Apparently Orr fends off any criticisms of his tree god nonsense with the allegation that criticism is racist
Quite sad really
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Apparently Orr fends off any criticisms of his tree god nonsense with the allegation that criticism is racist
Quite sad really
Orr either useless or has some secret agenda.
RBNZ communication almost non existent and transparency is a worry
Reserve Bank used dubious assertions to justify its aggressive rate cut.
https://www.interest.co.nz/opinion/1...ggressive-rate
Scathing, but it’s not just Orr is it, cunning move or admission of inadequacy putting in place the Monetary Policy Committee?
Pitiful reduction in bank lending interest rates supports the views that RBNZ OCR manipulation has reached the law of diminishing returns, as well as having almost no ammo left when the next shock occurs.
Michael Reddell's latest blog on the subject:
https://croakingcassandra.com/2019/1...f-a-strongman/
Missed a couple of articles
https://www.stuff.co.nz/business/116...nomy-economist
https://www.stuff.co.nz/business/116...-of-adrian-orr
RBNZ's elephant in the room.
http://www.sharechat.co.nz/article/b...ital-room.html
I don't know about "everything" needing more debt but in a growing economy/ growing population new businesses rarely flourish without borrowing at some point in their development and first time home purchasers likewise.
Personally, I think AO is letting his dislike of Australian banks and their NZ profitability affect his view on the capital adequacy question.
OK not everything but at least property prices and the share price of publicly listed companies.
No doubt new business and first home buyers require debt, but my concern would be more about the size of the debt.
A spiral of ever increasing land prices and valuations justifying larger mortgages which in turn further increase land prices as well as interest rates coming down improving debt serviceability. We didn’t have the lower interest rates until after 2007-2008 but it was a similar cycle and finance companies were coming up with a lot of the development debt.
Since then the finance companies have largely disappeared and it was the depositors into those companies who would have probably taken the biggest hit from the GFC in NZ.
As a percentage of GDP I understand debt has been growing for households https://tradingeconomics.com/new-zea...ds-debt-to-gdp
Hopefully a reliable website as I googled debt to gdp, and this was near the top. Although that said since 2008-2009 it has levelled off. I would have thought that with the increase in GDP from business and housing investment this ratio would find a sustainable level as gdp growth increases and debts get repaid maybe 100% is the natural level I don’t know. Possibly something wrong back in the 80s and 90s with such low levels of debt to gdp.
Although our government seems to be more responsible than households. https://tradingeconomics.com/new-zea...nt-debt-to-gdp
I also understand that first home buyer’s debt as a percentage of income is larger although this graph only shows a 60% increase since 2000.
https://www.rbnz.govt.nz/statistics/...household-debt
I would like to think that AO is concerned about depositors rather than what you suggest as NZ is one of the few countries without deposit insurance. We saw how depositors were treated in the GFC until the taxpayers of NZ guaranteed the banking and finance industry. I guess AO doesn’t want to see that happen again and I would tend to agree with him on that one. The role of the reserve bank is to promote the maintenance of a sound and efficient financial system. Not one that relies on the taxpayers of NZ when it gets into trouble. Although there appears to be room for debate regarding the level of capital the banks should hold.
Unfortunately AO's concern for depositors doesn't extend to getting interest rates on deposits above the inflation rate so he is reaming depositors slowly rather than quick in a violent bank collapse.
Disclaimer; I own no shares in Australian Banks, how about you?
A lot to agree with there, Aaron. A few points, though.
We certainly need a deposit insurance scheme although it's anyone's guess as to who will end up paying for it. Mostly the depositors themselves via even lower interest rates, is my guess. Incidentally, the fact that Aus had insured/guaranteed deposits prior to the GFC forced our govt to act - or risk an outflow of funds. And the banks/depositors paid the insurance premium, let's not forget.
We don't get to hear a lot about the effect of low deposit interest returns on either depositors or the economy. It's one thing to seek to stimulate the economy by knocking 50 basis points off already low rates but there is a cost in terms of lower spending power on the part of depositors, who, we have been told, heavily outnumber borrowers. The RB really hasn't much choice but to follow the rest of the world there but it's a moot point whether we should try to lead the pack. Question. To what extent does this affect business/consumer/investor confidence?
Yes, I hold Aus bank shares, around 5% of a widely diversified investment portfolio- about 70/30 equities/bonds - built over the last 50+ years. Another question. How much do NZ Kiwisavers have invested in Aus bank shares? Do we have any idea?
I suppose someone has to pay the premiums, not sure how it works to be honest. If it is a national scheme then depositors across all banks will pay to help out those in crappy banks that fall over reducing premium costs. Still better than taxpayers bailing them out, insurance also takes the smaller depositor out of the picture in a crisis as insurance will have them covered and the govt may not feel the need to bail the banks out.
No one is talking about how the current economic system is trying to generate inflation to reduce over-indebtedness by stealing from depositors through inflation. It is an outrage but no one seems to be talking about it. I guess I am a dummy thinking targeted inflation, protecting borrowers at the expense of savers, negative interest rates etc etc is nonsensical. I will be broke before central banks do the right thing and let markets decide interest rates and stop propping up asset prices with easy money and low interest rates.
I too would be less inclined to agree with Adrian Orr if I owned Aussie bank shares. Not sure about Kiwisaver ownership in general. My Kiwisaver fund doesn't own any as I switched to as close to cash as possible some time ago (so hoping banks don't go under). That is why central bank intervention propping up asset prices is making me so mad. Self interest as always, also I think it is exacerbating inequality and not giving the next generation the same chances that we had to secure our financial future.
I don't understand the US repo market but basically banks were asking for higher interest rates to reflect risk so the federal reserve comes in to suppress them. Total bull****. Money is worthless in the current environment so I take my chances that we have a market crash prior to people losing confidence in Money. Looking at the NZ govts debt level if there is a crisis of confidence in money the $NZ should appreciate significantly although if commodity prices drop at the same time who knows.
Out of idle curiosity, does the RBNZ run stress tests on the banks registered in New Zealand?
I seem to recall that some were done a couple(?) of years ago, but I've heard nothing since.
Perhaps there's been another round and some banks failed?
I read an article saying they do. The writer was therefore a bit bemused by this tinkering, because the banks had been passing them. He wondered whether the RBNZ sees something more calamitous than is already factored into their models. Those models contained extreme scenarios around house prices and dairy payouts along with a bunch of other stuff.
RBNZ's latest stress test was in 2017. See Post 106 above.
We (some) seem to have upset our Adrian
What a weird statement - sometimes it best just to shut up
Acting with integrity - for all New Zealanders
Release date11 October 2019
Statement from the Reserve Bank of New Zealand’s Senior Leadership Team
Leading the people at the Reserve Bank of New Zealand is an absolute privilege, and we never take that for granted. We are surrounded by incredibly clever and dedicated people who are driven by the shared values we have at Te Pūtea Matua: inclusion, integrity, and innovation.
Every day we come to work with the same ambition and drive – to serve all New Zealanders so they can live their lives with prosperity and the reassurance that the financial system we regulate remains stable and productive. To do that we need to have the brightest and best people who come from all sorts of backgrounds with a wealth of experience, wisdom and knowledge.
We are immensely proud of our workforce and the contribution they make – we make no bones about that.
Sometimes we make difficult decisions that are unpalatable for a few, but we do that with the many in mind. We are not looking to win votes or accolades – we do what’s right for the good of all New Zealanders for today, tomorrow and for generations to come.
As global economic environments throw challenges at central banks, more than ever we need to be innovative and the best way we can do that is to ensure we have diverse and fresh thinking in our midst. That’s the smart thing to do.
We’ll continue to have informed and mature conversations on the remit we hold on behalf of Aotearoa.
We’ve charted our course, prepared for whatever is on the horizon and will weather the storms. New Zealanders can depend on that.
This is the only statement we will be making on the recent remarks about the capabilities of our people.
The Reserve Bank of New Zealand’s Senior Leadership Team
https://www.rbnz.govt.nz/news/2019/1...new-zealanders
How bizarre! And prickly! As I have read it, the recent commentary has been about the people leaving, not the capabilities of the people staying.
I believe there is a problem to solve with banks whereby the government should attempt to ensure that it doesnt have to bail them out. Technically it doesnt have to of course but we all assume it would, and history confirms such behaviour. I'm not really a fan of Deposit Inurance however I think I do have to concede that the larger trading banks rely on an implicit govt guarantee and hence charging insurance is fair
I think some formula should be applied using number of years paying this insurance premium to calculate minimum capital ratio with limits on how low it can go. After 10 year of payments(without claiming)then, you can have say a capital ratio at todays levels or higher. Otherwise its at some high level up towards Orrs figures.
How do they get on in the Channel Islands?
They make much of their "guarantee", but from what I have managed to figure out, the fund backing it is only about GBP100m. Which kind of indicates that it's not all that much of a scheme, given the size of the banking system there.
But I may well have this wrong - I have no money there so have put little time into it.
Reddell concerned about Orr’s behaviour and writing to the Board and to Robertson.
Reddell might be just be grumpy but he could well be doing a good thing for the people of Aotearoa.
https://croakingcassandra.com/2019/1...board-members/
yeh I've been reading Reddell lately and he sure has an axe to grind about Orr.
I guess technically he (Redell) is right in that Orr is operating both unuseally for a RB governor but perhaps more importantly outside the RBNZ's mandate.
For all his wordiness Redell is quite factual and isnt adverse to being shown the numbers that prove high capital ratios for banks would be beneficial but Orr is not providing these.
Reads like a company’s growth strategy
Whoever gets the job will need to be careful what they’re eating at a BBQ ...answering what’s your job “Assistant Governor/General Manager, Transformation and People” is quite a mouthful
https://www.rbnz.govt.nz/news/2019/1...ership-changes
So the RBNZ has an Auckland office? The one I knew was closed when the NZD was floated and Exchange Controls were abolished. But I guess it makes a bit of sense with all the major banks headquartered in the Big Smoke these days.
:mellow:
.Quote:
They are headquartered in a shaky place
Not really. It's several centuries since the Auckland volcanoes erupted!
;)
Croaking Cassandra louder than ever today!
"At midday the Governor of the Reserve Bank will descend from the mountain-top,having communed with himself for some months, and tell us how much more capitallocally-incorporated banks will have to hold"
and it is 18% as expected (I think)
16% for smaller banks
the kiwi is bouncing around about a 1/3rd of a cent up
and the RBNZ website is crumbling under the strain.
Orr unfit to hold office
https://croakingcassandra.com/2020/02/17/simply-unfit/Y
Finally getting with the program .
8 AM ANNOUNCEMENT today .
Would have been a lot easier if he just followed Aussie and let the hand brake off gently ......
QE NZ
should further stimulus be required, a Large Scale Asset Purchase programme of New Zealand government bonds would be preferable to further OCR reductions.
I hadnt clicked - its a 0.75% CUT. massive. even massiver than his earlier go.
Orr shoots all his load in two single goes.
So, the RB talks about all the "other" weapons they have to combat the current crisis but the first reaction is to use the same old move - cut the cash rate!
:confused:
it feels very ironic to me that the RBNZ hasnt even had time to implement its strategy to combat a 'one in 200 year' event before that very event happens , and even worse they decide to delay implementation of that strategy.
statistics are so useless huh. Fat tails rule the day.
Adrian been outgunned today by Jerome...The FED cut rates 1% to Zero use what the FED calls crisis policy...and the Futures have been closed...Hmmm kinda doesn't sound good in the world atm..eh
Will NZ banks pass on all the rate cuts ?? and will kiwis get over the FEAR of CORVID19 and continue to buy and build new properties (really the heart of NZ growth over the last many years =Consumer spending)
Reddell not impressed
https://croakingcassandra.com/2020/0...etty-dreadful/
I haven't red that one but have been reading a lot of them recently.
I'm actually quite impressed by what Orr is saying today, and I comment that I am increasingly unimpressed with how niggardly Reddell is in his criticisms. A real croaker as he calls himself. I think he must have a bee in his bonnet about something..... Very knowledgeable and thorough though.
One of the most influential / powerful people in the country and we can’t even vote him out.
Of course there will be a recession, and of course Orr has to try not to predict it. Any financial journalist will know that, and if they need Orr to confirm what they know, they should switch to writing the gardening column. The big question is will it be worse than a recession?
RBNZ starts $30 Billion QE https://www.stuff.co.nz/national/hea...rotect-economy
Maybe not good news for depositors but encouraging.
https://www.stuff.co.nz/business/120...rbnz-announces
Adrian may be making the dollars worthless with QE but at least our Aussie owners won't get NZ cash to bail themselves out ahead of NZers.
smart move for sure banks will have enough loan defaults to deal with and need to hold as much capital in reserve ...
Dividends not being paid forces more people to take pain so isn't really a good thing. It is however fair to be forced to make concessions if public money is being used to support the banks. Is it?
Probably but Im not exactly clear on that, what with the state putting its noses so much into business its hard to know if you can fart without breaking a regulation.
In the governor's case I suppose he considers that he's acting to protect the NZ banking and monetary system. As he is employed to do.
The taxpayers guaranteed the banks back in 2008/09 no one was bi*t*hing about government interfering in business back then. Not paying dividends forces the right people to take the pain, the business owners. Don't gamble with depositors money when you know tough times are ahead.
in my opinion the govt is causing the pain, the RBNZ cannot fix it, but the govt can.
There is no evidence to support the lockdown.
The entire world has shut down without a shred of evidence to support it? Possibly the results in countries such as Italy, Spain and now possibly the US would indicate some sort of evidence in support of the lock down?
Are we to assume just about the entire world leadership from China to the US to NZ have locked down everything on a whim without any evidence?
Or are you suggesting the cure may be worse than the disease or possibly you don't give a s**t about old people dying. You and blackcap might be right but we will never know as just about the whole world has decided a lock down is the best option. I thought the UK was going to go with the herd immunity but they changed their minds for some reason. Either they flipped a coin and changed their minds or they were presented with some evidence that a lock down and social distancing was a better option. There is pain either way physical or financial it depends what is most important to you people or money?
If the lock down pricks the debt bubble that will ensure additional economic pain but if the virus was allowed to spread exponentially the eventual drop off in customers may have had as big an economic impact anyway. a 2% loss of customers plus a likely reduction in people going out anyway.
Sorry I might be getting off topic.
yeh its not the thread but I am not convinced the shutdown is necessary
Sorry can't help myself.
Thanks for calling out my fake news with the 2%. Although your analysis seems overly simplistic as I don't think everyone on board caught the virus but thanks for the optimistic outlook.
As of February 20, tests of most of the 3,711 people aboard the Diamond Princess confirmed that 634, or 17 percent, had the virus; 328 of them did not have symptoms at the time of diagnosis. Of those with symptoms, the fatality ratio was 1.9 percent, Russell and colleagues calculate. Of all infected, that ratio was 0.91 percent. Those 70 and older were most vulnerable, with an overall fatality ratio of about 7.3 percent.
Extrapolating those numbers to China, the team estimates that 1.1 percent of symptomatic cases there turned deadly. Considering asymptomatic cases drops that ratio to about 0.5 percent in China, the team calculates.
The Diamond Princess seems like a good way to judge how deadly the virus is as they tested everyone. If the above is not also fake news then 2% is only for those who become symptomatic. Including asymptomatic people this drops to 1% so half I what I said. and even at .5% in China not quite double what you are suggesting.
I stand corrected but you might want to get your facts straight as well.
Reading the last post I can see why macduffy is shepherding me around to a relevant thread.
Adrian Orr and low interest rates and easy money is really getting some headlines lately.
https://www.nzherald.co.nz/business/...DJ7NCDFPGUMYA/
I would have voted Social Credit if I thought it was a good idea. I guess the reserve bank buying the govt bonds off the banks provides some income for the trading banks while interest rates are so low.
Adrian Orr has his hands tied as he has suggested. The govt is the only one who can provide real change. Reduce the Reserve Banks inflation target to zero%.
I am also confused Adrian Orr says the interest rate suppression is to ensure full employment yet in the news I hear that we import workers for the fishing industry, harvesting and farming. Also I heard a plan to train inmates to drive as we have a driver shortage. Someone is bullshi**ing. Is it Adrian or business leaders, or is Adrian seeing something worse coming down the road.
Economists predictions earlier this year of a 10% fall in house prices don't appear to have been that prescient either.
Personally think the Govt / RBNZ are increasingly wanting to keep property from stalling as that would be far to close to falling in value and as majority of young adult kiwis property mad an ticked to the eyeballs the mandate is to keep the madness flowing while spewing how hard your working to help First time home buyers ... it’s the old kick the can down the road
It used to be you take on debt you take on risk but as you say people have an expectation central banks will ensure/insure there is capital gains and that interest rates will get cut each time there is trouble. Currently they are gauranteeing 2% per annum but as all the inflation they are creating is in asset prices you are getting 7%. Who needs yield with capital gains like this. All the while people without assets are not really waking up to the fact that monetary policy has/is destroying any chance they have to get ahead as asset prices soar at double the rate of wage inflation for the last 20 years. This is only sustainable as interest rates have been steadily dropping over this time and people can take on more debt to make up the difference, but we are now at or near zero. Savings are losing 2-3% in purchasing power each year currently, how do you save for a house deposit?
You might get a handout from this govt but you won't get a hand up as that would require a rethink on monetary policy and whether constantly rising prices is actually a good thing.
Possibly but holding cash at the moment is contrarian a financial market meltdown would make help cash although I can't see it happening.
Look at this about the third to last paragraph.
https://www.nzherald.co.nz/business/...7NZMDY6XRAYJY/
"Second, the Government should rethink its monetary policy instructions. The case for lifting the rate of consumer price inflation to 2 per cent per year in a post-Covid world seems to be close to non-existent. The costs are too high and the benefits are mainly wishful thinking."
Although this is from the NZ initiative so now I am unsure if I am a heartless monster or not.
Following on from the NZX , maybe they went for another target ......
Reserve Bank responding to illegal breach of data system
10 January 2021
The Reserve Bank of New Zealand – Te Pūtea Matua is responding with urgency to a breach of one of its data systems.
A third party file sharing service used by the Bank to share and store some sensitive information, has been illegally accessed.
Governor Adrian Orr says the breach has been contained, and the Bank is treating the matter with the highest priority, and acting with urgency.
“We are working closely with domestic and international cyber security experts and other relevant authorities as part of our investigation and response to this malicious attack. The nature and extent of information that has been potentially accessed is still being determined, but it may include some commercially and personally sensitive information.”
“The system has been secured and taken offline until we have completed our initial investigations. It will take time to understand the full implications of this breach, and we are working with system users whose information may have been accessed. Our core functions remain sound and operational.”
Fallout from data leak ...Taxpayers Union questions Orr suitability for the job
https://mailchi.mp/9f8a4889e6aa/orrs...ng-but-upfront
Maybe I am being too harsh on Adrian, I see the $NZ has been rising against the $US and the TWI since 2020 despite his low interest rates and easy money. His actions must be less retarded than other central banks namely Japan, China and the USA. In a global currency war I guess wealth and income equality as well as social mobility are victims.
NZ's success regarding the virus has also helped. Nice to think that putting people before profits has produced a better result for just about everyone rather than if we had half ar*ed it like the UK USA etc.
Also note in the herald today new rules coming regarding peak livestock to cut our emissions.
If they can establish peak livestock numbers perhaps they can come out with a peak human number for a country this size. It would seem more important as there is a strong argument that it is human caused climate change.
Seems like such bu****** sometimes even though the intentions of saving the planet seems a good idea it comes across as a bunch of townies wanting the rural sector to make all the sacrifices so they can continue to fill the cities with more and more people. Have a look at the whole basis for our economy. More and more consumption for more and more growth in a virtuous upward spiral. Change that model and you might get a more sustainable economy.
Rodd Carr is no doubt a very smart guy but I suspect he could win more people over if he shaved and removed the Tiki then he might appear less like an aging hippy.
Grant Robertson is weak.
https://www.nzherald.co.nz/business/...P6CGHGDGYCHUI/
https://www.stuff.co.nz/business/300...decisionmaking
He is asking Adrian Orr to consider housing when making monetary policy decisions. How vague is that? It comes across as so lame and gutless it is infuriating.
How about getting rid of targeted inflation, that is something more concrete.
Or possibly talk to stats nz or whoever compiles the CPI. The figures I have are out of date but purchasing a home comprises 5.42% of that index, rent 9.12%, Alcoholic beverages & tobacco 7% Recreation & Culture 9.51%. If your house or rent is 50% or more of your weekly budget perhaps it deserves a much higher weighting in the CPI than alcohol. That would give Adrian a challenge with his inflation target if house costs and rents made up 50% of the basket of goods.
I would expect such a weak response from a National government but it is disappointing coming from labour.
I'm pitying Adrian now - juggling all those balls - interest rates, employment, house prices. He'll need to be some new variety Superman!
:ohmy:
I am sure he already considers house prices when setting monetary policy so nothing has changed for him in reality. The reserve bank has already predicted a 22% rise in house prices for 2021 so he is obviously already considering them.
This is just Robertson and Labour pretending they are trying to address the issue of house prices and inequality without actually doing anything.
https://www.interest.co.nz/property/...rice-inflation
With a prediction of 22% for 2021 for house prices I wonder how this fits in with the main reserve bank mandate of price stability and a sound & efficient financial system. My idea of price stability differs to what I am seeing and reading but I lack the intelligence of Adrian Orr or Grant Robertson.
Perhaps they should clarify what a "sound and efficient financial system" looks like. They aren't blowing a housing bubble provided they can inflate away the debt I suppose. Perhaps it is an efficient way to ensure growing inequality.
Hopefully the majority of the population will start judging Robertson and Ardern based upon outcomes, rather than the platitudes being espoused about the housing market. Campbell pushed Robertson this morning on that very issue and he became visibly uncomfortable. We need results from this self-declared transformative government, and fast.
Not likely Labour brought in the shift to neoliberal policies and capital over labour, not likely they will change back. Here is someone else's view although some pretty dodgy articles on this site.
https://www.zerohedge.com/markets/la...onse-kiwi-nces
No doubt they will be accused of being communist, but probably more like dictatorship. I was suggesting Labour were weak earlier on this thread. Since then denying interest deductions (I have already said I think it is unfair and inconsistent but palatable if new builds get to keep the interest deduction) and extending the bright line test. More aggressive but not at the heart of the problem, monetary policy. Possibly a move away from neoliberalism and more central control is being heralded by the article below. Either that or it is not just me thinking that Adrian Orr comes across as being one of the lesser responsible person in charge of the financial system.
https://www.nzherald.co.nz/business/...KUNLMY3YUYOTY/
I think separating the central bank from government was because politicians could not be relied on to be responsible with the printing press. 30 years of lower interest rates and easier money would indicate even an independent central bank can't help itself. What is the solution to the next crisis? My guess is more money and negative interest rates why limit asset prices with pesky interest rates.
Ashley Church is concerned about the changes. Since 1989 he has looked like a financial genius by borrowing and buying houses so any change to the trend for the last 30 years would make home look like an idiot if he is still overleveraged.
It might also make his criticism of the Reserve Bank LVR restricting first home buyers look stupid as well. I am sure Mr Church has done well out of monetary policy over the last 30 odd years and credits himself as a hard working financial genius. He would like to see it continue by allowing new home buyers to borrow even more to keep things going. Lower interest rates more money has worked well until now,why wouldn't it continue forever?
Legendary work from the reserve bank on inflation over the last thirty years? I think exporting jobs to countries with low labour costs so we can buy back at lower prices and keep inflation low has been great? Having house prices rise at double the rate of wages would also make him happy no doubt. Having a CPI that may not reflect a normal persons budget might also help. Alcohol & Cigarette costs have a similar weighting as rent. This might be a good reflection for some families but not most.
https://www.oneroof.co.nz/news/39327
@Aaron
I agree the housing affordability is a mess. But let's be mindful NZ is a small nation and it's choices are limited in terms of investments. The article is not biased adjusted in terms of inflation figures. As the principle amount on houses always rise (due to inflation), the % mortgage rates will continue to go down over multi-decade time frames. Can you imagine what 20% mortgage rates would be on a $1.5M house in Auckland? Think about it, 1978 is entirely different to the past 20 years - we have not seen hyperinflation yet.
Mr Church also neglects the fact that 1st time home buyers are unaffected by these changes in LVR. What Mr Church should be arguing about is how the average millionaire in NZ has become so rich solely on investing in residential / real estate properties. A far cry difference compared to the millionaires created in N. American through stock market investments in retirement planning. The NZ Reserve Bank is not to blame but if you ask me to compare. Well the NZRB has made people in NZ rich off buying houses vs in the US, the US Fed has made people rich from rises in the stock market. Talk about wealth inequality!
There's a lot of things wrong in NZ in terms of financial inequity. As in my other posts in other threads, the key problem in NZ lies in un-fair taxation. Those choosing to buy houses and holding for 10 or 30 or 40 years will definitely get the benefit of tax free capital gains. Those that choose to buy Kiwi Saver funds (as much as the FMA promotes how good they are) will only retire an average life - if they can contribute enough. The KS funds even in PIE, after paying annual mgt fees, FIF / FDR, and taxes on dividends RWT, will result in the individual having less at retirement than the leveraged approach to buying a 2nd home.
Labour Party was not serious about widening the investment landscape for NZders. No NZ Political party has (after all FIF was introduced by Bill English). When you look at 20% of expat NZ citizens living abroad - there is good reason why.
Its not just limited safe investments in NZ ... but costs of Land...high subdivision costs / monopoly of building products .. greedy tradies ...
If we could build nice new houses for a fair amount Vs average household NZ incomes then we wouldn't have a run away housing market
average annual NZ household disposable income (after tax and transfer payments) was $81,934...so using fair housing values 5x times = $405k
ultra low interest rates have also of course allow this to ballon... with everyone jumping on board
Looks like Grant Robertson agrees with you.
https://www.stuff.co.nz/business/300...g-house-prices
Obviously can't rely on Adrian Orr to do the right thing and start slowly raising them.
Now that would give us world-wide exposure! A shame about the effect on exports, though.Quote:
Obviously can't rely on Adrian Orr to do the right thing and start slowly raising them.
:ohmy:
Ultra low interest rates aren't the 'primary' cause. It's like arguing which came first, the egg or the chicken? I prefer to point at the NZ culture and NZ's lack of taxing capital gains on residential houses as the impetus of the housing problem.
I've lived in NZ for over 25 years and witness many gov'ts that have never been serious about taxing houses. I mean where else in this world where the #1 choice for getting rich, goes untaxed? How can that be? You may say the low interest rates made it worse ; yes I fully agree. But the driving factor will be from a tax perspective and the recent changes by Jacinda (moving Brightline test to 10 years - excluding mortgage interest rate deductions) do NOT address the primary reason why so many buy houses as investments.
I agree high cost of land development is a problem in NZ (Developmental Contribution Fees, cost of Notified Resource Consents, RMA) all add to the price tag and i'm afraid, all city councils "Have become dependent on these high fees" as these gov't workers rake in huge salaries. Inefficient at best. If you cut these fees down to half - where would the shortfall come? The $3.4B that Megan Woods announced last month is only a drop in a bucket for municipal gov'ts and will not fix the problem.
x 5 times = $405K ?? Not when 3/4 of NZ's population lives in the North Island and a good 33% of total NZ population living in Auckland? How about 85% of total population lives in urban areas (say your Alk / Wellington / Chch) ? Tauranga & Queenstowns are pretty hot expensive places too. I prefer to look at this which is more accurate at x 10 times on GROSS income. https://i.redd.it/ng1n24q608k61.jpg
Yes we can build affordable houses (capital improvements) by sourcing overseas ; but that would come at the cost of losing jobs in NZ. Would that be a good thing? You know we have a timber shortage but all those logs are being exported to China instead of being used for timber framing.
In all aspects, hard to believe NZ is still the land of milk and honey. I look at the next generation and I can't see much hope. Our university education is lacking (on the international scale) - despite how much $ parents sink into private school education. Our ability to invest as a NZ resident is skewed. The winners in NZ don't seem to help the needy much (not seeing much charity from that group).
So you think fair value housing in NZ should be 10x median income ?? I did some numbers in our my southern City... I could create a basic 3bd home for well under 400k(flat land on outskirts of city /New Transportable 80sqm house ... that should be a norm right across our large Landmass to population but sadly it isn't .. far too many hands out clipping the ticket..that and having Cities surrounded by coasts ...
I agree ultra low rates aren't the only factor increasing property prices but they sure have added fuel .. we purchased our last property early 2016 this was when we seen fixed 1yr rates come down from the high 5% in 2015 to mid 4% 2016 ... to present 2.25%. ... when watched our property go from $550k go to $950k in 5yrs ... no way that would have happen if rates had moved back to 2015 levels 5%+
Still this is just a few of many factors why we don't have affordable housing in Major centres ...
I disagree the list you provided has Sydney ahead of Auckland. Aussie has a capital gains tax and a housing affordability crisis. You might be able to tell us if your beloved Canada also has a capital gains tax and high house prices.
Although there are many reasons for high house prices in NZ I would argue that monetary policy and low interest rates are the main reason. In the herald today they discussed rising house prices since 1981. If you take a graph of the NZ OCR over that same time you will notice that the OCR has fallen over this time in an inverse relationship. A well established relationship that as interest rates fall asset prices rise. We have had 30 years of falling interest rates that have become more and more extreme after each crisis and coincidentally (I don't think so) house price rises becoming more and more extreme.
People like investing in houses because the reserve bank guaranteed capital gains are untaxed (true), but surely the fact that monetary policy pretty much guarantees you a gain is a big plus to current investors (not so much for future investors if interest rates change course). Also it is simple to understand, you have some control of your investment and you don't have some guy in a suit clipping the ticket come rain or shine or allocating him/herself a ridiculously large salary at your expense. And most of all you you can use a lot of leverage to amplify gains as long as you know the NZRB and the National or Labour govt has your back.
NZ doesn't have a comprehensive capital gains tax much of the developed world does. If Australia, Canada, UK etc have historically high house prices to income then it won't be capital gains tax being the main driver. Although it will play a part. What they do have in common is lower and lower interest rates and loose monetary policy.
Check for yourself
https://www.global-rates.com/en/inte...ral-banks.aspx
Interesting read
https://thespinoff.co.nz/business/30...ike-it-or-not/
Reminded me Adrian did try to force the banks to increase the amount of capital they hold from around 10% to closer to 20%. But turned back into a jellyfish as soon as covid hit.
You read articles like this and realise that rising rents are at least partly(if not wholly) due to crazy monetary policy. The NZRB is largely responsible for this. Maybe rather than controlling rents governments should get out of controlling interest rates and let the market weigh up risk and decide.
House prices would not be so ridiculous and landlords would not have to constantly push up rents to justify the price they paid for their property if prices were based on a reasonable current yield rather than a future capital gain aided by rising rent.
In the current environment the price of a house seems more dependent on how much you are allowed(willing) to borrow, rather than the yield provided by the investment because as we all now know the tax free capital gain is where the real money is made.
https://www.stuff.co.nz/life-style/h...-nz-initiative
the NZ initiative point out keeping rent at below market rate is a bad thing yet don't mention keeping interest rates below market rates as a bad thing. I guess consistency is not part of their way of thinking.
If the RBNZ wasn't setting interest rates, what are these "market (interest) rates?Quote:
the NZ initiative point out keeping rent at below market rate is a bad thing yet don't mention keeping interest rates below market rates as a bad thing. I guess consistency is not part of their way of thinking.
I guess I would need to understand international finance better and the nature of money in a fiat currency system.
If banks and finance companies are the market place for interest rates we did see finance companies successfully attract capital through higher interest rates (and back handers to "financial advisors") although obviously the risk assessment by the lenders of the capital was not very good.
How are NZ banks funded as the article below points out the more banks lend the more money gets created. Do banks even need depositors? I read of central banks printing money and buying bonds, does this fund banks in NZ.
The OCR influences all other interest rates, but how if banks are free to set rates however they like how does it do this.
The underlying factor is 'what % of the total population' is able to afford the house they live in? Both Canada and Australia have CGT, but i'm sure Sydney & Vancouver only represent a small % of the total population in each country (and so be it were the top 1% are able to buy those places). When 33% of NZ's population live in Auckland region, then yes we have a problem. Vancouver might be only 1% of Canada. If you look at other major cities in Canada like Edmonton, Calgary, Quebec City, Montreal, even Ottawa, all have exceedingly affordable housing (the latter being the most affordable and Ottawa is gov't central, like Wellington govt). The only 2 real outliars are Vancouver and Toronto and I do believe a large part of that is more to do with Canada's approach multiple ways of taxation to discourage landlordism (if there's such a word?). When Jacinda made that landmark speech in March, the stats were staggering. Some 40% of ALL property transactions were made by those who already owned multiple houses. 15,000 houses were purchased by those who already OWNED 5 OR MORE houses!!! Shocking if you ask me and well beyond the realm of things when you compared to Canada. The critics got it wrong in their reporting. Like which came 1st, the egg or the chicken... people's behaviour dictates first - they're always going to go for the tax free capital gain which is still the best game in town in NZ. In Canada or in the US, the best game in town to get rich is owning shares through retirement savings (for which in NZ have nothing except the dismal Kiwi Saver). No TFSA/IRA no RESP / Education savings plan. No Disability savings plan (which all of these grow 100% tax free and not limited to only domestic stock exchange).
https://www.youtube.com/watch?v=JwoImm6FgCM
Things are not fair and the fairness is easily judged when you look at other countries. The middle class NZ resident with Kiwi Saver will have less of a portfolio at retirement than the Cdn or US resident investing in the same shares. Corporate taxes are lower in Canada & US than in NZ. Income taxes are lower there too. The Vancouver home of similar value to the Auckland home, will be larger, more comfortable, better in every way than the Auckland home (so if you want to go and compare things like cars - you need to look at apples vs apples). There no Toyota Corolla that ends up being better in Canada than in NZ ; but on the issue of houses and standard of living - then there's a clear difference. The low interest rates set by central banks over the past decades are not the cause - the OECD has set it clear that NZ houses have ran away in terms of affordability and you can't simply put it down to low mortgage rates. Again, blame the behaviours of landlordism.
SBQ. Sorry, but it looks like you need to be called out again. You may want to "fact check" yourself before attempting to build your arguments. Otherwise you may find that the basis of your points are being built on quicksand and that they will be dismissed as quickly as you appear to be glibly dispensing them.
QUICK FACTS:
Vancouver's population 2.6M (approx 7% of Canada. Certainly not 1%)
Sydney's population 5.3M (approx 21% of Australia. Surely this shouldn't be called a "small %")
To further illustrate what's actually happening, despite Aussie having CGT, house prices in greater Sydney increased by over 8% in the March Quarter. Even higher than Auckland at 7.2%. Vancouver; I'll leave you to look into that, rather than potentially further embarrass.
The actual reality is significant house price inflation has been, and still is, occurring in multiple markets across the globe. NZ is NOT some sort of unique/special case.
With the ongoing global "Everything Bubble", arguably created by QE, TINA et al, one could say that it isn't really a surprise.
If you don't believe in the past 30 or so years NZ's unaffordable housing is not unique enough to be ranked #1 by the OECD for the poorest familes, then you must belong on that camp of those that own lots of residential properties. For a progressive nation, this is not something NZ should be proud with. I stand corrected the Vancouver / Sydney % population ; but I won't back down on NZ's culture for landlordism.
https://www.rnz.co.nz/national/progr...ability-report
Your % difference does not change the fact, vast majority population in Canada or Australia do not use houses as a vehicle to make their riches. Is my 33% population figure in Auckland that far off? Show me some figures on % of all houses that are rental vs owned by 1st home owners? Then you have something to argue about.
Don't try to justify the means why NZ houses are unaffordable to MOST of the general population by saying it's the same in other OECD nations. It's not. Those countries have done far more for the middle working class than NZ has ever done. But i'm not trying to skew and change the topic. It's not a justification that say Sydney is as expensive as Auckland despite they have CGT. You need to look at the struggles of the middle class and low income workers in both parts. When a high % of houses are in rental state, that means more of the population can't afford to own their 1st home.
...then you must belong on that camp of those that own lots of residential properties.
Your % difference does not change the fact, vast majority population in Canada or Australia do not use houses as a vehicle to make their riches.
Don't try to justify the means why NZ houses are unaffordable to MOST of the general population by saying it's the same in other OECD nations. It's not. Those countries have done far more for the middle working class than NZ has ever done. But i'm not trying to skew and change the topic. It's not a justification that say Sydney is as expensive as Auckland despite they have CGT. You need to look at the struggles of the middle class and low income workers in both parts. When a high % of houses are in rental state, that means more of the population can't afford to own their 1st home.[/QUOTE]
SBQ.....just settle a little huh. .........You are jumping around with a pumped up chest like an over-excited teenager on their first date. And, once again making wild assumptions. In this case on which "camp" I'm in and my opinions on what is driving the deterioration in house affordability in NZ. If you want to successfully "argue" on a forum site then my suggestion to you is keep your boundaries clear on what is fact and what is your opinion. Dressing up your opinion & assumptions as fact is not going to help you win any solidly principled based argument.
You may want to pause & consider that I made NO reference to your "landlordism" opinions. I simply held you to account for your glib assertions re the numerical facts regarding other cities/markets.
Whilst discussing & sticking to the facts, here is something further for you to consider. The MAJORITY of NZ housing stock is still clearly owner-occupied. Yes, the % has reduced over the decades (peaked around 75% in the 90's from memory), but it still sits around 65% today. Meaning up-to only 35% are owned by landlords. When compared to other markets, it's very similar actually. Home ownership figures elsewhere:
Australia - 67%
Canada - 68%
UK - 65%
USA - 66%
Denmark & Sweden (supposedly very "progressive & modern" countries) - 61 & 64%
These facts are a little confronting for you perhaps, but I trust that it makes you pause and reflect a little more on your epistemological framework. Just maybe you will consider that there are some other key drivers to why we are getting the current outcomes in NZ, and just maybe they relate back to the Subject Line of this forum thread. ;-)
QUOTE: ASSUME - and you will end up making an ASS out of U & ME
Yes your right looking at CBA's 2020 annual report deposits are 69% of total assets and debt issues 14%, equity is only 7% of total assets.
I had better shut up as I don't know what I am talking about. Does anyone know of any good online courses for understanding the banking system?
Many thanks FTG I have found SBQ is pretty fast and loose with the truth/facts, good to see someone pointing it out.
Sadly I am not the only one making s*it up.
So the Labour Party is over-reacting for nothing about the cost of housing? The stats Jacinda made were of no interest?
There are other reasons why Denmark & Sweden have lower home ownership - from what i've been told, they focus their investments towards share ownership rather than holding it all in a dwelling. Perhaps you can be eager enough to fact check this out?
The 65% ownership figure does not tell the whole story. Try looking at the composition of it such as by age group and if you have noticed (or missed out), the trend for the past 25 years? It's been well commented by the media:
https://www.tvnz.co.nz/one-news/new-...el-in-70-years
https://www.theguardian.com/money/20...rship-ons-rent
and as my architect designer friend told me last week, "Seniors do not like to pay rent for a dwelling they live in". If you have children, what will it be when they grow up trying to buy their first home?
Australia from what I recall still allows negative gearing so for the wealthy, real estate is still their best game. I would imagine the UK would be similar ; hence similar housing affordability issues. The US is different and you can see up and down home ownership % over the past decades; though their tax approach to owning houses is a lot different. Canada if you missed, had an increasing trend on home ownership for the past 25 years. Again, what's the OECD's view on NZ's housing? A bunch of waffle? Do they say the same for Aus/Can/US/UK ???
Getting back to the reserve bank making $ out of fresh air. Not all banks are the same. That is larger banks in NZ have the ability to weather more risk and be more competitive on mortgage rates. The better question is, what % of the banks in NZ are foreign owned and how much of the profits they make, goes abroad? Does the reserve bank not care who their $ is lent to and knowingly, the profits are sent abroad if these banks are foreign owned?
I heard on the radio this morning Janet Yellen suggested interest rates may need to rise a "little" bit to make sure the economy doesn't overheat.
I guess the market reaction caused her to reverse course quickly.
Still zero hedge asks "did she just start the process of thinking about thinking about thinking about normalization?"
Not a chance, inflation is needed to take care of the debt so owners of assets can keep their gains without making any effort.