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What New Zealand Can Teach Us…

Economists, by nature or nurture, are like living and breathing versions of the Picasso paintings that show both sides of a solitary image. So well-known is their use of the phrase “on one hand … but on the other hand,” that President Harry Truman once famously asked for a one-armed economist to provide him with economic counsel.

With that caveat, New Zealand is I think a Petrie dish for how tight monetary policy plays out. The Reserve Bank of New Zealand started lifting rates earlier than other central banks last year and are set on more rises ahead.

Now according to a Reuters poll, New Zealand’s house prices are forecast to fall 10% this year and 5% next as aggressive interest rate hikes take some heat out of a blazing housing market, but not enough to solve the ongoing affordability crisis.

And while the Reserve Bank in New Zealand does need to take home price movements into consideration when making interest rate calls, it seems to me that the objective of snuffing out inflation is number one, two and three, and to that end, if higher unemployment, or lower home prices are a necessary consequence then so be it.

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Written by Walk The World

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  1. As a New zealander dont follow us…..our Prime minister is like Steven Bradbury ( your gold metal winning Australian Olympic speed skater ) Not even close to being the best person for the job but everyone else fell over…..when it comes to central bankers they are the smartest people in a empty room

  2. “10% this year, 5% the next”? Routers poll eh.

    Adrian Orr, is a ridiculous figure. He sounds like a tik tokker talking up the current Fed thing, a la ain’t they all “data driven” now? Bloomberg is worthless these days. If only you could constrain your wild millenarian demons Mr. North. Remember he’s the mini-mandarin who actually said the RBNZ is not actually responsible for the housing boom. What else could this Cross Tasman Flathead say though? We know what he’s thinking because everyone else is thinking it too.

    It’s September 2 Mr. North and the only Armageddon on the horizon is Amazon’s Rings of Power. What do you think the voices are telling The Cabbage today? Perhaps ‘tomorrow, tomorrow..’? Has his “precious” arrived yet? He would find himself quite at home in Tolkiens Middle Earth.

  3. Hey Martin, could you please provide sources when citing things.
    Appreciate your work in summarising and aggregating the information, but I would love to explore some of these topics further from the primary material itself. Thank you!

  4. Nz playing out exactly like Ireland did in 07/08 . Late 07 they were off 10% they said then that a housing correction of 10/15% was most likely .after that they went through the floor .

  5. I think it was corelogic out the other day. Property prices will improve next year so you might want to consider getting back into the market. I just about fell of my chair. A property downturn that only lasts a year. And they are saying it’ll be going up soon as it’s still going down. Property spruiking at its finest. When has a down ever lasted only one year as interest rates go up . I doubt a downturn has ever lasted under 3 years with interest rates dropping. People need to remember,
    Outside Auckland prices down to flat 2008 to 2015 (with a national government and high immigration)
    The 2008 nz GFC sour the housing market downturn last plus 4 years with the OCR dropping 6% in 2009.
    Household debt is through the roof and this is as much a debt bubble as a housing bubble.
    When house prices drop more than around 15% capital gains/equity/leverage/deposits for housing is destroyed.
    Central banks can drop interest rates but that doesn’t create a deposit. That’s why downturns generally last 3 plus years.
    And as for LVRS. Nz is in big trouble. Lvr were dropped to short a time ago with a massive amount of investors taking advantage of this last year and the year before. I doubt many investors will ever be in the 80% lvr range that brought last year let alone the 60% now.

  6. Surely a John Adams interview titled “What happened to the pivot” would be of interest. After all I remember clearly John saying he had committed his own financial eggs based on this certain pivot the reserve banks would make when they abandoned the fight on inflation . It included a quick retreat into negative interest rates .?
    Leith was just as committed to this view . Would be great to hear what they think about those predictions now.

  7. New Zealand can teach you that if you elect a woke WEF Klaus Schwab shill like Jacinda Ardern, she will guide you down the path towards debt, supply shortages, and overall doom and gloom. 30 years of bullshit education and increasingly corrupt media has allowed problems to exacerbate without the guilty parties being decapitated.

  8. Australia has an enbedded culture of real estate capital gain entitlement that transcends fluctuations in interest rates. Kind of like a religious belief that may not be backed by economic rational evidence.

  9. New house build prices in NZ(costs) have risen 18 percent in one year alone. This inflation is far from settled, due to the printing of money not backed by production, or GDP. It is likely that we will see further price increases for new builds, which could mean that existing house prices do not fall as much as some have predicted. They could fall 10% max and then level off for a few years before rising again, excepting very high interest rates which is unlikely for the foreseeable future since high rates will impede economic growth and lead to mortgagee sales.

    One should be mindful that a house is a real asset unlike cash or even shares. If you've earned a dollar today and paid tax on that dollar, and then suddenly that dollar is worth 80 cents due to quantitative easing, you've been taxed again. Why would you place any trust in such a scheme? At least a house is a roof over your head.

  10. Population surveys are a great tool.
    The thing is that inflation is not the increase in prices.
    Inflation is the act by governments of increasing the pool of money or money supply.
    This inflates and that's why it is at the core of the meaning of inflation.
    So inflation wherever it is has already been done and the result of inflating the money pool is to dilute it and so for a given good. You must pay more because there's more water in your cordial not more cordial in the water.
    Inflation is done by governments who try and cover it up with some sort of gobbledygook jargon.
    Inflation is a tax and it helps governments and they will only do anything about it when there is public clamour.✌️🇦🇺

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