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Public not listening to us: RBNZ

The Reserve Bank says although it is trying to be more open about what it is doing and its views on future interest rates many people aren't listening.

Friday, December 6th 2013, 10:03PM 4 Comments

Deputy Geoff Bascand told a meeting in Auckland that understanding of, and confidence in the Bank’s actions and messages – and the institution itself – was essential.

He said sometimes what the Bank said about what it was going to do in terms of monetary policy was almost as effective as what it did do.

“In this context, statements and analysis by the Bank are designed to inform and shape expectations about future monetary policy settings. Indeed, when used in this instrumental manner, the words of the central bank are themselves monetary policy actions."

He said:  “The communication challenge with forward guidance – which equally applies to publishing interest rate projections – is how to reduce uncertainty about the likely path of policy while at the same time conveying its conditionality and the possibility of change in policy settings…Achieving this depends crucially on the private sector believing the bank’s unwavering commitment to the inflation target.”

But it had become clear that not all interested parties always had the same understanding of what the bank meant, he said.

The bank has not been shy about likely interest rate rises next year. But Bascand said there still seemed to be significant surprise when an opinion column spelt them out recently.

“A recent foray into the ‘public audience’ via an opinion article explaining the LVR policy, that repeated our monetary policy expectations, appeared to reveal substantial public surprise about our interest rate projections,” he said. “While unintentional, it therefore possibly enhanced the projection’s impact.”

Bascand said: “We have reiterated that LVRs are targeted at the primary objective of financial stability, but that there is also a potential benefit for monetary policy if they reduce the spillover of house price inflation into stronger consumer demand and higher price inflation for goods and services. Explaining important inter-dependencies with other policies – our own or wider government ones – is vital.”

So far this year bank staff have given 17 on-the-record speeches, eight more than last year, and 90 off-the-record addresses. That is on top of the six-weekly official cash rate and quarterly Monetary Policy Statements.

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Comments from our readers

On 9 December 2013 at 10:13 am Jimmy said:
Restrictive LVRs simply extend the gap between the rich and poor. It also makes me angry how open our country is to foreign investment in property.

The statistics about foreign investment having minimal impact are ridiculously skewed. Very few foreign investors they say - sure that's correct - but HOW many properties do rich offshore investors have EACH?

They base statistics off the number of investors, not the number of properties each investor has.

I've heard first hand from agents of investors taken around Auckland on coaches buying over 100 properties in one go. A search on property guru (especially in South Auckland rental areas) confirms a lot of overseas ownership.

Why not do what plenty of other countries have done - if foreigners want to invest, they only have the option of:
1. building NEW if their intention is to rent the property and
2. they can ONLY buy a 2nd hand dwelling IF they live in it themselves.
These 2 simple things will help boost our economy - it helps towards the housing shortage (economics 101, supply and demand) and it helps towards employment for tradesman.

The RBNZ are too high up the food chain to understand what is going on at a true housing level. Ask any serious investor, estate agent or anyone else in the property business at the ground level and I guarantee they will give you a number of other BETTER and SIMPLE solutions to help stagnate the escalating house market prices.
On 9 December 2013 at 10:33 am Jeff said:
Like Reserve Banks all around the world ours has for the past few years warned of inflation risk and imminent interest rates increases.

Neither of which have occurRed. Of course we will be surprised if they, contrary to past action, actually act on these warnings.
On 9 December 2013 at 10:55 am AFA Muggins said:
The Reserve Bank has a 3 year horizon on policy. This is mandated.

The population by necessity has to consider longer time frames on decisions they make. Particularly issues of long term borrowing and long term saving and investing.

By the very nature of the time frames, these objectives have conflicts.
On 9 December 2013 at 2:14 pm Amused said:
Well said Jimmy. You hit the nail on the head.

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 6.35 5.25 5.45 5.99
ANZ 6.34 5.59 6.05 6.29
ANZ Blueprint to Build - - - -
ANZ Special - 4.99 5.45 5.69
ASB Bank 6.35 ▼4.99 5.45 5.69
Avanti Finance 6.65 - - -
Basecorp Finance 7.25 - - -
Bluestone 6.89 - - -
BNZ - Classic - 4.95 5.39 5.69
BNZ - Mortgage One 6.39 - - -
BNZ - Rapid Repay 6.39 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 6.39 5.55 5.99 6.29
BNZ - TotalMoney 6.39 - - -
CFML Loans 7.25 - - -
China Construction Bank - 5.35 5.80 5.99
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 4.89 - -
Co-operative Bank - Owner Occ 6.25 4.99 5.39 ▼5.69
Co-operative Bank - Standard 6.25 5.49 5.89 ▼6.19
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 5.35 5.85 -
Heartland Bank - Online 4.60 ▼4.79 ▼5.15 ▼5.14
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 6.50 5.60 6.00 -
HSBC Premier 6.34 5.09 5.34 5.59
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 6.00 ▼4.79 5.15 ▼5.69
Kainga Ora 5.85 5.31 5.58 5.97
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 6.00 5.95 6.45 ▼6.59
Kiwibank - Offset 6.00 - - -
Kiwibank Special - 4.95 5.45 ▼5.69
Liberty 4.84 - - -
Lender Flt 1yr 2yr 3yr
Nelson Building Society ▲6.95 5.55 6.15 -
Pepper Money 5.29 - - -
Resimac 5.59 6.54 6.44 6.98
SBS Bank 6.29 ▼5.39 ▼5.79 5.99
SBS Bank Special - ▼4.89 ▼5.29 5.49
Select Home Loans 6.89 - - -
TSB Bank 7.05 5.65 6.09 6.39
TSB Special 6.25 4.85 5.29 5.59
Unity 5.65 4.95 5.55 -
Wairarapa Building Society 6.49 5.55 6.15 -
Westforce credit union - Special - 5.35 5.85 -
Lender Flt 1yr 2yr 3yr
Westforce credit union - Standard 5.85 6.05 6.55 -
Westpac 6.39 5.55 6.05 6.29
Westpac - Offset 6.39 - - -
Westpac Special - 4.95 5.45 5.69
Median 6.34 5.33 5.79 5.83

Last updated: 15 August 2022 8:19am

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