Yip. As with her colleagues, on matters economic & monetary, consistently glib.
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Yip. As with her colleagues, on matters economic & monetary, consistently glib.
Worried about group think at the RBNZ. Hard not to think it might be a problem when the justification for a lot of decisions appears to be "central banks in other countries are doing it too."
https://www.stuff.co.nz/business/130...-ocr-decisions
I mean is there much though required? easy money, low interest rates good, tight money, higher interest rates bad. Asset price inflation good, too much CPI inflation bad. Deflation equals the end of the world and lots of really bad stuff, very much to be feared.
At the moment globally I think it is a matter of waiting until pesky CPI inflation subsides so they can get back to boosting asset prices and getting back to the trickle down economics we know and love so much. Adrian is a master of the "wealth effect", it must be killing him with house prices down, not being able to drop rates. Adrian will be concerned about his "sustainable" house price rises.
It might be more subtle than that, possibly inflate away debt for a while, rob savers and entrench wealth disparities before heading off to the races again.
Didn't stock markets jump this week because Jerome Powell said something about slowing interest rate rises. Closer to the pivot so smart investors getting in ahead of the central banks.
Not that much to economic management and stock market investing really. Just a tweak to interest rates here and there and ramp up the printing press if deflation threatens. And for the investor it is a matter of anticipating the timing of the central banks actions. Risk on and risk off, TINA, BTFD, FOMO, YOLO.
Some accountability at last????
https://www.msn.com/en-nz/news/natio...842688cbc4c8df
The terms of reference say: "The inquiry may assess whether New Zealand’s initial elimination strategy and later minimisation and protection strategy in response to the COVID-19 pandemic, and supporting economic and other measures, were effective in limiting the spread of infection and limiting the impact of the virus on vulnerable groups and the health system, having regard to New Zealand’s circumstances, what was known at the time, and the strategies adopted by comparable jurisdictions.
So did they do the right thing at the time? Did they reduce the spread of covid initially? I would have to say yes but with hindsight we can see it was a massive over reaction and that I am almost embarrassed at the way I(we) treated the anti-vaxxers. If they weren't such a bunch of dumb ar*e d*ckheads an apology might almost be appropriate. It is like a bad cold and I see no masks or any concern at the weekly deaths currently.
Sadly what we want to look at is the actions of the govt and the RBNZ in creating a housing bubble and massive wealth transfer and exacerbating inequality in NZ. No one gives a **** about covid anymore, but the effects from a reckless RBNZ and finance minister are still with us today. The important stuff will be ignored.
It won't look into, vaccine efficacy, or some individual decisions by the Reserve Bank. Monetary policy will be looked at by the inquiry, but not decisions by the RBNZ's independent monetary policy committee.
What is the point of the commission then? to waste more taxpayer money and rubber stamp the govts pandemic response without addressing the wealth inequality created by an incompetent, out of control RBNZ following a path of least regrets.
It will be chaired by epidemiologist Professor Tony Blakely. I wonder what an epidemiologist will find regarding the govt pandemic response. Particularly as it was the end of world scenarios being put forward by his peers that created the panic in the first place and in hindsight caused a massive overreaction to a bad cold.
What a waste of time and taxpayer money. I am predicting the findings ahead of schedule below.
"The commission has found that the government acted appropriately at the time of the pandemic and we would note that other countries followed a similar approach. There was some dodgy legislative bulls*it but it doesn't matter anymore. We did not consider the actions of the RBNZ or the ongoing economic results of the pandemic response as these reflect poorly on the Labour govt", P.S thanks for the cheque.
Yes I think it is a bit stupid for an epidemiologist to chair that inquiry. their vested interest is in a broad and detailed response to the virus, so as to utilise their expertise.
That first variant was much worse than omnicron though wasnt it? so we dodged that bullet which was a good move I think.
It certainly sounded bad and the lock downs allowed everyone who wanted to, to be vaccinated. I guess the efficacy of the vaccine has already been proven so is not included in the scope of the commission.
My concern is Adrian has only just stopped handing out freshly printed dollars to the banks today on top of everything else. I would have thought the major concerns were not so much the medical initiatives but the economic ones.
To quote Bernard Hickey, writing in The Kākā newsletter, argued that - contrary to many assumptions - New Zealand’s economic response to Covid-19 was among the worst in the world in terms of widening wealth inequality and being a wasteful use of taxpayer funds.
$15million of taxpayer funds to go into the commission and the important questions have been left out.
The FLP may not be that big a deal.
https://www.interest.co.nz/banking/1...vided-economic
"The Funding for Lending Programme provides funding to banks at the Official Cash Rate. So as the OCR is increasing so does the cost to the banks. Compared to the wholesale markets it is comparatively cheaper, but it represents less than 2% of total bank funding. So it's at a very marginal level still providing some stimulus and hold rates back a little bit. We take that into account when we're setting the OCR levels. Our estimate is that it is adding roughly five basis points to the OCR track," Silk said.
The FLP hasn't been good for savers
However, by the time it launched the FLP was arguably already a solution looking for a problem, with the most dire economic predictions in the early days of the Covid-19 pandemic not coming to fruition. Earlier government and Reserve Bank support measures including the Wage Subsidy, OCR reduction to just 0.25% and Reserve Bank quantitative easing, or government bond buying programme, were already stimulating economic activity. Asset prices were surging with Real Estate Institute of New Zealand data showing national median house prices up 18.5% year-on-year to a new record median high of $749,000 in November 2020.
Up 18.5% year on year to $749,000 median in November 2020. The average house price in NZ is currently $987,887 (September 2022) down from the $1,043,261 peak in March 2022 but still up 32% in just under two years on top of the 18.5% gain prior to that.
I guess Adrian and the MPC saw the wealth effect and trickle down economics as a better option to young people being able to buy a house of their own and having a more egalitarian society. The commission will not consider this so expect the same actions in the next downturn. The Labour govt has effectively provided a stamp of approval for the RBNZ to continue to exacerbate wealth inequality in NZ.
A firing squad might be more appropriate for a review of the actions of the RBNZ IMHO.
Who is to blame for inflation?
This article tries to address it but comes up short IMO.
https://www.stuff.co.nz/national/the...high-inflation
It begins with this definition.
Inflation is a general increase in prices and fall in the purchasing value of money. It occurs when the demand for goods and services is greater than the supply - and it is high, sitting at 7.2% at the moment.
Milton Friedman argues inflation is always and everywhere a monetary phenomenon. Perhaps it is just chance inflation took off after the largest amount of money printing NZ has ever seen. Unfortunate factors such as the pandemic and Putin are being blamed.
The Reserve Bank has two primary goals: to keep inflation low (between 1-3%), and to ensure maximum sustainable employment.
The Reserve Bank says today’s high inflation is half to do with overseas pressures, including supply shocks created by Russia’s war on Ukraine, and half to do with domestic issues.
Half to do with domestic issues. I wonder what issues specifically??? According to the article.
Those issues include labour shortages, which puts pressure on supply (that is providing goods) and can also push up wages – a pandemic-related immigration downturn has created workforce gaps, alongside the Government’s immigration ‘reset’.
These are factors Adrian Orr has no control over.
So not enough immigrants into an already overheated economy? Any other factors that Adrian does have control over??? No mention of any in the article except this.
The only thing the Reserve Bank can do to control inflation is to raise or lower the official cash rate – the rate at which it lends money to banks. Banks then pass those costs on.
I assume doubling their balance sheet through LSAP and FLP (money printing) and cutting the OCR to .25% (historical low). LVR restrictions were removed. Perhaps they played a "bit part" in house prices and the inflation. All within the RBNZs control, but don't forget how much worse it would have been without Adrian at the helm. He had the "courage" to act much like other heroic central bankers, like Ben Bernanke, Alan "Bubbles" Greenspan, Janet Yellen and Jerome Powell.
In summary
The factors creating inflation right now are complicated and intertwined. There are some obvious candidates – but it’s incorrect to point the finger at just one institution or person.
No one is responsible for inflation (except maybe Putin and the covid virus)?? Really?
I guess Bridie Witton is a political reporter not an economic one and long informative articles do not get read so I can partly take responsibility for the cr*p put out by reporters and would not want to hold Bridie responsible for the piece of fluff she produced. "The Whole Truth" my a*se.
I would like to get paid to find the whole truth rather than spouting uneducated/ignorant bull**** online. Being paid to take the time to properly understand something would be great in this day and age. Pity sometimes it feels like reporters are just phoning it in.
Here are some suggestions to get inflation under control.
There’s no mystery to controlling inflation. You just have to stop spending money you don’t have…stop lending out money at interest rates below inflation…and stop ‘printing’ up extra money to cover the holes in your budget.
More people consuming more stuff, yay for immigration. More than 3,000 a month or 36,000 annually (conservatively). It should suppress wage growth and reduce pesky CPI inflation while putting pressure on housing and house prices.
What's not to like. Even if you don't like it, both major parties have the same policy. ACT likes it Greens like it. Is there an anti immigration party? because they will get my vote even if they are hate filled aholes.
https://www.nzherald.co.nz/business/...GS2EQXGDH2SUU/
Yes locally every couple days I see people trying to find accommodation through our local FB accom pages ... and we have next to nothing right across the Central Otago region ... they have Jobs to come to hundreds jobs ... but pretty much ZERO places to stay .. more immigration isn't going to add low cost housing ...esp now with inflation in lending and build costs ...
Maybe apart from Queenstown and Wanaka the appeal of central otago is the wide open spaces and lack of people.
Apparantly immigration changes are needed as the international labour shortage had become "extremely severe". Where did all the labour go???
https://www.msn.com/en-nz/news/natio...84e831c5172dd1
They didn't all die of covid, that is mostly older retired people, so no. The million plus exodus never happened. Then why are we short of labour? maybe an overstimulated industry is taking all the workers?
What industry would have been growing at an unusually fast pace spurred on by reckless monetary policy and immigration.
https://www.newshub.co.nz/home/money...es-expert.html
45,000 people available to work in the next little while. They probably do not want to be nurses or chefs though so if we bring in 36,000 to 50,000 more people each year it will be sweet. A virtuous circle of more people needing more houses. All politicians are on board as the townies love being crammed in cheek to jowl so it is a vote winner.
To me it does not make NZ a better place, just more like every other overcrowded s*ithole country on the planet.
Even the productivity commission thinks that "more" does not mean "better."
https://www.productivity.govt.nz/inq...tion-settings/
One of their recommendations to govt is "Reduce the use of Skills Shortage Lists for immigration purposes and encourage wages to reflect scarcity." i.e. let wages rise.
Thanks Adrian, admittedly only plays a "bit part" in inflation despite being responsible for price stability but 10% food inflation outstanding work if only it were house prices.
https://www.interest.co.nz/personal-...ate-food-price
National have a plan to fix inflation though (see at the bottom of the article.)
"National has a plan to fight inflation. We will address worker shortages, reduce costs on businesses, bring discipline to government spending, give Kiwis more money in their back pockets through prudent tax reductions, and focus the Reserve Bank solely on managing inflation."
1/ More immigrants lower wages. I have already stated my dislike for this. Lower wages but higher house prices (not a big part of CPI fortunately) Does not seem to reduce the need for more immigrants rather an upward spiral much like using debt to solve a debt crisis, more required each time.
2/ Reduce costs on businesses. Wages for one but not sure about others maybe tax cuts.
3/ Reduce govt spending. Cutting wasteful spending, no one would disagree with that. Cutting essential services? a hard job to tell the difference sometimes. Depends on your viewpoint.
4/ prudent tax reductions. Inflationary, but based on earlier proposals european car dealerships and yacht manufacturers might be the most affected by increased demand. Cutting taxes for the rich not only provides the magical trickle down effect but, if the plebs don't get any tax cuts they can't spend anything either therefore limiting the inflationary effects of any tax cuts.
5/focus the Reserve Bank solely on managing inflation. Long overdue, but don't expect it to be a priority in the face of house prices falling and while Adrian is at the helm a path of least regrets and sustainable house prices might reduce the effectiveness. Any other competent RBNZ governor should make this work without the full employment mandate. Opening the immigration spigot and not worrying about unemployment levels, should really knock wage inflation on the head.
Reads like an opinion piece on immigration but interesting to the debate none the less.
https://www.stuff.co.nz/business/opi...omic-direction
At least National can provide a vision that all here on share trader can appreciate. Flood the country with cheap labour, it is good for a consumption driven economy, it keeps house prices high while allowing capital to thrive by sharing less with labour. i.e. lower wages means higher dividends or company growth. It also means we have a greater choice of restaurants and coffee shops.
Labour is kowtowing to business and the consumer townie economy, at the expense of our quality of life and can't explain the real reason for their u-turn on immigration for fear of losing their voter base.
John Key explains the need for immigration at 5.04 minutes in "the migration changes are good but a year late. The reality if you go to a restaurant these days and can't get a booking is not because they are full but they can't find staff"
https://www.youtube.com/watch?v=ZeRFm2vSbOY
The only reason it was a year late is that according to John "The Labour govt are controlled by the unions and unions like the idea of higher wages" but John points out that this increases pesky CPI inflation, so silly workers will lose their gains through inflation so they should just accept low wages. Better to have a low wage economy servicing the wealthy home owning half of society who are doing all right. This from the man whose main achievement in govt was increasing a regressive GST tax to cut progressive income tax rates (what a cu*t). His other great achievement was overseeing a housing crisis which he denied was a crisis. Again, maybe it is perspective. Rising wages are a problem but rising rents and rising house prices are not, in John's world at least, there might be other Kiwis with a different view but you won't see them on TV.
He points out housing has come back but won't go through the floor because to quote 10.34 "migration settings are going to change" so per John immigration keeps wages down but keeps house prices up. At least he is honest, most media commentators continually seem to ignore or deny this reality.
Building costs are going up and John thinks only the labour component might go down. Building costs increasing without house price increases will see construction stop and with increased demand from immigration we are back to a John Key utopia and young Max Key's property development company can make money again.
John Key, ladies and gentlemen a real down to earth kiwi bloke what a f*cking hero. I know he is right in what he says and maybe I should just accept that is the way of things and knuckle under.
Voters vote for what they think is best for them and I guess as long as you own at least your own home then continuing down the same path as the previous couple of decades is the way to go.
Good to see a NZ thought leader concerned about restaurant bookings and house price rises and suppressing wages. I wonder what director's fees at ANZ have been doing after record bank profits thanks to Adrian Orr.
John McDermott pointing out the obvious
https://www.interest.co.nz/business/...rmott-assesses
QE, McDermott says, gets into the financial system where it has to work through asset prices.
"So it has over inflated asset prices. It creates a distortion in terms of wealth distribution, it distorts business decisions, and it creates financial fragility in the system so everybody is over leveraged, there's too much debt in the system," says McDermott.
He also touches on another important point but does not expand on it (maybe he does in the audio). It might be significant in light of Japan's latest nothing burger to suggest it is moving away from QE and interest rate suppression.
"The business model relies on keeping QE going. So I think we need to say that has not to be New Zealand's future, we don't want a distorted financial system. So it's important to reduce it before we get hooked on that really bad habit."
You cannot reverse course without a major problem and you need more and more each time as we have seen since 2008 with 2020 being the biggest money printing binge on record. I have no faith that Adrian has the spine for the job as he is in the top half of society who benefit from QE and I imagine it would be hard to find someone in banking or finance with the honesty or integrity to keep to the mandated 1%-3%. Our inflation should be like Japan's interest rates somewhere between -.5% and +.5% with 0% being the target.
I vaguely recall rubbishing John McDermott in an earlier post as he said something I did not agree with, and I wonder if there is an easy way to find an old post as the search function on the site seems limited. At least for me. See my question in the newbies section
Higher redundancies expected next year if we go into a recession and happening already to a lesser degree.
https://www.nzherald.co.nz/business/...C2B5I3ZA7DXX4/
Immigration ramping up at the same time.
Sounds like a recipe for lower wages and much higher unemployment for the new year. Well done the "Labour" govt. always planning ahead.
Aaron, happy new year. All the best for 2023
You might enjoy reading this guys stuff
Latest piece - Central bankers have created excessive unemployment for decades because they use the wrong theory -
http://bilbo.economicoutlook.net/blog/?p=51089
Happy New year to you too.
If I follow the article correctly central banks have been running monetary policy too tightly for too long creating excessive unemployment and in the second half of the blog he supports MMT as a good idea.
He comes across as a bleeding heart liberal wanting full employment and money for all. I am for reversing the tide on capital over labour and rich vs poor but would disagree with his suggestions to achieve this.
Looser monetary policy has created full employment in NZ no doubt, but has it made life better for the poor working stiff? I would suggest loose monetary policy has pushed up asset prices(capital) much more than the price of labour. I also think loose monetary policy is what keeps the financialized system functioning. Latest case in point the UK and buying guilts to save leveraged pension funds. No doubt Bill would have approved of this.
Like all economists interesting theories but generally full of s**t. Reading his blog is one way to spend and unproductive rainy day, but probably the first and last time for me.
What are Bill Mitchell's views on the works of Gideon Gono and why do we bother paying taxes as Bill correctly points out, when our elected representatives can just print up some cash?
An article pointing out the arrogance and uselessness of our RBNZ governor.
https://www.stuff.co.nz/business/opi...entral-bankers
Nothing new though.
Confirmation bias from an economist and most likely a leftie.
https://www.zerohedge.com/markets/no...r-poorer-again
Are the assembled billionaires in Davos really worried about what was already projected as a mild recession that would reverse very low unemployment rates and very high (nominal) wage growth? No! What worries them are tight labor markets and nominal wage growth: that, and the asset-price recession in 2022 as interest rates rose in response.
With higher rates, the rich have already been in recession, and they didn’t like it. One year was quite enough, thank you very much, and now it’s time for central banks to make the rich richer and the poor poorer again, as before. Thus all the right headlines, speeches, data, and rumors are being mobilized in support of ‘Just not 2022!’ trades in 2023 – and working so far.
However, as mentioned, not all the headlines line up correctly for that happy, illogical narrative of no recession, no inflation, lower rates, and higher asset prices.
The Davos set needs central banks to work their magic after 2022. Although at the end of the article he notes.
Most fortress owners don’t tend to relax when someone is messing with their foundations, even ineffectually. At least not successful fortress owners. That is another argument mobilising against the happy, illogical narrative of no recession, no inflation, lower rates, and higher asset prices. Meanwhile, if the fortress were to crumble due to a Death Star-style weakness, it would topple onto everyone’s heads, including those doing the chipping away at it. Again, that backs recession, inflation, higher rates, and lower asset prices.
We will all suffer if central banks do their jobs but none more so than the wealthy.
Sounds like we need low interest rates and easy money as well as mass immigration (to cap terrible wage inflation and increase rental demand and house prices) to fix all of NZs problems.
Cost of living increases, number one concern with the NZ voter??
https://www.nzherald.co.nz/business/...JT6HPYEZCUYTA/
6,000 immigrants in November (or 72,000 annually) and picking up steam. What does increased demand do to prices???
I forget the supply side. Immigrants push down wages, they only increase rent and demand for housing. Bad wage inflation sorted, good rentier inflation increased. Win Win for the right sector of society. No trouble booking a restaurant any more either.
Annual inflation running at 7.2%. Who is responsible and why do they still have a job when the target is already high at 1-3% but they can't even do that.
7.2% or 140% above the top end of his target or 620% above the bottom end of his target if you want to be negative. How can someone keep their job while continuing to FAIL so miserably at it.
https://www.stuff.co.nz/business/131...s-in-unchanged
Not the best $835,000 the NZ taxpayer has spent on controlling inflation.
Did you expect the RB to just snap their fingers and the inflation rate would come down?
If everyone had a floating mortgage OCR changes would have a faster effect - if you are a year away from coming off your fixed rate it is a year before any OCR change really affects your directly.
The lag is a problem and exacerbates the risk of overshoot.
I would question how we got here in the first place. Pandemic response? Putin? supply chains? monetary policy? Too much concern about pushing up asset prices?
You are right though there is a risk of doing too much the other way which might be just as bad. I hear anecdotal evidence that things may be slowing down quite dramatically since the Christmas break.
I read somewhere that tightening into a recession is a new thing too so who knows how that will turn out.
I can confirm your first point. I have an interest in retail and things have definitely slowed post Christmas. Not sure if its due to people being on holiday or tightening. I lean to the latter as I looked at last years figures and things are definitely tracking behind.
I had heard demand for fencing wire has dropped right off, which might mean farmers are tightening their belts (debt plays a big part in some farmers businesses) or less subdivisions that need fencing. Only a passing conversation so can't read too much into it. Local builder had a building company ring and ask whether he had work for a gang of 4 guys. Nothing significant but little signs things might be slowing down and pressure on prices might ease, except you suspect in things like building supplies the large suppliers have found that people just pay more every couple of months as they raise prices. Haven't checked but remember seeing a post on the Vulcan Steel thread where the happy investor was pleased to see margins improving which would indicate prices are increasing faster than costs. I should check out Fletchers margins in their next set of financials.
Auckland Business and Chris Hipkins don't think 6,000 immigrants a month is enough.
https://www.newshub.co.nz/home/polit...-problems.html
https://www.stats.govt.nz/informatio...november-2022/
Oh well election year the rest of NZ can have a say on the issue.
Not sure National would be any different. I do wonder how the inflation in house construction costs is alleviated. We are building houses and infrastructure to keep up with the 50k plus immigrants we get most years which requires more workers due to the labour shortage as a lot of labour is tied up building houses, roads, hospitals etc to house the increasing population. The whole process seems a bit circular but I guess it makes sense if more people consuming more stuff is what your economy is based on and how success is measured.
Seems like not a lot of thought is going into how we live our lives and what we want as a nation but then again I am not a business "leader" or politician. Ganeesh Nana as chair of the productivity commission needs to push the debate on levels of immigration. Not just the simplistic push down wages and push up rents and house prices approach but whether it is good for NZers other than landlords and employers.
Property investors know Adrian Orr is keen to ease. Only need to fix for one year as rates will be coming down in a year.
https://www.rnz.co.nz/news/business/...s-survey-finds
Maybe some intelligent people are thinking along the same lines as me.
https://www.rnz.co.nz/news/business/...gaps-economist
We have got a productivity commission and Ganesh Nana raised the issue of policy and thinking around immigration (I suspect there is none other than boosting GDP) versus training young people in NZ and providing them with opportunities to grow and becoming more productive as a nation.
Have you got any practical suggestions around this? What I am seeing is a group of young men not willing to work. They don't turn up to interviews. They fail drug tests. They are happy walking around the streets on weekdays but they won't apply for a job. We offer jobs to people who turn up and pass a drug and attitude test. The pay and benefits are good but the Kiwi applicants are few and far between, assuming they can can hang onto the job once they get it. We have zero such issues with immigrant workers.
No, no practical suggestions or practical experience. I guess if wages rise and benefits don't then there might be more incentive to work.
What I have been arguing without an ounce of proof, the construction industry is going gang busters and at a guess I would suggest more people than ever are employed in the industry. The main driver for this being 50,000 plus immigrants each year needing somewhere to live. If the building and infrastructure industry did not take up so many of the hardworking young NZers would we have more people available for work in other industries?
There will always be useless bludgers but hopefully they are a very small minority, not much you can do to encourage them to work other than stop handing them money for doing nothing.
In other news, its raining in Auckland, so we need more immigrants.
https://www.stuff.co.nz/business/131...-cleanup-ahead
There was a thought with so much infill housing trying to keep up with demand, Auckland is a lot less porous than it used to be. Admittedly it was a record rainfall I believe, so hard to blame immigration. Although... if you want to spin it, the rainfall is due to climate change and we are trying to put less CO2 into the atmosphere. How much CO2 does your average NZer spit out per annum and how much would 50,000 extra people produce per annum. An interesting comparison if farmers are ever asked to pay a fart tax again.
Interesting article in the herald this morning.
https://www.nzherald.co.nz/business/...NL46SNWJHQPTM/
Opinion piece so you might want to google Ruchir Sharma before reading.
What caught my eye (confirmation bias) was this.
Combined stimulus in the US, the EU, Japan and the UK, including government spending and central bank asset purchases, rose from 1 per cent of gross domestic product in the recessions of 1980 and 1990 to 3 per cent in 2001, 12 per cent in 2008 and a staggering 35 per cent in 2020.
It looks to me like a trend.
So I guess to save us next time they require more than double the stimulus of the time before so 70-80% of GDP in stimulus. I am planning on being a multi millionaire by the end of 2024 based on these figures.
Interesting view lower in the article. I have only read about ageing demographics being deflationary as older people spend less. What this guy suggests is declining birth rates and ageing populations will be inflationary for wages rather than the deflation we expect. Interesting to see who will be right over time but both seem like reasonable arguments.
.25 from the Fed, rate rises slowing, a pivot approaching and rates should decline thereafter.
With inflation in NZ at 7% I wonder why term deposit holders are not demanding at least 7% to maintain their purchasing power???
Maybe it is simple economics, supply and demand. If the supply of capital tightens up then central banks print money to ensure there is never a supply issue so term deposit holders can never demand higher rates because the supply of capital is unlimited.
Is that what a capitalist system means. Unlimited supply of capital or is it central control of capital and interest rates, with the free market working its magic everywhere else, except in the most essential areas of capitalism.
Where is all the cheaper "capital" coming from?
Funding For Lending anyone???
Quantitative easing anyone QE1, 2, infinity???
I wonder if this could be considered a cheap, plentiful source of capital, what do you reckon Dobby?
I used to think capital came from savings and banks and financial institutions competed for that capital by offering a return on investment, but I am badly wrong with that understanding.
The RBNZ board support Adrian's reappointment, surprise, surprise.
https://www.nzherald.co.nz/business/...LWHOVECCPNCTI/
They mention a lot of the things they have achieved under Adrian like a timely review of money creation programmes but they fail to note that the mandate for the RBNZ is "price stability" and whether Adrian and the board have achieved this. They have not.
They have not and are failing terribly. The board is new so I guess we need to give them some time but if they are unable to achieve what the reserve bank act asks of them they should be sacked along with Adrian Orr. My concern is they are a bunch of "world improvers" with no idea what they are supposed to be doing at the RBNZ.
The headline also reads "RBNZ Board assures Robertson Orr will promote a ‘safe environment for debate’"
This is probably true as the large turnover of staff means anyone with a differing view has already left.
Here we go Dobby an article about how interest rates are controlled. (i.e. not a free market) It explains why interest rates below the rate of inflation are possible.
Bit of a long one and I cannot admit to understanding it all so will try and cherry pick bits and pieces that seem like they support my argument.
https://www.interest.co.nz/banking/1...ng-process-and
The Reserve Bank uses its tools and operations to keep short-term interest rates between banks close to the Official Cash Rate (OCR), which flows through to other interest rates in the economy.
Under the LSAP programme, the Reserve Bank creates new settlement cash to purchase government bonds from the market. Since government bond yields serve as a benchmark for longer-term interest rates in the economy, bond purchases have the effect of lowering longer term interest rates.
The FLP is a monetary policy tool intended to lower overall bank funding costs, and therefore retail interest rates.
Why were all the additional monetary policy (AMP) tools required (LSAP & FLP). It does not say but looking at the stats NZ graph inflation around the time that Adrian Orr lost the plot, inflation was a comfortable 1.5% well inside the 1-3% range (comfortable c.f. current 7%) What did Adrian do? According to figure 4 in the article he increased base money from roughly 15 billion to 55 billion. Interesting in that same graph that broad money has been steadily increasing every year.
https://www.stats.govt.nz/indicators...ice-index-cpi/
This started about March 2020 (pandemic panic time) and has only recently slowed down. Compare that to the inflation graph which broke the 3% top range in June 2021.
I would suggest it was an absolute balls up by the RBNZ but scarily I do not think the beneficiaries of the inflation such as asset owners are that worried. I imagine we will see comments from disgruntled boomers as minimum wage workers get a 7% rise to stay still, relative to CPI but still waaay behind house price inflation.
If Adrian is considered to be competent amongst our rulers then they must be OK with what is happening re inflation and just paying lip service to the so called "cost of living crisis".
If they were really concerned they should have acted against the people most responsible, not hire them for another 5 years. I guess Labour is complicite and did not want to admit how badly they f**ked up with the ongoing lockdowns after the initial response.
Inflation just another regressive tax in NZ no wonder our young people are leaving. The immigrants are only filling up the minimum wage jobs in restaurants and fruit picking. Any young person in NZ can work out at $22.70 or $47,216 annually even at 10 times earnings or $472,160 they will not be able to own their own home or have any sort of financial security.
Does Broad Money require a 1% - 2% population increase every year hence the need for immigration? What happens if it contracts? Is the monetary system like a ponzi scheme that will collapse if it does not keep expanding?
RBNZ looking after the rich for decades .... glad I've got debt free home and other property interest the RBNZ petty much has our backs cheap debt easy leverage .. high interest kick back pay min payments on minor loans to assets ,....
Lucky your rich, did you send Adrian Orr a box of chocolates for Christmas for all the good work he did on your behalf over the last couple of years?
Hate to say it but Jacinda came in to power promising to do something about the cost of housing after John Key said there was no problem. What did she do???
https://www.stuff.co.nz/business/131...bilisation--qv
If the graph at the bottom of the article is correct, average house prices went from $535k to $808 (they have come back some) that is 51% but to annualise it over 5 years 10.2%. Not sure what fixing house prices involves but hard not to think Jacinda and Labour are just as full of sh*t as National under John Key.
Chippy has got immigration going and is part of the party that reappointed Orr. Chris Luxon wants to remove interest deductibility restrictions and wind back the bright line test to 5 years. Not sure either party has any interest in affordable housing. Actually I take that back, I am sure neither party has any interest in affordable housing.
ASB morning brief headlines.
1/The value of KiwiSaver assets fell from $90.2 billion to $86.5b over the 2022
2/ House prices fell further last month as more homes were listed for sale on Trade Me
3/ The Reserve Bank may have "already done enough" with its increases in interest rates,
Here is a dreamer on zero hedge.
https://www.zerohedge.com/markets/world-without-finance
Was a load of bull ****e
Sorry Aaron …I’ve been sucked in
This guy Clint is an unofficial PR man for Labour …so he’s probably very wrong
Silly me for not realising
No Point in deleting post cos you have copied it
Thinking about it further I only looked at the group totals I guess if there was deflation in other transport items then this would reduce the effect of airfare rises on the group.
Looking at the data in the excel spreadsheet on the stats page airfares were 29.1% of the inflation. And petrol prices deflated 22.9%.
So I need to apologies to you and Clint. His figures are probably right. I only say "probably" because I am not 100% sure I understand the data I am looking at.
Also apologies to Baa Baa for unnecessary profanities.
Another timely reminder you should never listen to me.
Mind you Clint might have said the rise in airfares offset the fall in petrol prices while food made up 23% of the inflation, household and household utilities made up 25.4% of the inflation and recreation and leisure a further 20.2%.
Aaron ….that Clint guy all over the place pointing out how great the Labour govt is.
Even if he’s right with his 1% the way he puts it without actually saying it is comparing it to annual inflation of 7.2% and not the 1.4% for the quarter …but that’s persuasive PR for you eh.
On Orr and OCR it’s amazing how many gurus are calling on him to take it easy on Wednesday ……and he’s probably been pressured by the independent MOF as well.
Even at 1% per quarter a 4% inflation rate is still 33% higher than the top end of the RBNZ mandate. Still a failure by Orr and co. Who knows with lagging effects of interest rate rises what the right level is. Orr will never please everyone no matter what he does. Let's hope he remembers that price stability is his main role and that he is currently failing miserably.
Maybe he could ask Chippy to curb immigration to help him reduce demand.
Looks like my initial post has been censored. I assume for profanities or defamation.
Be nice to know why.
I thought linking house price rises to immigration was a no no for main stream media. Isn't it racist???
No just Xenophobic, the colour of your skin does not matter.
https://www.oneroof.co.nz/news/43088
If history rhymes then inflation first, extreme wealth and income inequality, social unrest (stupid people like me blaming foreigners) and finally we get a Napolean or a Hitler. Interesting times.
Interesting you tube clip on inflation targeting.
At 7.29mins in, Arthur Grimes the father of inflation targeting says it all when he says "Why does the central bank want to use its policies to increase the cost of living for ordinary citizens. Its just bananas"
Is there a cost of living crisis in NZ as politicians keep saying? Why don't they do something about if we know the cause?
https://www.youtube.com/watch?v=UN-O6oNes0I
Couple of seppo economists argue for a higher inflation target after that.
Typical arts graduates wanting to take the easiest/laziest option.
My mate Michael Reddell still getting into Orr and his mates …
As the RB MPC slinks back today from its extended summer holiday don't forget the billions of dollars of taxpayers' money they lost, to no useful end, thru the LSAP programme. As ever, money rashly wasted can't be used later for more pressing calls - eg flood repairs etc.
What a massive overreaction the covid response was. I still support the first lockdown decision and went along with the others which were throwing more and more money to people each time. Wage Subsidies, RSP, CSP. The LSAP funded it all and the FLP helped to put a rocket under the housing market.
I went along with the other lockdowns but in hindsight the other lockdowns were a total waste of money and everyones time. I was going to say money that we have to pay back but I am not sure I believe that, as inflation will take care of some of it. At 7% inflation for 5 years thats 35% of your loan sorted. Also when you can print billions and billions more does repayment even mean anything to a govt. Not the US anyway, no way they will repay their debts.
There is also the time and disruption to all our lives when eventually we all just went back to normal and some people died of the virus and no one really cares. I did see an article about a slightly higher death toll due to covid but it wasn't anyone I know so didn't care or read the stats. (Could check on Snoopys tally in another thread)
They did what they thought was best at the time so hard to judge them as it is all easy in hindsight.
I only hope Adrian now realises his only job is price stability, not saving the housing market, stock market or everyone else, with crazy money printing and ridiculous suppression of interest rates.
The censors on this site are annoying. I would have thought a debate on where to draw the line on obscenities and profanities would have been welcomed. Maybe not by some hypocrites.
.. when you put the picture of getting as many Jabs into arms as possible and once that was done the operation FEAR was put to bed and now its old news ...well moved onto the next agenda ...Carbon
As to the RBNZ .. another 50bpts rise today .. that will help the masses of kiwis struggling .. got to keep that evil inflation under-control ...now how was that created ?? restrictions on trade-movement COVID POLICY , anti energy policy-climate control policy ,Ongoing anti small business regs restrictions(esp. during COVID times) , trade wars -COVID finger pointing, removal and lockout of foreign workforce,,International trade breakdown
As we know one of are largest inflations cases is "FOOD" here in FARMING/FISHING NZ an exporting FOOD nation .. that pretty poorly managed.. I know working in the Fishing sector the fisherman work the hardest take the most risks and make the least per Kg ...Vs the middle men , Taxmen GOVT costs, Aus Supermarket giants..
then the NZ consumers pay 200%+ more than fisherman gets.. etc
rant over
Should have gone all the way and made OCR a round 5%
‘Reserve Bank Governor Adrian Orr is calling on banks to lift deposit rates as much as they have lifted mortgage rates, saying their tardiness is boosting their profits and preventing the benefits of the higher Official Cash Rate (OCR) flowing to savers.’
Orr has been crushing savers for a long time, still is with inflation at 7%. Without his FLP program maybe banks might feel they need to compete for capital.
https://www.stuff.co.nz/national/pol...borrowandspend
Is it me or is he starting to make the right noises IMO.
He diplomatically suggested if the government were minded to do some “reprioritisation” of spending (in other words, to make cuts to redistribute funds to cyclone relief) or jack up taxes to help pay for it, that would make his life easier.
There are a whole lot of cries for help for people hurt by the cyclone but everyone changes party when a tax rise is mentioned. Although cutting wasteful spending would be a better first step IMO. Maybe someone needs to look at how Waka Kotahi has been spending their money.
Problem that was pointed out to me the other day is that we have a lot more "spenders" than "savers" in society so you can't win in a democracy.
Adrian's inflation hurting everybody with his cost of living crisis. Poorest bearing the brunt.
https://www.stuff.co.nz/business/mon...t-of-inflation
ANZ economist Finn Robinson said rising interest rates were a driver of the increase for higher-spending households.
Finn does not point out the double whammy of rising interest rates. Increased mortgage payments AND more importantly falling asset prices. Fighting inflation hurts the wealthy hardest whereas causing inflation hurts the poorest hardest. Makes me wonder why Adrian and other world central bankers have been creating an inflationary environment for the last 30 years.
Maybe Adrian should focus on price stability and return money to a "store of value" and a "means of exchange" rather than a tool to manipulate asset prices and create "wealth effects". Trickle down economics is b*llsh*t.
A -1% to +1% inflation target would make more sense. Mind you Adrian can't even keep inflation below 3%, which is too high anyway. Ask Arthur Grimes.
Eleanor Catton is a writer so listening to her on economics might be like listening to me on any topic. A gigantic waste of time.
https://www.msn.com/en-nz/news/other...7bc942d5&ei=11
But confirmation bias is my thing. Huge Betrayal from Jacinda.
saying she couldn't see any evidence of "political change".
"Inequity is rising in New Zealand at a terrific rate," Catton told The Sydney Morning Herald.
She also said the COVID-19 pandemic caused wealthy people to make "a profit and people who struggled were struggling more".
In a separate interview with The Irish Times, Catton slated Ardern for earlier ruling out a capital gains tax - saying it was a "pretty huge betrayal of young people".
In Jacinda's defence she would not have won any election with a capital gains tax proposal. I think Labour won because Jacinda said all the same things John Key and National did 1/no capital gains tax 2/ no touching national super but Jacinda made an additional promise that National did not. 3/To print billions to save old people from covid with young people to pick up the tab. A massive overreaction in hindsight.
If Eleanor wants to see political change she needs to talk to the people of NZ as we are the ones who keep electing the same politicians.
I'll bet Adrian Orr is happy/relieved Eleanor is only blaming Jacinda for the wealth inequality and inflation (cost of living crisis).
Aaron …another Adrian speech
Got a bit carried away with buzzwords etc
Looking ahead, in striving to be exceptional in our work, we are working to act holistically across all aspects of the Reserve Bank’s work strands to draw data, gain insights, and most importantly manage trade-offs. Most of the goals of our work are mutually supportive, but we will meet trade- offs from time-to-time.
https://www.rbnz.govt.nz/-/media/pro...challenges.pdf
Nice to see he knows what his main priority is.
The first strand is our monetary policy work. Through our role as the supplier of a fiat currency – the New Zealand dollar – we aim to keep consumer price inflation low and stable through time. Our desire is to maintain the purchasing power of our currency through time, by moderating economic demand to broadly match the supply capacity of the New Zealand economy. In doing so we meet the necessary criteria of a trusted currency – it is seen as a unit of account, a means of exchange, and a store of value.
I wonder if this graph is correct.
https://tradingeconomics.com/new-zea...er%20of%201977.
Since Adrian was appointed Governor in 2018 M1 has doubled from roughly 70,000mill to 140,000mill. I wonder how many previous governors doubled the base money supply in 5 years. Does not sound like the actions of someone trying to protect the NZD as a unit of account, a means of exchange, and a store of value.
What about interest rates. He started at 1.75% in 2018 and took it down to .25 of a percent. Has any governor ever taken the OCR so low???
https://www.rbnz.govt.nz/monetary-po...licy-decisions
Admittedly this last year or so he has probably raised the OCR faster than any previous Governor but isn't that due to the cost of living crisis he helped create.
Pumped house prices so hard during covid that frightened first home buyers felt they had to take on a big mortgage or forever be excluded from owning a house. Now Adrian is hammering them with interest rate rises because his extreme actions have led inevitably to inflation.
Actions speak louder than words and Adrian has both, in spades but his words do not seem to be in line with his actions.
Disclaimer I only skim read the article and pick pieces that support my way of thinking without having a good understanding of anything.
Govt policy driving up rents according to landlords.
https://www.nzherald.co.nz/nz/politi...F6QL6YLRB4DIE/
Buying property at ridiculously low yields and annually trying to pump up rents to make the investment sensible. Who knows maybe a number of factors. At least with inflation at 7% they can justify big rent rises without govt policy.
Maybe unsound monetary policy has inadvertently pushed asset prices too high and now rents are playing catch up.
Out of idle curiosity, how do we all think Messrs Brash or Wheeler would have done?
Winner might have a view he did not seem to like Wheeler. I suspect they would drop interest rates and print money as well. It has been going on for 30 years. Although the graph does not back my statement the general trend has been down until recently. Now it is a question of how long it will stay up before going negative. Adrian did discuss negative rates awhile back, despite negative rates being nonsensical.
https://www.rbnz.govt.nz/monetary-po...licy-decisions
Interesting link, thanks for that.
Mister Orr sure inherited quite a tricky situation, didn't he!
He has only carried on what previous governors have done but done a lot more.
https://www.nzherald.co.nz/business/...PXNBXKV7QS7W4/
Adrian says that an $8billion dollar loss is just "noise"
Former RBNZ deputy governor Grant Spencer says the cost is real and shouldn’t be disregarded. Who to believe?? Adrian also said things like the central bank only plays a "bit" part in the housing market.
The reason for the loss is that Adrian desperately needs to reduce the RBNZ balance sheet so he can do it all over again. The central bank guarantee to support asset prices remains in place.
When previously asked about the issue, Orr and his colleagues have explained the cost of the LSAP programme to the Crown should be considered alongside its benefits.
For example, the downward pressure it put on interest rates lowered the Crown’s borrowing costs. Lower interest rates also helped stimulate the economy, which increased the Crown’s tax take. (As well as increasing asset and house prices)
As for the smooth functioning of the bond market at a time New Zealand needed to issue a lot of debt – it’s hard to put a price on that. $8billion seems like a high price to me.
What if we did not have a crazy RBNZ governor and the NZ govt was forced to sell debt at higher yields. Would we have had the second (pointless) round of lockdowns in August 2021 or would the govt have been forced to seriously consider the costs and benefits of its massive over reaction when faced with higher interest rates.
Are we (NZ taxpayer) not effectively paying a higher interest rate anyway when these bonds are sold at a loss? Money for nothing, thanks Adrian.
All that punting and making huge losses and he gets away with it and keeps his job because he's a hero in so many eyes
And he probably considers himself a hero and the greatest central banker there's ever been
But he's even worse than his predecessor Wheeler who was even worse than Bollard before him
Demand for capital required for the cyclone clean up. Concerns that capital is not unlimited and interest rates could rise to reflect the demand and supply of savings.
https://www.nzherald.co.nz/business/...JRMQAK5EV2S2Y/
$3billion, Adrian could whip that up in less time than it takes to tap 3,000,000,000 onto a computer screen. Capital is unlimited, why worry about it now.
Adrian helping Aussie banks to record profits while not exactly helping local NZ owned financial institutions. Not earth shattering but something negative about the RBNZ so thought I would post.
https://www.interest.co.nz/banking/1...etition-gareth
Inflation targeting a thing of the past???
https://www.stuff.co.nz/business/131...l&cx_artPos=10
Economists with their usual, "other countries are doing it so we should too arguments"
“Inflation is a pain in the neck. Unemployment is an existential threat. Unemployment is definitely more painful than inflation. Yet – maybe it’s not rational – but people really hate it.”
Inflation at 5% probably not too bad for a home owning well paid bank economist. Unemployment is an existential threat. I would have thought that working and being paid in worthless dollars might be just as bad. Even worse pay rises lower than inflation slowing reducing your quality of life year after year with no hope for the future. Trickle down on steriods.
The RBNZ poured cheap money into the retail banks via a dunderheaded ‘funding for lending’ programme, then Orr wonders in public why retail banks won’t offer decent term deposit rates. There should be a ‘banking inquiry’ alright - an inquiry into the actions of the RBNZ encompassing 2020 - 2022, as it seems over this period they created a lot of the mess this country now finds itself in as regards a fiasco of a housing market & a banking sector gone rogue.
Looks like Adrian continues to fail at his role at the RBNZ, inflation steady at 7.2%. If I were the teachers striking I would be making sure you are asking for enough to cover continuing high inflation for the next couple of years at least.
Adrian does not have the stones to bring it under control and home owners and asset owners prefer loose monetary policy as inflation is not that bad if asset prices are going up as well while inflation eats away at any borrowings required to buy the assets, so do govts and political parties making promises to win elections. That is why we need a strong independent reserve bank governor. With a salary of $800k a year I suspect we know who Adrian will be more concerned about rich or poor... tough decision.
https://www.newshub.co.nz/home/money...ise-again.html
Funny how narratives change to suit the times. I used to read that retiring baby boomers would cause deflation as someone a couple of years into retirement tends to spend less. Now I am reading that retiring baby boomers are leading to a shortage of labour pushing up wages and inflation. Who knows what to believe.
Opinion piece so take it with a grain of salt. Richard Prebble reckons the RBNZ is the main reason Aussie banks are making so much profit and questions why the NZ taxpayer is subsidising them through the actions of the RBNZ.
https://www.nzherald.co.nz/business/...CLNKQREHXJYGA/
That would explain Labour stopping Chloe Swarbrick's investigation of the RBNZ actions in response to the pandemic and now National's banking enquiry. No accountability at the top.
Not much comment on the US CPI 6% is better than 9%.
But isn't the Federal Reserve doing QE to bailout bank depositors? Won't this add to inflation?
Or will crashing financial markets offset this by reducing the wealth effect.
Prediction, QE is a given therefore expect continued high inflation.
The pain brought on by central bank largess won't be through falling asset prices it will be through inflation. Maybe it will be both in which case everybody hurts.
Not a big fan of the NZ Initiative, they can't work out that GST is a regressive tax. Surprised they are criticising the RBNZ I would have assumed they would be fans of trickle down economics.
Maybe Adrian stuffed up so bad they had to say something. I wonder if they were sounding the alarm bells while house prices were shooting up? I would have thought they would be fans of inflation as well, as it is also a bit like a regressive tax. Maybe the current hit to asset prices is too much to bear.
Fortunately for Adrian they are a political organisation so lay all blame at the feet of Grant Robertson, which is not entirely unfair, except that Adrian is supposed to have a back bone and not kowtow to everything Grant Robertson wants.
https://www.msn.com/en-nz/news/other...df9e7cab&ei=11
According to the report due to the high turnover of staff under Adrian's rule they don't even have people qualified to do the job properly anymore. I guess the results speak for themselves.
NZ GDP negative. That is good news according to today's business herald. Interest rate cuts can't be too far away (f*cking idiots)
BTFP Bank Term Funding Program. Unlimited money, thank goodness liquidity returns to financial markets no one needs to sell anything. Price discovery is once again beaten by a central bank.
I think your wires might be crossed Aaron....
FACT CHECK: NZ Initiative Quote: "If a poor person and a rich person buy $11.50 worth of potatoes, $10 of it will be for the potatoes and $1.50 will be GST. The poor and rich person pay the same amount of tax. It’s a flat tax, but regressive as a portion of income.
Just do a little more diligent research Aaron and you will be able to answer your own questions. But to help you, YES, the NZ Initiative have been sounding off multiple warnings over recent years. And by the way, they are certainly NOT 'fans of inflation'.
Agreed. Smoke & mirrors type PR/Comms from the RBNZ inevitably fails to fool the observant amongst us.
Playing around with the OCR is just like using a very blunt (& totally hit & miss) instrument to do modern-day surgery. It won't fix the underlying cause and is likely to cause collateral damage. Remember, Price Inflation/Deflation experienced in an economy is ultimately and simply a reflection of what is really happening with underlying Monetary Inflation.
Distill that premise down further and the harsh reality is, that the ONLY truly effective way to control 'inflation' in an economy is to properly manage the amount of total money in the economy (M3, using US terminology), relative to population demographics. Controlling inflation in NZ to within a 1-3% target band (mid-point 2%) is the supposedly RBNZ's number one remit.
Sadly they have, and continue to, fail miserably.
I think your wires might be crossed Aaron....
FACT CHECK: NZ Initiative Quote: "If a poor person and a rich person buy $11.50 worth of potatoes, $10 of it will be for the potatoes and $1.50 will be GST. The poor and rich person pay the same amount of tax. It’s a flat tax, but regressive as a portion of income.
Just do a little more diligent research Aaron and you will be able to answer your own questions. But to help you, YES, the NZ Initiative have been sounding off multiple warnings over recent years. And by the way, they are certainly NOT 'fans of inflation'.
Agreed. Smoke & mirrors type PR/Comms from the RBNZ inevitably fails to fool the observant amongst us.
As we know, playing around with the OCR is just like using a very blunt (& totally hit & miss) instrument. Price inflation is ultimately and simply a reflection of the monetary inflation in the economy.
Distill that premise down and the harsh reality is, that the ONLY truly effective way to control 'inflation' in an economy is to properly manage the amount of total money in the economy (M3, using US terminology), relative to population demographics. Controlling inflation in NZ to within a 1-3% target band (mid-point 2%) is the supposedly RBNZ's number one remit. They have, and continue to, fail miserably.
I think your wires might be crossed Aaron....
FACT CHECK: NZ Initiative Quote: "If a poor person and a rich person buy $11.50 worth of potatoes, $10 of it will be for the potatoes and $1.50 will be GST. The poor and rich person pay the same amount of tax. It’s a flat tax, but regressive as a portion of income".
Just do a little more diligent research Aaron and you will be able to answer your own questions. But to help you, YES, the NZ Initiative have been sounding off multiple warnings over recent years. And by the way, they are certainly NOT 'fans of inflation'.
Agreed. Smoke & mirrors type PR/Comms from the RBNZ inevitably fails to fool the observant amongst us.
As we know, playing around with the OCR is just like using a very blunt (& totally hit & miss) instrument for modern-day surgery. Quite possibly not actually fixing the problem, plus likely causing collateral damage ('unintended consequences').
Price inflation is ultimately and simply a reflection of the monetary inflation occurring in the economy.
Distill that premise down and the harsh reality is, that the ONLY truly effective way to control 'inflation' in an economy is to properly manage the amount of total money in the economy (M3, using US terminology), relative to population demographics.
Controlling inflation in NZ to within a 1-3% target band (mid-point 2%) is the supposedly RBNZ's number one remit.
Sadly they have, and continue to, fail miserably.
Cheers for the update FTG, good to be corrected where I am ignorant.
At least the NZ Initiative is looking at the big issues and not afraid to criticise where appropriate.
I guess the BTFP in the USA won't help them control inflation.
You mention GST is "regressive as a portion of income". So not a regressive tax but poor people pay a lot more as a proportion of their income. Not sure how that checks my facts that GST is effectively a regressive tax... but whatever.
Bull reckons higher for longer interest rates on the black monday thread. Interest rates on term deposits would disagree as they drop after 12 months and go lower the longer the duration of the deposit.
https://www.interest.co.nz/saving/te...s-1-to-5-years
Some companies are reaching their March 2020 lows which was an opportunity of a lifetime. If rates are only going to fall from here then anything with a yield and the ability to increase earnings along with inflation would be a good idea, would it not? They will cut rates if there is a recession or a financial crisis and we have seen over the last few days there is no need to increase yield to attract capital as central banks will provide all the capital banks need at next to no yield.
The only question then is what the real economy is going to do. Most likely slow down with a recession reducing earnings putting marginal businesses under which might flow to the landlords etc. Still don't know but have an itchy trigger finger.
An economist saying things I think are idiotic, trying to reduce the cost of capital because it is easy and pushes up the price of his house.
https://www.msn.com/en-nz/news/natio...2d72653c&ei=19
Cameron argues in a world of supply shock after supply shock, you wonder whether a 1-3 percent inflation target is actually the right target. He is a bit vague on where he thinks it should be but I reckon a -1% to +1% would be an inflation target if price stability was the aim. I base this inflation target on the dictionary definition of "stable" Cameron obviously defines stability, differently.
So supply shocks are the cause of inflation? According to Cameron, nothing we can do about those so we should accept higher inflation.
I assume his next utterance would be to drop interest rates (he must still have a sizeable mortgage) and provide easy money to support asset prices and get the wealth effect going again.
I wonder if he thinks the money supply might play a "bit part" in the inflation storey? Probably not.
https://tradingeconomics.com/new-zea...er%20of%201977.
https://fred.stlouisfed.org/series/M1SL
https://tradingeconomics.com/united-...er%20of%201986.
https://fred.stlouisfed.org/series/MANMM101AUM189S
https://fred.stlouisfed.org/series/MANMM101CAM189S
https://www.interest.co.nz/public-po...bank%E2%80%99s
Inflation will be extended if Kiwi's can't accept they are worse off, Reserve Bank’s Chief Economist Paul Conway says
Paul Conway said inflation was “high and widespread” because strong demand had outstripped supply.
What caused strong demand Paul? Could it have been excessively stimulatory interest rates, a huge increase in the money supply, cheap and easy credit being funneled to the banks through FLP and govt through LSAP.
Gee whizz Paul an apology for the RBNZs incompetence would mean more than these bull*hit explanations.
I can't tell whether they are pretending that they did not play the biggest role in the current inflation or maybe they genuinely do not understand what they are doing.
https://www.stuff.co.nz/business/mon...st-and-poorest
They pushed inflation to 7% and according to this article average household income rose 5.4% so we are all poorer. The pandemic response was partly to blame, maybe the war in Ukraine as well but the majority is the fault of the RBNZ and its crazy monetary policies. Now Paul Conway just wants us to accept that we will all be poorer on average for it.
They also exacerbated wealth inequality, Bernard reckons by roughly $1trillion.
https://www.1news.co.nz/2021/12/13/w...-began-hickey/
With people like Adrian and Paul getting away with what they are getting away with it is good that the hate speech laws never came in because I am almost certain to break them when I think about what has happened and the results it has produced.
YES well said!!! Posted the same on the BRISC thread that with leaders like these who needs an enemy...
These remarks are a disgrace and sure older RBNZ GOV;s would not enter politics.
And that is the job of the PM and any comments like that should be made in a briefing to the executive.
As it is a danger to the currency,
Interesting article on the rise of government rescues. Probably behind the paywall though.
https://www.nzherald.co.nz/business/...GBHRNKS6DXERQ/
Waltzing, I would suggest the biggest danger to the $NZ is the RBNZ, Adrian Orr, Paul Conway and the MPC.
Another reminder that Adrian and the RBNZ is impoverishing average NZers.
Inflation will be taking care of government and wealthy asset owners debt while we all struggle more. Well done the RBNZ. Not only are wages falling in real terms but employers and business leaders are screaming out for more immigration to keep wages down. We discuss the need for doctors and nurses, but I suspect a large chunk are unskilled labour here to help keep pesky CPI inflation down, so the RBNZ can get back to asset price inflation sooner.
https://www.nzherald.co.nz/business/...KOJJVDESOTRCA/
I have radio nz on in the car when going to and from work sometimes. Last night some leftie economic commentator seemed angry that the RBNZ was engineering a recession and causing people to lose jobs by raising the OCR.
This morning they were debating whether the RBNZ should raise the OCR by .25%.
Never much debate when rates were dropping more just excitement that we had the lowest mortgage rates ever and the highest house prices to income ever.
More importantly no debate regarding Base money in NZ trilpling from under $20bln in 2020 to just under $60bln two years later. The GFC saw base money double from $5bill to $10bill but that just pushed up asset prices not CPI so all good. Adrian's inflation makes the GFC response look pretty weak.
Why is everyone getting hot under the collar about the symptoms not the causes of our cost of living crisis (just call it inflation because that is what it is).
https://www.rbnz.govt.nz/-/media/518...723f98974.ashx
I know I am not intelligent but sometimes it seems to me that all the yap in the news lacks a bigger perspective on things.
We won't have to worry about rate rises for long. Things are looking pretty grim so more unconventional monetary policy just around the corner to "fix" things. Did I read right this morning, ezibuy's sales dropped 51% over six months to December. Womens clothes and household stuff, demand falling off a cliff?? That can't be good for an inflate and consume economy largely based on building houses for immigrants.
The gold price this morning says some people other than me expecting more currency debasement and inflation as the answer to all our problems. Printing money and suppressing the price of capital is easy and the only thing they know.
Yes RBNZ want higher unemployment ,,they want lower housing prices ...but the fact is if your a Landlord and your presently re-fixing rates or soon too for that big loan investment you got years back that massively increase in costs will be passed on to the tenants = inflation in living costs ... IMHO just lifting rates 500pts in couple years is a very blunt tool to bring inflation under control ... you can come up with so many scenario's ... less money in consumers pockets less spending money for businesses = having to increase costs to consumer to keep afloat etc
I would suggest interest rates have been a very blunt tool for lifting house prices and debt levels, now that has reversed because house prices have reached ridiculous levels and we ran out of workers as the economy was overstimulated. Whether negative interest rates or printing our way to prosperity is realistic I will leave to economists.
I have been giving Adrian some hate over the last little while for getting carried away on the easing side of things, but now he is doing the right thing any shade I've been throwing will be nothing compared to the whining from over leveraged first home buyers, over leveraged property speculators(retirement village operators) and investors, farmers, company's with too much debt after buying back their shares and generally anyone who has had a care free relationship with debt over what has been an historically loose period of monetary policy.
I would almost feel sorry for him except he brought it on himself and I suspect the hysteria from spenders will force him to change course quick smart in the not too distant future.
Also if demand is dropping off a cliff maybe we can get back to 3% CPI, but if inflation is always and everywhere a monetary phenomenon tripling base money might take a while to work through the system.
"The root cause of financial instability is cheap debt. Whenever central banks suppress interest rates below the rate of inflation, the resulting negative real interest rates fuel financial instability."
https://tradingdiary.incrediblecharts.com/