By VERNON SMALL - The Dominion Post | Thursday, 20 September 2007
The housing market is cooling under pressure from four increases in official interest rates this year, the Reserve Bank says.
Just hours after the United States central bank cut rates by 50 points to 4.75 per cent, Alan Bollard told the finance and expenditure select committee yesterday that the New Zealand housing market was responding to the Reserve Bank's interest rate medicine.
The Kiwi dollar jumped about US3 cents, to US73.1c yesterday after the US rate cut - the Kiwi's biggest one-day gain in nine years.
"The numbers we are tracking now suggests that we are having a significant bite into the housing mortgage market," Dr Bollard said in evidence to the committee's inquiry into monetary policy.
"It's been coming through pretty much as we forecast. It's not falling off a cliff, but it is coming through showing some contraction there, and we think that has to happen."
His comments came as a Bank of New Zealand survey of residential real estate saw professionals reporting the market had turned down fast.
The survey, sent to 11,500 people, found many had noticed a downturn in house sales and were less optimistic about the sector's fortunes.
Agents described the market as extremely quiet, with low sales and falling prices, particularly in Auckland.
House prices have doubled in the past five years.
Last week, Dr Bollard held the official cash rate at 8.25 per cent, noting that previous increases were starting to dampen domestic spending.
Dr Bollard told the committee monetary policy was working and the 'irony" was that New Zealand's regime was seen as the standard model for a small open economy.
Inflation had been kept under control, and the economy had experienced the longest period of uninterrupted growth in New Zealand's history.
Export volumes had held up, though manufacturing sales in the domestic market had been harmed by competition from China.
It was true that monetary policy was taking longer to bite, but that was because of a highly unusual set of circumstances - high commodity prices, a massive housing boom and an excess of global investment funds.
Reserve Bank chairman Arthur Grimes said it was worth considering other ways to using the bank's main official cash rate, but most came with "fish hooks". "The message I would like to leave with you is: avoid tinkering unless you're pretty sure, almost certain in fact, that tinkering is going to benefit."
The housing market is cooling under pressure from four increases in official interest rates this year, the Reserve Bank says.
Just hours after the United States central bank cut rates by 50 points to 4.75 per cent, Alan Bollard told the finance and expenditure select committee yesterday that the New Zealand housing market was responding to the Reserve Bank's interest rate medicine.
The Kiwi dollar jumped about US3 cents, to US73.1c yesterday after the US rate cut - the Kiwi's biggest one-day gain in nine years.
"The numbers we are tracking now suggests that we are having a significant bite into the housing mortgage market," Dr Bollard said in evidence to the committee's inquiry into monetary policy.
"It's been coming through pretty much as we forecast. It's not falling off a cliff, but it is coming through showing some contraction there, and we think that has to happen."
His comments came as a Bank of New Zealand survey of residential real estate saw professionals reporting the market had turned down fast.
The survey, sent to 11,500 people, found many had noticed a downturn in house sales and were less optimistic about the sector's fortunes.
Agents described the market as extremely quiet, with low sales and falling prices, particularly in Auckland.
House prices have doubled in the past five years.
Last week, Dr Bollard held the official cash rate at 8.25 per cent, noting that previous increases were starting to dampen domestic spending.
Dr Bollard told the committee monetary policy was working and the 'irony" was that New Zealand's regime was seen as the standard model for a small open economy.
Inflation had been kept under control, and the economy had experienced the longest period of uninterrupted growth in New Zealand's history.
Export volumes had held up, though manufacturing sales in the domestic market had been harmed by competition from China.
It was true that monetary policy was taking longer to bite, but that was because of a highly unusual set of circumstances - high commodity prices, a massive housing boom and an excess of global investment funds.
Reserve Bank chairman Arthur Grimes said it was worth considering other ways to using the bank's main official cash rate, but most came with "fish hooks". "The message I would like to leave with you is: avoid tinkering unless you're pretty sure, almost certain in fact, that tinkering is going to benefit."
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