ADRIAN ORR our NEW RBNZ GOVERNOR

[Aaron]

Only read the herald article, so probably not a very balanced view of what was said, but sounds like Adrian not only knows the correct price for capital but knows exactly how much houses should cost.

If he had any sort of clue regarding the correct price for capital then houses might not have inflated to the levels they have. An investor wants a return on capital, negative real rates are not something they would accept in a free market. But if capital is available at the touch of a printing press why should we worry about the price of it. Worthless really if you think about it.

Adrian should try and do as little as possible except follow his mandate of price stability and controlling the money printing presses, but that does not seem to be in his nature.

https://www.nzherald.co.nz/business/...ORNJZ6DZZC4C4/

[Logen Ninefingers]

Only read the herald article, so probably not a very balanced view of what was said, but sounds like Adrian not only knows the correct price for capital but knows exactly how much houses should cost.

If he had any sort of clue regarding the correct price for capital then houses might not have inflated to the levels they have. An investor wants a return on capital, negative real rates are not something they would accept in a free market. But if capital is available at the touch of a printing press why should we worry about the price of it. Worthless really if you think about it.

Adrian should try and do as little as possible except follow his mandate of price stability and controlling the money printing presses, but that does not seem to be in his nature.

https://www.nzherald.co.nz/business/...ORNJZ6DZZC4C4/

QE, the popularity of MMT - Modern Monetary Theory (which hardly seems to get mentioned these days, it was all the rage at one time), endless government and private sector debt accumulation.....all of this had people questioning whether 'money' had any value these days, as it seemed to be able to be brought into being in enormous unending quantities with no serious cost (interest rate) attached to it.
The irony is that money was not losing its purchasing power at that time. Inflation had not shown up in a big way, so there was this situation where money was seen as readily available and cheap, but everything that you bought before with this money was still available at similar prices. Groceries, fuel, consumer goods....inflation on these items was very low.
So where was this cheap and plentiful money flowing? Into assets. Asset price inflation was going through the roof, but because goods and services were not seeing inflation people just assumed they were getting wealthier as some sort of naturally occuring phenomenon.
What killed off all fanciful notions around money creation and interest rate suppression was the emergence of widespread inflation in every sector of the economy. It immediately killed MMT thinking stone dead. It killed of the thinking that QE and ultra-low interest rates had no inflationary consequences. And people are still getting their heads around this. They are still looking for a revival of 'the good times', probably because they were very comfortable with that recent environment where banks were shovelling money at them at dirt-cheap interest rates.

[Aaron]

QE, the popularity of MMT - Modern Monetary Theory (which hardly seems to get mentioned these days, it was all the rage at one time), endless government and private sector debt accumulation.....all of this had people questioning whether 'money' had any value these days, as it seemed to be able to be brought into being in enormous unending quantities with no serious cost (interest rate) attached to it.
The irony is that money was not losing its purchasing power at that time. Inflation had not shown up in a big way, so there was this situation where money was seen as readily available and cheap, but everything that you bought before with this money was still available at similar prices. Groceries, fuel, consumer goods....inflation on these items was very low.
So where was this cheap and plentiful money flowing? Into assets. Asset price inflation was going through the roof, but because goods and services were not seeing inflation people just assumed they were getting wealthier as some sort of naturally occuring phenomenon.
What killed off all fanciful notions around money creation and interest rate suppression was the emergence of widespread inflation in every sector of the economy. It immediately killed MMT thinking stone dead. It killed of the thinking that QE and ultra-low interest rates had no inflationary consequences. And people are still getting their heads around this. They are still looking for a revival of 'the good times', probably because they were very comfortable with that recent environment where banks were shovelling money at them at dirt-cheap interest rates.

I think they could have kept inflating assets if they kept everything going through the banking system so only wealthy people with collateral could get to use the cheap and easy money. I think the mistake they made that destroyed the monetary utopia was printing it and giving it to the plebs during covid. That kicked off CPI inflation IMO. Asset prices are hardly a part of the CPI and rents could have kept rising without pushing CPI too high.

[Aaron]

The Reserve Bank of Australia has made an ad, and it’s surprisingly honest and informative.

Might also be applicable to the RBNZ.

https://www.youtube.com/watch?v=DNxXRigHri4

[Aaron]

Increasing interest rates, surging immigration Tony Alexander reckons its a dogs breakfast, good luck predicting the outcome.

https://www.oneroof.co.nz/news/43552

I guess drive wages down or slow their growth, so the RBNZ can drop interest rates and push house prices up. Govt and RBNZ will have learnt their lesson, they should only push up asset prices through low rates and pushing easy money through the banking system so that only owners of collateral can access it.

Housing shortages and desparate tenants should help justify rents keeping up with property price rises, then we are back to the good times.

[Aaron]

Increasing interest rates, surging immigration Tony Alexander reckons its a dogs breakfast, good luck predicting the outcome.

https://www.oneroof.co.nz/news/43552

I guess drive wages down or slow their growth, so the RBNZ can drop interest rates and push house prices up. Govt and RBNZ will have learnt their lesson, they should only push up asset prices through low rates and pushing easy money through the banking system so that only owners of collateral can access it.

Housing shortages and desparate tenants should help justify rents keeping up with property price rises, then we are back to the good times.

Damien Venuto might get it.

https://www.nzherald.co.nz/business/...O6P6E7XMYWSOA/

“Some forecasts predict up to 80,000 people could lose their jobs,” Howard says.

The one caveat here is that migration is picking up, which in turn means that the labour pool is becoming larger - which in turn has a flow-on effect when it comes to unemployment.

“Regardless, it’s definitely going to be harder for people. The Reserve Bank has forecast unemployment to be around 5.1 per cent this time next year, and they see it peaking at 5.7 per cent in the March quarter of 2025.”

That would put the numbers on par with the historical average New Zealand has faced when it comes to unemployment. And while that might not seem like much, it still requires tens of thousands of job losses to get to that point.

High unemployment rates will require stimulation from the RBNZ, I just wonder if the additional immigrants are bringing any capital in which case they may stimulate the economy and CPI inflation but Adrian will be able to point at high unemployment figures to justify the pivot even if inflation stays high.

Damien says it will be harder for some people. Not business owners/employers and landlords obviously but maybe if you are on wages and a tenant, things might be a bit tougher but as Mike Hosking would suggest those people are not aspirational. It feels like we are trying to create an aspirational NZ. I would suggest arsepirational.

[Aaron]

Looks like Chippy is all over the cost of living (inflation) crisis.

https://www.msn.com/en-nz/news/natio...3254cddf5&ei=9

Landlords don't even need an actual increase in demand to increase rents. Maybe NZers just desparate to have a roof over their heads for winter before the accommodation shortfall due to massive immigration.

https://www.nzherald.co.nz/business/...HO5NFEST5LX2Y/

Food price rises largest since 1987 and 1987 included GST being introduced. I wonder if the hard working productive agriculturalists and horticulturalists are seeing much of this rise or if its the middle men.

Maybe Chippy thinks the initial stimulation and consumption of the 100,000 immigrants will be offset by low wages for the foreseeable future. I guess another 100,000 people won't add much to our carbon emmissions or have we given up worrying about climate change. I guess farmers could plant more trees and pay a fart tax while we build more roads in Auckland.

[Aaron]

Whats this increased immigration might boost inflation in the short term?

https://www.nzherald.co.nz/business/...DRU4DJTGVBQ3U/

Don't panic people, you need to think longer term. We have enjoyed lower inflation by sending all our manufacturing to china and other asian countries. This had the added advantage of easing demand for labour in NZ. Now that we are bringing the labour to NZ I guess we can expect continuing subdued wage inflation in the years ahead once we have built houses and further infrastructure for everyone. It worked with manufactured goods why would it not work with services as well. Or maybe it is like debt and finance we just need more and more each time things slow down.

Politicians in general must have this great vision of NZ being an overcrowded sh*thole just like the rest of the world because it would be hard to find a party with policies that run counter to this trend of consume and spend.

I guess for townies it is a utopia of cheap and varied dining out, with lots of shopping but for a minority of NZers who hate shopping, eating out and like a bit of space we don't really have a party to vote for.

[Aaron]

Gareth Vaughan argues borrowers who bought their first home in 2020-21 face being let down by the system

https://www.interest.co.nz/property/...face-being-let

I read this as I was not sure where he would go, but he just points out all the ways the RBNZ encouraged buyers and drove up house prices to ridiculous levels.

As he points out

Scarily in March 2020 the national median house price was a then-record high of $665,000. That's still $115,000 below April 2023's $780,000, which in turn is $145,000 below the November 2021 peak.

He has no conclusions or suggestions for change unfortunately. The home buyers can safely assume interest rates will drop as soon as it visually decent to do so. The people who remain let down by the system are those that do not have parental support to help them attain the stability and security of owning your own home. Having an investment in your own country. No wonder they are leaving in droves, fortunately NZ is still preferable to India, China, The Phillipines, South Africa and plenty of other countries around the globe so we will have no problem replacing them.

[Logen Ninefingers]

Savers continue to subsidise borrowers.
Term deposit interest rates are pitiful, the OCR continues to be below the rate of inflation, and the government continues to borrow and spend to address a ‘cost of living crisis’ which is in actual fact a societal borrowing crisis. The government is another entity subsiding heavily indebted people who overpaid for their assets.
The Property Ponzi Scheme is the massive economic hole that NZ has dug for itself. It dominates all areas of policy, from the OCR rate to immigration rates to the ‘borrow and spend’ mentality of all our political parties. Everything that is done is done with an eye to keeping the over-inflated property bubble pumped up.