ADRIAN ORR our NEW RBNZ GOVERNOR

[SBQ]

Looks like I am not the only one unsure about the outcomes of NZRB policy.

https://www.interest.co.nz/news/1103...hat-impact-low

Do low interest rates raise asset prices? hmm tough question to answer Adrian Morron.

per the NZRB
“The overall effect of monetary policy on inequality depends on the strength of each channel, which may reinforce or offset each other. Therefore, the overall effect of monetary policy easing on inequality is indeterminate."

Well we have had 20-30 years of falling interest rates so what has happened to wealth and income inequality in NZ over this time? It would be interesting to know if it has increased, decreased or stayed the same. Even then we can't be sure if interest rates and monetary policy were the reason for any change.

This from Berl
"In March, the Reserve Bank dropped the Official Cash Rate (OCR) from one percent to a record low 0.25 percent. Interest rate cuts at all major lenders have followed. The intention is to maintain confidence in markets. However, this has the potential to have a long term impact on home ownership and wealth inequality."
https://berl.co.nz/our-pro-bono/ineq...nd-new-zealand

I am unsure if BERL is making stuff up or perhaps have some insights or common sense not available to the NZRB.

Your last link is of most interest and should be a real eye opener on NZ's inequality.

The problem with monetary policy is it does not discriminate. When the approach to lowering interest rates, with the intent to provide economic stability to businesses does collateral damage. That being it makes the rich get richer. Something so elementary in macroeconomics that I wonder why people never come to that conclusion.

Anyways about rising asset inflation (particularly residential houses) in NZ. I bring back the question, 'which came 1st, the chicken or the egg?'. Central banks around the world are not at fault for this and instead, I put the blame at "investor behaviour" because they got a free ticket to borrow more cheap $ and buy more and more houses because the banks and the NZ Gov't makes it so easy. All while the reserve bank wanted to maintain liquidity for the financial markets to keep things afloat, at the same time causing more inequality (as the report cites)

I put it all down to bad gov't policy - such one as allowing no CGT on residential investment properties - yep best game in town. Bring on the inequality band wagon with Kiwi Saver at the working class and houses for the wealthier which is a better ride. The 20% that own 70% of NZ's wealth enjoy rubbing their hands and the wealthier oligarchs love sending their children to private schools.

[Aaron]

Bank of Canada may have worked out that central bank policy is helping to create inequality.

Stanley Druckenmiller has worked it out too and he seems pretty smart.

https://www.zerohedge.com/markets/dr...inequality-fed

Glaring and expanding wealth inequality is destructive to society. While there will always be inequality and successful capitalism should rightfully reward those that work hard and come up with great business concepts the artificial exponential enrichment of the few by a “government created agency” (Jay Powell) is not in the purview of the Fed’s mandate.

Same could be said of the NZRB.

[Panda-NZ-]

An interesting alternative perspective from ARK's Cathy Wood:

US is set up for massive deflation.

https://nz.news.yahoo.com/arks-cathi...160519316.html

Though she probably would say that given all her high pe funds.

[Aaron]

https://www.stuff.co.nz/life-style/h...rs-and-economy

I don't think he got this right. The choice isn't between house buyers and the economy, it is between home owners and tenants or older asset owning generations versus younger generations wanting to get ahead.

The economy does not want to see rate rises either as this will drive up the $NZ making exporters less competitive and a lot of businesses are carrying debt and enjoying cheap capital.

The choice is now that not just asset prices are inflating but also consumer goods prices are rising, do you squeeze the tenant further with inflation or do you not back the asset owners/risk takers/job creators with loose monetary policy. Anyone buying a house on what has been described as an expensive market is taking a risk. Is it the NZRBs job to protect them or provide a sound stable currency. I know the NZRB is in their words "The Reserve Bank manages monetary policy to maintain price stability, promotes the maintenance of a sound and efficient financial system, and supplies New Zealand banknotes and coins." But central banks have been using monetary policy to protect risk takers from taking any losses at the expense of price stability and the maintenance of a sound efficient financial system.
The wealth effect and trickle down economics are bulls*it yet that seems to be what is driving the RBNZ and central banks around the world.

IMO it is wrong but it won't change any time soon 65% of NZ owns a house so they have no reason to get upset about this and we live in a democracy.

Please note any reference to the NZRB was not the royal ballet but my mixed up acronym.

[Aaron]

More of the same.

https://www.stuff.co.nz/business/125...nt-projections

Anyone in power expressing concern about house prices, is not being genuine.

[Aaron]

Were independent central banks created to ensure price stability and a sound financial system because politicians could not be trusted with this.

https://www.interest.co.nz/bonds/110...ent-bonds-some

I guess if financial stability is rising debt then job well done. If 2% inflation provides stability 4% should provide twice as much stability. Is this why house prices are so stable? They have been averaging 7% for a long time and recently seem to have gone super stable. No wonder economics and banking is so difficult to understand for the average person.

I see Adrian trying to talk down house prices as he doesn't have the balls to do the job he was entrusted with.

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

Only FOMO keeping them up??? I would suggest monetary policy is driving the FOMO but what do I know.

[Aaron]

“When looking at the future of our balance sheet, it should come as no surprise that climate change and sustainable finance is at the forefront of our minds,” she says.

https://www.goodreturns.co.nz/articl...s-in-size.html

How about you stop pushing prices up to create a "wealth effect" so people consume more, that might be a start if you are concerned about climate change. It also will align with the banks "stated" goal of "maintaining price stability".

Is climate change even a part of the central bank role?

Are these statements taken out of context or is Vanessa Rayner a f**king idiot.

[macduffy]

Good points, Aaron. It seems that everything has to be seen through a climate change lens these days. A sound financial system doesn't need to be "justified" in that way.

[Aaron]

Good points, Aaron. It seems that everything has to be seen through a climate change lens these days. A sound financial system doesn't need to be "justified" in that way.

I was thinking that monetary policy designed to push up prices to create the wealth effect so people will consume more runs counter to any real attempt to address climate change if it is man made. Any talk is just hot air unless you are looking to actually change the consumption led constant growth model that society is currently based on. Not that this is any of the RBNZ's concern as it is not part of its mandate.

Our elected representatives should be making the hard calls and overhauling the mandate of the NZRB if it is not working for society.

https://www.newsroom.co.nz/ideasroom...ing-as-science

Unfortunately I can't access Don Brash's response as I am not a subscriber to this site.

[winner69]

Our Adrian obviously doesn’t really understand his role ....and has far too much spare time

https://www.stuff.co.nz/business/125...000-on-rebrand