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  1. #11
    l'Excuse greater fool's Avatar
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    "There is something wrong with a regime that requires a pyramid of corpses every few years." George Orwell.

  2. #12
    Senior Member TeslaGod's Avatar
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    greater fool

    Totally agree, the government meddling in Central Bank policy is extremely dangerous.
    Last edited by TeslaGod; 07-08-2021 at 10:40 AM.

  3. #13
    l'Excuse greater fool's Avatar
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    The Reserve Bank of New Zealand Bill was passed following the third reading in Parliament today. ( 10Aug2021 )

    "I am proud to see the passing of this important piece of legislation. Not only does it modernise the more than 30-year old Reserve Bank Act,
    the reforms support and protect the Reserve Bank’s independence while ensuring it operates in an accountable and transparent manner," Grant Robertson said.

    http://www.voxy.co.nz/politics/5/391129

    Key features include:

    - strengthening decision-making: all decisions other than monetary policy will be made by a board rather than a single decision-maker
    with the Governor as a member of the board;

    - reframing the financial stability objective to "protecting and promoting the stability of New Zealand’s financial system", which will provide better clarity;

    - ensuring operational independence is balanced with appropriate accountability - with changes to update the Reserve Bank’s accountability and reporting frameworks,
    such as aligning with the Crown Entity framework requirements for statements of intent and annual reports;

    - providing for a Financial Policy Remit to be issued by the Minister, setting out matters to which the Reserve Bank board must have regard;

    - changes to the funding model to promote transparency and allow for appropriate recovery of costs, through industry levies and fees;

    - providing the Minister with the ability to direct the Bank to maintain a minimum level of capital; and

    - providing the Council of Financial Regulators with a statutory mandate to support effective and responsive regulation of the financial system, by facilitating
    cooperation and coordination between its members.


    https://www.scoop.co.nz/stories/BU21...serve-bank.htm


    And, having passed the new rule book, what has Robertson directed the RBNZ to do next week..........??

    https://www.interest.co.nz/property/...erest-rates-50

    The central bank has its next review of interest rates on Wednesday, August 18, and most economists now believe it will raise rates then
    - but the general expectation is for a 25-basis-point rise to 0.5%.

    ............that the RBNZ is frustrated with continued “risky lending” and is going back to the macroprudential tool-shed to find a bigger hammer.
    "Ideally it wouldn’t have to. Using interest rates to douse the housing market is cleaner and potentially less distortionary. Making a fast start
    with interest rates – whether it’s three 25bps hikes in a row or an initial 50bps – might avoid having to play catch up down the line. With one
    eye on Covid, it seems to be the path of lesser regret."
    "There is something wrong with a regime that requires a pyramid of corpses every few years." George Orwell.

  4. #14
    Senior Member TeslaGod's Avatar
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    Most likely a combination of LVRs DTI and possible OCR hikes.

    All basically designed to block out the next generation of those wanting to achieve home ownership and prosperity.

    None of this will effect me.

    Wealth transfer complete.

    Sad reality.

  5. #15
    l'Excuse greater fool's Avatar
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    Quote Originally Posted by TeslaGod View Post
    Most likely a combination of LVRs DTI and possible OCR hikes.
    All basically designed to block out the next generation of those wanting to achieve home ownership and prosperity.


    https://www.landlords.co.nz/article/...re-regulations

    Finance Minister Grant Robertson and the Reserve Bank have signed this week a new memorandum of understanding regarding macro-prudential policy.
    This involves policies the Reserve Bank can implement which will influence bank lending.
    Alexander says they include things such as limits on lending as a proportion of core funding from domestic and long-term stable sources, minimum
    requirements for the amount of capital needing to be held against certain types of lending, and loan-to-value ratios.

    The memorandum gives the Reserve Bank a new suite of tools it has called “debt serviceability restrictions”. These tools include but are not
    limited to the following.

    Debt-to-income restrictions (DTIs)

    The Reserve Bank will be able to limit the debt a bank can extend to a borrower as a ratio of their income, with that debt being measured maybe
    as just mortgage debt, maybe as all debt.
    In Ireland this ratio is 3.25 times income and in Britain it is 4.25 times income.

    Debt servicing-to-income restrictions

    The Reserve Bank will be able to force banks to cap the proportion of a borrower’s income which can be allocated to servicing debt.
    Banks usually use 30% or thereabouts. The Reserve Bank might make them use something lower like 25%.

    Interest rate floors

    The Reserve Bank will be able to specify the minimum interest rates banks must use when calculating debt servicing ability.
    For instance, a bank might lend at 4%, but the Reserve Bank may require they work out debt servicing costs using an 8% interest rate.
    Alexander says for the moment the bank may not feel it is necessary to use any of these tools. And DTIs may be some way off as the banks need to
    do some work with their systems and start consultation.
    “But monthly debt data continue to show high growth in housing debt of about $3 billion a month.
    “The rate of growth in housing debt over the past year has been 11.9% compared with 6.2% one year ago, 6.2% two years ago, and 5.7% three years ago.
    “The pace of growth is the highest since early-2008.”

    The memorandum, says Alexander, explicitly states the Reserve Bank must implement its macro-prudential policy according to the direction issued by
    the Finance Minister on February 25: “The Government’s policy is to support more sustainable house prices, including by dampening investor demand
    for existing housing stock, which would improve affordability for first-home buyers.”

    “What does all of this mean? To support more sustainable house prices the Reserve Bank is being instructed by the Finance Minister to further
    restrict access to borrowing by investors,” Alexander says.
    “The chances are high the Reserve Bank will utilise its new instruments in the next 12 months focused exclusively, if possible, on investors.
    “The Reserve Bank may tolerate an impact on owner-occupiers generally but will seek to limit any impact on first home buyers beyond that already
    set to come now from restricting the lending banks can do to borrowers with less than a 20% deposit.”

    Ghost houses
    There is another aspect of this to consider, says Alexander.
    The Government, and most people, are concerned about the lack of availability of accommodation for many people across New Zealand.
    “When that discussion comes up it sometimes goes down a particular path. What about all the empty houses sitting around the country?
    “People might throw into the conversation a guess as to how many there are. Then they will throw in a few guesses as to why they are sitting empty
    with a frequent conclusion that perhaps people are simply land-banking with a structure happening to sit on the land.”
    "There is something wrong with a regime that requires a pyramid of corpses every few years." George Orwell.

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