The Reserve Bank’s (RBNZ) Monetary Policy Committee is widely expected to raise the Official Cash Rate (OCR) following its first meeting for the year on Wednesday.
Most bets are on it lifting the rate by 25 points from 0.75% to 1%, but a 50-point raise is a possibility.
Inflation is running well beyond the committee’s 1% to 3% target range, with the Consumers Price Index up 5.9% in the year to the December quarter.
The labour market is tight, with the unemployment rate coming in at 3.2% in the December quarter.
However, uncertainty remains, with the omicron variant of Covid-19 only just taking off in New Zealand. Concerns around this could prevent the RBNZ from making a splash with a 50-point raise.
On the flipside, further supply chain disruptions caused by sickness locally (in addition to internationally) could actually be inflationary.
The Monetary Policy Committee is also expected to provide guidance on how it plans to reduce the size of its bond holdings.
The RBNZ bought $54 billion of New Zealand Government Bonds between March 2020 and July 2021 as a part of its Large-Scale Asset Purchase (LSAP) programme, designed to put downward pressure on interest rates.
The question is, will the RBNZ let the bonds drop off its balance sheet as they mature, or will it actively sell the bonds back to the Treasury.
BNZ senior strategist Nick Smyth sees it doing the latter. See this story for details.
The RBNZ is also expected to keep its Funding for Lending Programme (FLP) in place.
The programme, launched in response to the pandemic, sees it lend money to banks at the OCR. It’s another mechanism the RBNZ has used to suppress interest rates.
Some RBNZ observers have been calling for the central bank to ditch the programme, as it seems counterintuitive for it to be adding liquidity to the financial system at a time it’s tightening monetary policy.
However, the RBNZ has previously said it plans to stick to its word, and keep the programme in place until December 2022.
To date, banks have accessed $7.73 billion of term funding via the programme. The last time a drawdown was made was on January 26.
Coming back to the OCR, this will be the main focus of Wednesday’s Monetary Policy Statement.
Observers will be interested in seeing how high the committee foresees the rate going. Bank economists see it peaking at around 2.75% or 3% mid-next year.
Zollner summarises the arguments for a 25-point vs a 50-point raise
As for the decision around whether to go for the 25 or 50-point hike, ANZ chief economist Sharon Zollner expects the committee to opt for a 25-point lift. She provided a good summary of the two schools of thought:
Argument for a 25-point rise:
- But you said. The RBNZ has made it clear they prefer to move in steady 25bp steps unless the risks are a landslide in one direction.
- Less risky alternatives. Beyond moving the OCR itself, the forecast track has a huge impact. A more aggressive OCR forecast delivers more tightening upfront – with less risk of a U-turn in actual policy.
- Omicron chaos is just kicking off. Relatively short-lived it may be, but it’s going to be intense and enormously stressful for many firms, and a double hike might look a little tone-deaf in that context.
- Broader financial conditions have tightened materially. The CCCFA and LVR rules have tightened credit availability. Swap rates suggest mortgage rates will rise. Long yields are up. Our Financial Conditions Index has tightened rapidly.
- The housing market is already in retreat, with house sales falling and annual house price inflation rapidly losing steam. That’s very unusual so early in a hiking cycle, when more typically the RBNZ is struggling to get traction. It’s quite a game changer.
Argument for a 50-point rise:
- Q4 CPI inflation came out at 5.9% (RBNZ expectation: 5.7%), led by domestic inflation. Core measures are all outside the target band.
- The Nike argument. If you’re confident you have a big job to do, why not get going? A slower start means higher rates for longer, all else equal.
- The Bank of England nearly kicked off their hiking cycle with 50bp. It was a close-run thing, with a 5-4 vote. The Fed’s Bullard is in favour of a 50bp start in the US too.
- The RBNZ has shown it doesn’t mind surprising the market. And the market is on the fence anyway.
- Omicron is going to be inflationary, if anything. The experience of the rest of the world means the RBNZ will be comfortable forecasting Omicron’s negative impacts on demand to blow through fairly rapidly.
- The NZD is sharply lower. That will add to imported inflation pressures.
- Energy prices keep rising. Petrol prices have an outsized impact on household inflation expectations in particular, but also hit firms’ costs.
'Foot in each camp’ factors
- Inflation expectations in the RBNZ’s survey rose, with the 5-year measure lifting from 2.17% to 2.30%. A 0.3% deviation from the target midpoint is not insignificant at that time horizon, but it would be an exaggeration to suggest it’s into the danger zone.
- The unemployment rate, at 3.2%, was in line with RBNZ expectations but with slightly disappointing employment and wage growth. Still, unemployment is at a fresh record low.
Curve control
Sean Keane, of Triple T Consulting, also made an interesting point in a note he wrote for Credit Suisse.
“Were the Monetary Policy Committee to deliver a 50bp hike, they would need to get the tone right so that 3-5-year mortgage rates didn’t start falling on the expectation that the RBNZ will contain inflation more quickly and trigger a faster slowdown,” Keane said.
“That would mean hiking by 50bp and being hawkish in tone. The rate market would need to price the terminal rate above 3% in that scenario.
“Recent history would suggest that the Committee’s preference is for a slow and steady tightening of monetary conditions however, with the message remaining one of indicating at each meeting that more rate hikes are going to be needed over the months ahead.
“The level of price pressure in New Zealand at present probably warrants a 50bp rate increase, but delivering one poses some challenges to curve control that the RBNZ may prefer to avoid at this stage.”
Keane also said, “The RBNZ really should have hiked the OCR by 0.50% at the last meeting of 2021, and by not doing so they have allowed inflation expectations to build further and faster.
“Inflation is quickly becoming a political as much as an economic issue in New Zealand with the opposition National Party now committed to removing the RBNZ’s mandate on employment and focus on housing. This means that inflation outcomes will become increasingly important for both the RBNZ and Prime Minister Ardern.”
110 Comments
It's really difficult to see the actual economy from the housing market. But things are actually super shaky right now. Everything is taking longer and costing more, a lot of NZs business are cash poor, so a big rate hike may have flow on effects above what a lot of people might assume.
The border opening will also reduce domestic consumption over coming months as people stop spending money on Reno's and small SUVs, and go for their annual cruise or whatever instead.
I need to look at some stats... but for unreliable commentary on the supply front the map for one large local companies property listing has exploded. They will need to reduce the font size of the property markers on it next issue. Be interesting to know if that's normal or not vs previous years. I don't "feel" like it is but then maybe they have a bigger proportion of the market than previous years, or some other variable.
Fitzgerald,
Well, many clearly agree with you, but I'm less certain. Sure, the RB fanned the flames by overdoing OCR reductions but didn't cause the problem all by itself.
If it now raises by 0.25% and then again in 3 months time, the effects will be little/no different from a 0.50% rise now. You cannot just brush covid related uncertainty aside as unimportant. In short, I think your analysis is too simplistic.
Even 50bp is too low. Rate rises are supposed to discourage borrowing and encourage saving...
Who is willing to bet on this Govt & RBNZ, that for once they get something right? Because if you choose to believe them and hold cash you're effectively doing just that.
Cash is trash and all that...
Ah but then the alternative to cash is the everything bubble?... Seems like a Minsky Moment in the making. Now I'm just giving myself anxiety.
All I can see ahead is pain and I'm not smart enough to out think it, or fast enough to out run it.
I'd rather cash devaluing at 5-6% per year than 'everything else', which on a weighted average basis is likely to devalue even quicker.
It's like waiting to buy a house at the moment - you're not interested in headline inflation, your only interest is nominal house prices, which have already started to go backwards. So, with respect to house prices, we are in a deflationary environment where cash is king.
Yeah agree.
That's effectively my view, others said in a debate here a few days ago that buying houses now were a good hedge against inflation. I disagree, when house values are declining. And shares don't look great either.
People just need to lose the greed, live more within their means and hunker down. This will pass.
In the context of our K shaped "recovery" it seems particularly nasty to dismiss another persons views based on how much wealth they are perceived to have.
The whole "I'm rich so I'm smart and worthy" and "you're poor so you are stupid and unworthy" mindset is a cancer on society right now.
Flying high,
Are you taking lessons from CWBW in being gratuitously unpleasant? "in fact he/she probably has little spare savings and cash". You clearly don't know what their circumstances are, so it's just an ignorant statement.
Even it were true, why should that preclude him/her from expressing a view?
As someone who has been involved in stockmarkets for many decades, both professionally and personally, I would be 'fascinated' to hear your views on the likely directions of the market.
Yes I'm purely talking about investment capital and the strategic management thereof. Agree that inflation is felt much more acutely by those living paycheck to paycheck, which is why it needs to be vigerously opposed. My comment relates to an often posited, but ultimately misguided veiw that 'inflation is eating away at your money, so best go all in on assets'. It's true in the long run, but foolish at present.
Allowing inflation to continue at a rate above wage growth will reduce consumer spending in real terms. To protect the economy inflation will have to meaningfully reduced and 25bps cuts haven't had the desired impact so far.
High inflation is no more sustainable than deflation right now.
Have you thought about farmland. Residential property has obviously peaked and most commercial property is in a dire situation due to on-line businesses snatching the revenue from retail stores. Both residential and commercial property prices may be masked by the devaluation of money which is now on the rise. Anything arable within one or two hours of Auckland could be a good bet. Around 10 to 20 hectares, not viable for dairy.
another andrew,
"most commercial property is in a dire situation due to on-line businesses snatching the revenue from retail stores.". That is not the case with industrial property. Just look at the results from Property For Industry(PFI).
It is accessible to small investors, while plots of land round Auckland are not. How much would 10/20 hectares cost?
Yes and that is why I’m my opinion we should be looking at the inflation and employment data and asking what does it tell us?
Although when we had the emergency cuts I don’t even think we had measured deflation (anyone can correct me) and the RBNZ took extreme measures! But here we are with inflation waaay outside it’s goal posts and a ‘wait and watch’ approach.
It makes me question what their bias might be and it appears that it’s all about protecting the property bubble - despite Orr saying house prices aren’t his problem…the cognitive dissonance of the man would turn the average person mentally deranged
Add the borrow and consume mantra and protecting the property bubble is cover for protecting the financial institutions.
Hype "aggregate demand" and then wonder why there's a problem when supply chains suffer a hiccup. But let's blame it on supply without addressing demand.
We all need to look at our demands, nothing is in isolation here.
Between the central banks and society's demands/consumption, the fear of losing material wealth, the demand for always more, and the consequent environmental issues, I'd suggest the majority of the population are "mentally deranged" and some are downright pathological.
"Recent history would suggest that the Committee’s preference is for a slow and steady tightening of monetary conditions"
Well, that's just tea-leaf reading. The MPC, as Michael Reddell notes, publishes no research notes, no minutes, and no voting records. So looking from the outside in is like discerning the movements of people in a panic room.
Which, come to think of it, is as good a description of what goes on as any.....
We really have experienced an extraordinary event in history. The pandemic has exacerbated inequality in our society. It was already pretty bad but now it is much worse. Many people, mostly in small businesses and niche areas of employment have suffered greatly. The prospect of home ownership has moved beyond the horizon for most young people. On the other hand one group, a quite large and often despised group, have benefited greatly. Effectively the pandemic has been like a major Lotto win for them, every single one of them, and I am not being hyperbolic when I put it this way.
You are correct in what you say. Unfortunately when you have such divisions it will only go one way from here, more of what we are seeing in Wellington getting progressively more violent, more crime, more poverty, breaking down of communities, more anger and resentment and more of the wrong people leaving this country forever. What's the point of all that individual wealth when that is our future?
For the vast majority of them their personal wealth in the short term is far more important than the well-being of financial markets and social stability in the long term.
As I’ve pointed out before, many have narcissistic or even psychopath traits as they are willing to do or say anything to improve their own position and couldn’t care less how it impacts anyone else around them within society.
Maybe if you hadn't sold during the pandemic, your tune today may had been the same as it was.
The great philosophy that transcends all time,
Being in the market beats timing the market.
I still own property and am one of the winners. I sold one house in 2017 so I wouldn't be negatively geared going into retirement. Then interest rates plummeted and it turned out I didn't need to do that. I was also hoping for higher term deposit interest rates in the years to come.
It is quite possible that my tune would be different. I'm a pretty shallow person!
Zachary,
I too must be counted among the winners, though in my case, primarily through the stockmarket-I have 1 rental bought over 21 years ago. I have no debt.
I am well aware that much of my current net worth is not due to my own efforts, but to fortune. Should i therefore feel guilty? I say no. I did not cause this bubble, nor did I seek it. I feel certain that it is damaging the fabric of our society and with 4 young grandchildren, I wish it were not so. What can I and others in my position do?
I have no intention of deliberately seeking penury, so I try to contribute in different ways; by helping my own children from time to time, by volunteer work, by giving to charities, by paying tax, by simply trying to be a decent citizen. Should I do more?
Fundamentally, this change of the property market from a sort-of market to being nothing like a free market and more of a massive welfare wealth-transfer scheme needs to result in a second and much bigger change to how we approach all housing and welfare. Welfare is now way out of balance, in our present focus on enriching asset owners at the expense of non-asset-owners. It's obscene and blatantly unjust.
The question is, given so much of property wealth is now sourced from and utterly dependent upon welfare, why are we shoveling so much welfare at asset owners rather than a broader set of society to achieve better overall outcomes?
If we keep doing what we're doing we'll reap destruction in society.
It looks to me like economic data would favour the 50bps rise, and as an additional consideration, the kiwi needs some defense or we'll import inflation now as other banks raise.
I would place almost an equally weight on a 25 or 75bps but the probability of either appears lower. Sifting tea leaves doesn't work out well for the New Zealand Reserve Bank, they are miserable at forecasting. Almost invariably would have been better having a clear-eyed look at the data and ignoring these narratives about transitory inflation, supply chains, pandemic spending angst, some distant war in a foreign land, trade disputes, social unrest etc. The inflation and employment data is telling to them what to they need to know.
It would be difficult for the RBNZ to 'ditch' the FLP programme before December 2022, because they have been explicit that they will not do this. Their prior statement on this looks close to a legal guarantee. However, the FLP programme becomes increasingly unattractive to the commercial banks as the OCR rises, and I would expect few further drawdowns. Previous drawdowns are locked in at the daily OCR date for up to three years at the borrowers discretion.
KeithW
Previous drawdowns are locked in at the daily OCR date for up to three years at the borrowers discretion.
Pricing Rate fixing frequency:
Refixed on each date that a revised OCR comes into effect (OCR Effective Date), except where an OCR Effective Date falls within 3 business days prior to the Repurchase Date (in which case the OCR prior to that OCR Effective Date continues to apply).
There are approximately $20 billion of Treasury bonds held at the RBNZ that mature in the period 2023-2025.
These do not simply 'drop off the balance sheet'. Rather, the Government (Treasury) has to pay this sum to the RBNZ which thereby allows them to 'drop off' the balance sheet.
Assuming that Treasury funds this by further bond offerings, and assuming the RBNZ does not undertake new QE through the secondary market, then there will be quantitative tightening.
Any 'active selling' of longer dated bonds would be in addition to this.
The RBNZ could also simply write off the short-dated bonds, but I see that as unlikely. It would reinforce the notion that 'money creation' by the combined actions of the two arms of the State (Treasury and RBNZ) was a long term strategy.
KeithW
Assuming that Treasury funds this by further bond offerings, and assuming the RBNZ does not undertake new QE through the secondary market, then there will be quantitative tightening.
Is that really the case Keith?
The government is in possession of bank IOUs (deposits - Crown Settlement Account) created by prior initial bank bond underwriting actions. They are extinguished by Treasury purchasing government bonds from the RBNZ - the proceeds (RBNZ asset ledger) are then netted off against the RBNZ's IOU liability ledger (floating rate bank reserve assets - Bank Settlement Accounts).
New bond issuance underwritten by banks remain in the public domain, new government deposits (bank IOUs) are lodged at the RBNZ's Crown Settlement Account.
Banks that previously owned floating rate government assets lodged on the RBNZ's Bank Settlement Accounts ledger are now in possession of publicly lodged coupon bearing government debt assets. Surely this is just an asset swap.
Treasury have about $35bn of credit in the Crown Settlement Account waiting to pay off the RBNZ held bonds as they mature (if that is the way they choose to go). There is also $40bn of private sector credit (govt liability) in the institutional settlement accounts at RBNZ - waiting to purchase new bonds. I presume that RBNZ will make some statement this week about a gradual transition back to usual times - with the eventual goal of restoring balance sheets to something more 'usual' in 2025.
The maths on this is pretty simple - mark the Crown Settlement Account down by $25bn and tear up $25bn worth of the bonds held by RBNZ. Swap $30bn of new bonds for $30bn of the credit in the institutional settlement accounts over the coming years and use the credit to pay off the remaining bonds and restore all settlement balances back to within normal range. No fuss.
There is also $40bn of private sector credit (govt liability) in the institutional settlement accounts RBNZ - waiting to purchase new bonds
The $40bn (govt liabilities) are RBNZ created IOUs (bank assets) balancing the bond assets purchased by the RBNZ.from qualifying bank dealerships. Private sector credit (bank IOUs) are lodged at RBNZ's Crown Settlement Account and debited from Bank Settlement Accounts until dispensed to qualified beneficiary bank accounts. Hence:
A recent Bloomberg article described central bank easing with the phrase “pumpingd money into the economy.” That’s a misconception. Monetary easing is actually an asset swap. The public was holding savings in one form, and now it holds it in another. The Fed buys Treasury securities from the public, and replaces them with currency and bank reserveds (base money) that someone has to hold, at every point in time, until the Fed sells its bonds and retires the cash. All monetary policy does is to dchange the mix of government obligations held by the public. Only fiscal policy – specifically deficit spending – changes the total amount of those obligations. - courtesy of Hussman
Indeed. So called easing is swapping one form of govt liability (bonds) for another (settlement deposits). Easing is just the reverse. Ask most economists whether Govt liabilities (a) increase, (b) decrease, or (c) stay the same when Govt 'borrows', and they will very get the answer right (c).
I am not able to follow what you mean - but:
The lack of empirical evidence for QE and how it is *not* money printing explains very well a whole bunch of things, from "inflation" to markets like swap spreads. QE is an illusion that doesn't fool the "bond market." It is designed to fool you. https://youtube.com/watch?v=652_2r
Raising OCR aggressively would be akin to a knee jerk reaction that will result in financial instability throughout the system and risk a dangerous decoupling of NZD with AUD.
There is still no clear determination in the effects of DTI and CCCFA but on a preliminary observation, it is already looking bleak in terms of liquidity plumbing.
The current global inflation is already subsiding, RBNZ will be wise and prudent in setting a clear, progressive but gentle rise rather than cause a dead freeze in the entire country's economy.
We do not need a recession ahead of other nations.
Considering the shameless history of interest rate decision-making in NZ in last 2 years, it will be 25 bps or max at stretch 50 bps the need of the hour is raise of 75 bps or 100 bps.
The manipulatory response for not raising the interest rate will be inflation is transitory or a result of a supply chain issue.
...inflation is transitory or a result of a supply chain issue.
That was last year. Look Reserve Banks can always find a reason to do as they please in the short term but that won't help half the rate of inflation which is what they now need to do now to get back within the target band.
RBNZ has lost its touch with reality, hence we have such run away with prices on everything in the country. The RBNZ bureaucracy which makes decesions gets paid salaries excess of anything other average kiwis are getting. So they have no idea what people are feeling at the grocery store, at the pump, at the rents, buying a house etc,etc.
GR, minister of finance is responsible for governor of RBNZ. But we all know what this government has been good for.
If they don’t raise by .50 the NZD will tank this will make inflation worse, peoples pay will need to go up with inflation just to be where they are today. If peoples houses loss value you still have somewhere to live but if people can’t afford food,power this is a far bigger problem.
Putting rates up will reduce peoples' (spenders') disposable income, reduce aggregate demand, and put more people on benefits. This *might* be enough to drive some minor reductions to the prices of some goods and services - but only if firms reduce their profit margins in response to what will be a relatively minor reduction in demand. If the nut we want to crack is really inflated house prices - then constraining mortgage credit is a far more elegant solution. Why reach for the interest rates sledge hammer?
The bigger issue here is that the price of imported goods and services have seen basically zero inflation for the last 10 years as companies have uberised their workforces, sought cheaper labour and raw materials overseas, and created ever more fragile 'just in time' supply chains (cutting back on the costs of inventory etc). Those days might be gone (but I doubt it).
As I often get stick for saying, it is worth pointing out that putting rates up could also increase the cost of some of the very things that are currenly pushing our non-tradable (domestic) inflation. For example, if you're developing a build to rent apartment block, what does an increase in the cost of borrowing do to the rent you need to charge to make your scheme viable?
The strength of the NZD has been bobbling around between 70 and 80 (Trade Weighted Index) for nearly 20 years now. The wider challenge is that with a trade deficit in actual goods and services, we have to offer a higher rate of return on our financial assets (Govt bonds) to bolster the NZD. I guess we could crash the economy with a big rate hike to make oil a few per cent cheaper (and our exporters furious), but perhaps we would be better off reducing our actual imports of oil instead?
We have to reduce our current account deficit - the Kiwi remains relatively weak while it persists, no matter what interest rate levels are - too high and we will have less discretionary income to fund imports from debt expansion - IE - increase the mortgage to fund exotic car and holiday imports.
"...for nearly 20 years now."
Indeed. The same 20 years that have seen persistently low inflation across the world.
But the inflation has changed. A switch has been flipped, we're in a new normal. And that includes threats to the strength of currency.
My take is that the $NZ is going lower no matter what. A little dip might help with the balance of trade -- but I think we're getting little dip in the $NZ regardless of what rates do, and a big, damaging, household-impoverishing dip if we keep them low.
Nov 21 Stuff article:
"Reserve Bank governor Adrian Orr has issued a fresh warning that high house prices are unsustainable"
"Orr told the Property Council of New Zealand that unsustainable house prices could pose a threat to financial stability".
This was before inflation hit 6% (more like 10%)!
50 bps here we come.
The major problem is average wage earners cannot afford house in Auckland and other areas until this is remedied you will always have a problem the first step is a deposit which take over 10 years to save for average earners, then average house is over 10 times yearly wages of a couple. How is this sustainable? A house should be around 420k for average wage earners to have a chance the market needs to drop 60% for this to happen.As property is large part of kiwi psyche things would need to change like houses are for living in not investing. So wages need to go up three times or house prices crash might be combination of both.
It is BS because wage growth is not running at the same 5-10% to match it. In fact with increasing interest rates your wages will need to be going up 10-20% and you know that's never going to happen and its the primary reason we are exactly where we are right now. Its taken us decades to slowly get into this mess, its simply impossible to fix it now in the short or even medium term. Things are still getting worse not better, it appears to me like a one way ticket. Really not sure how its all going to end and I have no ideas for fixing the problem either. Its like getting really obese and then trying to fix the problem, its far easier not to get obese in the first place.
"It is BS because wage growth is not running at the same 5-10% to match it"
But that is exactly the point of measuring in real terms as it shows how the price of something is being impacted by ones ability to buy it based upon the economic conditions of the time/s.
In real terms, we are in such a massive bubble where house price appreciation has risen so rapidly above the general level of inflation, and everyone has been gloating about that (look at the valuation of my house....house prices up 25% or 10% this year while inflation is effectively zero)....but now that the shoe might be on the other foot where inflation may rise vastly above the level of price inflation of housing...well apparently that is BS. But it is quite possible that we have 5-10 years of flat nominal prices while we experience 5-10% of inflation per year with rising interest rates to match. In real terms, that will be a price bubble collapsing back to within what would be reasonable for the buyers who experience the market in real terms.
When the leader of the country says "don't worry I won't let prices to fall, what do you think the greedy would do?"
The system is totally broken for the poor and average earner on this country.
I guess time for another occupation at the parliament but average middle class earner can't afford that because he has to work to make his ends meet. May be all of us middle class should go on benefit and then occupy the parliament grounds for fairness in the country.
Hi Carlos don’t think we need to go back to 2005 just reduce house price to a place average earners can afford this would also take down rent prices for people who still can’t afford to buy. It’s coming one way or another if you are over leveraged just sell what you can as this is what has been happening since end of last year, you saying it’s not going to happen doesn’t change what is happening.
What's happening is that high inflation is backstopping high house prices. With the cost of pretty much everything going up, house prices are not going to drop significantly. I'm thinking more of that 2008 blip where they dropped 8% then went on to recover in short order. Wednesdays announcement will be interesting, its going to have to move a lot to signal a change. How much it moves is a more important signal, if it goes 0.25% the party will just continue.
Ok.. off topic and after a few beers at street BBQ. Its apparent that the well off and landlord class have no inclination or interest in the plight of the masses and future generations as to housing or their ability to generate a future for themselves and their families.
Maybe a heavy topic too, I grant them that, but not even an acknowledgment.
the sad thing about this all (I’ve said it before) is the best sacrifice we went through and continue to go through was in the main to the benefit of the old, in both terms of covid death rates and as asset holders! The young sacrificed and saved the old! No bloody acknowledgment of it neither!
This landlord class are city dwellers. NZ is full of small towns with empty shops and empty houses. There are even some ghost towns - fun to cycle through but an absence of life - closed churches, closed post offices, closed schools and eventually closed pubs. What is the opinion of the property owners in these places? Reduce immigration to a roughly balance emigration and NZ's population will drop. Then the landlord class will suffer.
What they should do is go up by a full 1%, inflation rate and high petrol prices (a big driver) demand it. Our dollar will go back up into the 75c range and petrol should drop, dropping inflation.
But it will potentially crash the housing market...
So more likely they will go up by a measly .25% and .5% if we are lucky. They have spent the last decade painting themselves into an ever smaller corner, but now the inflation monster is out of the box.
Orr's resignation coming this year? Wouldn't surprise me in the slightest...
Agree it should be a 1% increase. That said I cant see Orr doing more than .5%. Anything less that that and hes dooming NZ to continue being further incinerated by inflation and should resign for failure to deliver the RBNZs primary mandate (controling inflation).
Much different proposition mortgages relative to average earnings in 2001 vs 2022 though, which is the main issue. The same increase today takes a lot more discretionary spend out of the economy compared to back then.
E: Also, I think I was paying around 85 cents a litre for petrol in those days. I'll happily go back to extra mortgage cost if it means my cost of getting to work goes down by 70%.
Nah come on GV, mortgages were absolutely crippling for people back in the day. You know they took out 3 mortgages to buy a house, at 22% interest rates etc. If only they had access to double digit term deposit rates so they could save up 2 years worth of wages and buy the house outright......
Yeah went 8.6% fixed a few years later for a 7 year term. Sounds pretty bad doesn't it, thing is the total mortgage was like the size of the DEPOSIT required now to buy a house ! Even rates of 1% now would still have you paying off more in total on a house, the initial principal is a nightmare so even on 10% I would still have been better off then than now.
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