ADRIAN ORR our NEW RBNZ GOVERNOR

[winner69]

Where is the deflation in this chart?

https://www.interest.co.nz/charts/re...e-price-growth

Why isn't the RBNZ doing something about it?

I stand corrected Adrian has done some thing.

https://www.newshub.co.nz/home/money...drian-orr.html

You won't talk down the market, actions speak louder than words Adrian, grow a pair and do your job, raise interest rates.

Increasing OCR not in his DNA

[Aaron]

Increasing OCR not in his DNA

True but he is on the case with Debt To Income limits. (DTI)

https://www.stuff.co.nz/business/125...l-house-prices

The bank said its analysis showed tools such as debt-to-income (DTI) limits were likely to be “the most effective additional tool that could be deployed by the Reserve Bank to support financial stability and house price sustainability”.

“Although we do not have a remit to target house prices directly, our financial policy tools can help to ensure prices do not deviate too far from sustainable levels,” Reserve Bank governor Adrian Orr said.

“We believe that a ‘sustainable house price’ is the level that the price would be expected to move towards over several years, reflecting the underlying drivers of supply and demand for housing, including population growth, building costs, land supply, and interest rates,” he added.

Purpose - Reserve Bank of NZ Act
(1)
The purpose of this Act is to promote the prosperity and well-being of New Zealanders, and contribute to a sustainable and productive economy, by providing for the Reserve Bank of New Zealand, as the central bank, to be responsible for—
(a)formulating and implementing monetary policy directed to the economic objectives set out in subsection (1A), while recognising the Crown’s right to determine economic policy; and
(b)promoting the maintenance of a sound and efficient financial system; and
(c)issuing bank notes and coins in New Zealand to meet the needs of the public; and
(d)carrying out other functions, and exercising powers, specified in this Act.
(1A)
The economic objectives are—
(a)achieving and maintaining stability in the general level of prices over the medium term; and
(b)supporting maximum sustainable employment.

As long as the CPI does not properly reflect inflation I guess Adrian is all good.

Maybe someone can interpret what "sustainable house prices" as defined by Adrian mean. A tool more effective than DTI limits to calm house price inflation is to raise interest rates.

[dobby41]

Increasing OCR not in his DNA

The OCR is a very crude and blunt tool.

[Panda-NZ-]

I prefer this reason why deflation is bad (leads to greater, worse things...)

https://www.thebalance.com/what-is-d...-s-bad-3306169

You don't have to look far in the past 10+ years how the EU is doing. They've essentially have never came out of the GFC in 2008 and like in that article why deflation is so bad; the EU problem is interest rates no longer are effective once you go negative interest rates.

Plus national debt becomes so much worse with deflation.

You sort of have to pick one now and its a good problem to have -- you're either worried about debt or inflation since it cant be both.

[Aaron]

Plus national debt becomes so much worse with deflation.

You sort of have to pick one now and its a good problem to have -- you're either worried about debt or inflation since it cant be both.

That is the problem the central banks want inflation to take care of the debt they have allowed to build up. Adrian Orr and all central bankers will never raise interest rates by any significant amount no matter how much I moan and whinge.

https://www.zerohedge.com/markets/mi...ders-magnitude

[Aaron]

DTI limits will ensure the central bank can continue to drive up house prices with low interest rates and easy money but overleveraged poor people won't destabilize the financial system.

Mind you poor people probably aren't supposed to be part of a financialized economy anyway.

https://www.msn.com/en-nz/money/othe...?ocid=msedgntp

[SBQ]

Plus national debt becomes so much worse with deflation.

You sort of have to pick one now and its a good problem to have -- you're either worried about debt or inflation since it cant be both.

Not really. It depends on what kind of national debt we're talking about. Last I recall the US debt is nearly 75% internal (domestic) - hence my comment before that not all central banks around the world are the same and do not have the same footing.

Also debt is only a perspective of view. During the 2008 GFC, we saw countries like Greece and Spain fall in crisis and when it came to issuing bonds, who came to the plate to buy? Note that when a country is in crisis - there simply isn't the domestic $ going around where the gov't can borrow. So instead it seeks foreign borrowings ; well would you know China (at the time being flushed with $) never came to their tables. But when ever the US issues T-Bill, China never says no. How does this reflect to the RBNZ?

[Panda-NZ-]

Not really. It depends on what kind of national debt we're talking about. Last I recall the US debt is nearly 75% internal (domestic) - hence my comment before that not all central banks around the world are the same and do not have the same footing.

Well many govts could borrow at negative real interest rates (10 year bond yield).

Every household has much more debt than the govt which doesn't get much attention from the public but inflation alleviates that burden from them too.

[Aaron]

Not really sure about the chart midway through the article. Price to Rent and Price to Income with 100 being the average and anything over being higher than average. Not sure I understand but NZ topped the chart so well done Adrian Orr NZ not only first in cricket but top at house price inflation and expanding wealth inequality.

The RBNZ doesn't get nearly enough credit for its achievements.

No choice but to plough ahead with the current policies though. Not sure how or when it ends but it is hard to see it ending well for the majority of people.

https://www.zerohedge.com/markets/al...ze-rates-again

SBQ I see your beloved Canada second on the chart, what happened I thought you were suggesting Canada's tax policies and NZs were the main drivers for house price inflation. Do both countries have a similar tax regime around taxing houses?

[SBQ]

Not really sure about the chart midway through the article. Price to Rent and Price to Income with 100 being the average and anything over being higher than average. Not sure I understand but NZ topped the chart so well done Adrian Orr NZ not only first in cricket but top at house price inflation and expanding wealth inequality.

The RBNZ doesn't get nearly enough credit for its achievements.

No choice but to plough ahead with the current policies though. Not sure how or when it ends but it is hard to see it ending well for the majority of people.

https://www.zerohedge.com/markets/al...ze-rates-again

SBQ I see your beloved Canada second on the chart, what happened I thought you were suggesting Canada's tax policies and NZs were the main drivers for house price inflation. Do both countries have a similar tax regime around taxing houses?

I have not been following Zerohedge reporting for a long time as I do not find their information factual and is very subjective how they spin their narrative.

For eg. Zillow has real factual (far more accurate data) of the # of house sales around the US and tracks those selling in say California, and the same people, buying in other states. If you look at the national rise in US house prices (likewise in Canada), they do no compare to NZ's massively high rise in house prices for the same period. Also you need to take population in proportion of house pricing ; in NZ (and correct me if i'm wrong), maybe 80% live in places that experienced insane returns. While in Canada and the US, you are not seeing 80% of the population with home prices that risen 30%. So I would question ZeroHedge's data source and how they are spinning their narrative of inflation and the massive housing bubble.

I opinion? Don't ask these guys. Ask someone like Warren Buffet who has been around far long than these guy reporting were born. I'm not seeing Buffet liquidating Berkshire's share position in fear of a massive bubble in the stock market (or housing market). If I recall correctly, he was saying the Berkshire's investment in housing and construction is very healthy. We had a stock market crash in 3rd week March 2020. The housing policy in US/Canada is in far better position than in NZ. What more to say?