Where is Bollard looking?

[Edinburgh]

So it happened as we all expected. But Bollard thinks we need more punishment.


'Dr Bollard did not rule out further tightening in the future, saying it depended on the extent to which housing and demand pressures showed signs of moderating in coming months.

"However, we do not yet see any prospect of a policy easing in the foreseeable future," he said.'


Where is Bollard looking? He needs to get out and talk to some estate agents.

Will this man not be happy until we get the hard landing he has started talking about?

By the way, did you note his prediction that house prices will eventually fall 5%. Infometrics has this happening in 2007.

[fudosan]

And BNZ's Tony Alexander expects a hard landing in the second half of 2006.

[[email protected]]

Go Bollard!! Make sure you keep crippling most sectors of teh economy so that we really get a crash landing next year!!
http://www.scoop.co.nz/stories/BU0512/S00098.htm

[fudosan]

The best business in NZ may be money lending as the consumers have insatiable appetite for imported goods.

[Taupo Tiger]

Hullo

You have just got to blame those property investors who are actively investing.

Now if they weren't borrowing so much money from the banks then interest rates would be dropping.

The banks would have so much money to lend they would be lowering their interest rates to encourage people to borrow.

Now that is my nine pence and one half pennies worth.

[donna]

I just don't get it!

I so do not get it! This is the way I am viewing it....

So interest rates are raised and potentially our borrowing of large sums individually may or may not be curtailed as a result. House prices fall as less $$ can or is borrowed (not sure on this point). So what we own currently is worth less - at least on paper it is - so NZ'ers are poorer (on paper ).

Our higher interest rates means cheaper imports so we are indirectly encouraged to buy liabilities (cars, other luxury items) instead of income generating investments like property.

So now we are poorer, and have some useless luxury toys to dull the pain....for the short term.

Our exports are affected so less $$ coming in to the coffers and together with our higher than average company tax rate our small businesses (as 85% of all NZ businesses have less than 5 employees) flounder and many end up out of a job and the businesses take their business elsewhere!

Without a job our reasonably intelligent workers also head offshore to Australia and Britain.

So what are we left with? A whole lot of dependents....hey and then NZ becoming a state of Australia suddently looks highly attractive .

However it would be only our sports people they'd be interested in...and by this time all our sports people would have jumped ship too along with any other intelligent person.

Am I on the right track?

Cheers,

Donna

[[email protected]]

Tiger there aren't enough investors in NZ to even make a blip on the radar. Less than 2000 investors in the whole country own more than 3 properties last stats I saw.

[CJ]

Where is Bollard looking?

He is only allowed to look at one metric and that is CPI which must be in the 1 - 3% range.

I would have been happier with a .5% increase and then a fast reduction in rates once it takes effect (maybe that is because my fixed rate expires at the end of 2006 ).

[tickytickid]

yes where

over the years our monetry policy has crippled our manufacturing sector, in return for goods from countries with very low labour cost so for example there are few clothing manufacturers left we all buy shirts at very low prices from china etc so our balance of payments will get further out of line.Raise interest rates to slow internal spending raises dollar lowers price we get for our primary produce . Its time to be looking outside the small bowl under a labour govt i was paying well over 15% interest on a 1st mortgage they nearly recked our economy yet they are taking us down the same road again 20 years down the track.
This manipulation is not working didnt lower house prices then wont now may flatten them but peoples expectations of what they can get drives house prices more than any other factor .
Thats as i see it

[fudosan]

I think Alan Bollard was at least right when he said that we need to live within our means. Spending $1.14 on $1 of income won't make anybody richer.

[Gatekeeper]

Agreed Fudosan. It can't go on, this spending more than we make, and its not like we have any choice as long as the US Fed are still raising.
We have to compete for funds and New Zealand is nothing in the big world picture. The govt. has little power, as the influences are from outside.

My thoughts are that in the future funds may be hard to come by at any interest rate. Its just taking longer than I'd figured. High inflation in energy, and energy related goods, deflation in property. Money increases in value? Any thoughts?

[kieran]

Less than 2000 investors in the whole country own more than 3 properties last stats I saw.

Latest database I saw was last year of 2,500 who own 3 or more in Auckland alone so my estimate is that nationally there are probably @6,000...

But more importantly this Bollard character...

He has said they have tried tightening by lifting int rates 8 times in the last 2 years... but wait a minute.

We came off historically low rates and every increase was just 0.25% PLUS there were no interest rate increases in the 6 mths preceeding the election.
(Then 2 subsequent increases since the election?)

Remember we were all told over that same 6 mths by the government that our economy was going great guns and this was mainly because of their policies! Yeah right...

Hang on, aren't we now told daily how bad our economy is/will be soon? What changed?
Oh we had an election.

I fear that we were collectively lulled into a false sense of security during the election campaign whilst our economy already showed signs of cracking.

I also fear that Dr Cullen put pressure on Bollard to NOT raise interest rates in the 6 mths running up to the election. Cullen denies that he has any influence over the RBNZ but I don't believe him for a minute. The evidence of Bollards many threats to increase interest rates this year (without any subsequent interest rate increases until AFTER the election) says otherwise.

I firmly believe Bollard should have put interest rates up sooner to ease the brakes on our economy sooner but now it's too late. We are reaching for the handbrake! Our economy is heading for a recession unless something changes and fast!

So now I fear we must all suffer with even higher interest rates coming in 2006. Many economists think that there may only be 1 or 2 more increases next year but I believe there could be several.

I now expect all interest rates to exceed 10%p.a.(yes floating and fixed) by 2007.

[cube]

we all buy shirts at very low prices from china

There is nothing inherently wrong with that - its called "the market", and its the same market that makes sure that, over time, Governments tinkering with tax rates, depreciation rates etc. have little or no effect on the upward march of property prices.

Supply and demand will wax and wane over a short period, but the world's population is getting bigger each day, and NZ is still an attractive place to live.

"Grow Rich with the Property Cycle" (Kieran's book) does a good analysis of the fundamentals (like population growth) versus market influencers (govt tinkering).

On a more macro-economic scale - China and India are going to be providing the world's manufacturing for the next few years, with Africa coming in behind as living standards in those two countries rise. Isn't it about time we got beyond National Economies, and got organisations like the WTO to focus on making the world richer and not worry about National pride in our balance of payments.

cube

[fudosan]

I also fear that Dr Cullen put pressure on Bollard to NOT raise interest rates in the 6 mths running up to the election. Cullen denies that he has any influence over the RBNZ but I don't believe him for a minute. The evidence of Bollards many threats to increase interest rates this year (without any subsequent interest rate increases until AFTER the election) says otherwise.

Very good observation that I did not take notice!!!
Hasn't the Reserve Bank made independent since the 1990 Reserve Bank Price Stability Agreement? Has this same pattern occurred in the last few elections, Keiran?

[kieran]

Has this same pattern occurred in the last few elections, Kieran?

Good q but I'm not sure and I don't intend to research it at the moment as there are more pressing matters of research I am currently undertaking.

Someone else may want to research that and post their findings here?