quickly collapses into the winter. Rate hikes can crash an economy like NZ (short-term fixed debt, 2:1 mortgage to business debt, consumer economy, trade deficit etc). Dropping interest rates in NZ just boosts asset prices - businesses won't borrow if the economy is tanking.
It seems to me that there's a forming assumption that interest rates only bite while the OCR is still rising.
You make a good point David, and I agree. This assumption is of course very wrong, it's the level of the OCR that matters in financial terms, the rise of the OCR only matters psychologically.
I'm sure that once the OCR peaks, the RB intends on keeping it at the new high level for a while, at least until new data clearly points that it should move. As I expressed before, IMO this "new data" will come in Q3-Q4 in the form of a significantly weakening economy, which will force the RB to lower the OCR again, by Q4 2023 - Q1 2024
Yes agree.
They will stop hiking in April (or now if this storm is as bad as it potentially could be), and then they will hold and wait and see.
I think they will want the CPI to get down to at least 3.5% to even think about cutting, and that would need to be coupled with clear evidence of unemployment rising quickly. I think we will see both these trends by late 2023, hence a cut in late 2023 or early 2024.
Looking pretty inclusively, it'd appear most human experience is fairly average by just blindly turning up to work every day for 45-50 years and going through the motions. If you can just survive till death that's a win.
Everyone looked to have a swimming time in that half century boom period after 1950, but that has set a somewhat distorted view of how the average human is supposed to get by.
People don't have to get into real estate, they can start a business, be wise with the surplus income they generate and invest it, whatever, but unless you're lucky the average individual sadly needs to do a lot more financial authoring of their career and work life if they want more than a hand to mouth lifestyle.
A site like this should be used as a resource to allow people to better navigate the financial aspect of their life. Instead it's a soundboard for how unfair the world is, as if any of us were promised anything just by our mere existence.
IMO far & away the best & most constructive comments dialogue in NZ. Also, while contributions vary in complexity and coherency, everyone is generally quite respectable of others completely different opinions & on the rare occasions I've seen it deteriorate into personal attacks usually other commenters will jump in before the moderators - who will take action if necessary.
Have you looked at some of the other sites ?
I think a rigid financial focus is incorrect, its also about the financial/economic impact on every aspect of our lives & the policies decisions made by players & how theg impact +/- etc. Personally I also value the occasional eloquent opinion contributions on other topics (eg Chris Trotter) which prompt my own thinking & questions.
RBNZ has not been aggressive enough yet. They must increase OCR to at 20%.home loan rate must be 40%minimum. businesses loan must be 80%pa. Credit card and personal loan must be 100% pa. Term deposit must 200% pa . House rate mua drop 95%. -1 million house only sell for 50k. New Zealand will be much better shape than now
And then the CPI would be at 1,000%. That's a loaf of bread, if there are any on the shelves at Countdown, at $69-50, $100 for a dozen caged eggs.
There is no easy answer to all of this. If there was, we wouldn't be here. - none of us.
But we are. We've tried a Regulated Market, up till the early 1980s and that was seen as unfit for purposes in the Modern World full of a whole heap of shiny new financial instruments. But what was left tied to the Regulators' apron strings when we freed up the markets back then? The cost of Debt. If we made one mistake at all, it was to free everything up, except for Interest Rates. We kept them on a leash.
So what's it going to be? Unregulated the last bastion of the Regulated Market of the past and leave interest rates to The Market's forces - scrap the OCR and RBNZ intervention, or Regulate the whole lot, again?
And the answer will be different for each of us.
Aggressive does not have limit. RBNZ can be even more aggressive. Push OCR set to 100% . All lending rates to 200%. Start to remove currency- NZD. Shout down all banks and finance company. NZ can go back using goods for trading not currency . Most of businesses and factories will be closed . No people have work. Universal benefits can be paid in form of food.inflation problem solved as there is not currency even exist.
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