tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Friday, October 11th, 9:10AM

Mortgages

rss
Latest Headlines

Paying the cost of bureaucratic incompetence

In its next monetary policy statement (MPS), the RBNZ should signal that a drop in the OCR is imminent, Squirrel Mortgages chief executive David Cunningham.

Monday, May 6th 2024, 12:09PM 2 Comments

If the RBNZ doesn’t ease the OCR it should at least give a concrete idea, in the May 22 MPS, of when it will start coming down, he says.

“With every economic indicator being weaker than expected things are pretty much playing out as the central bank and economists expected.”

While the banks’ economists are saying no easing of the OCR until November or February or even mid-year next year, Cunningham thinks this is wrong.

Squirrel Mortgages founder John Bolton says this is a classic example of the Reserve Bank looking in the rear vision too much when trying to run the economy.

He says the economy has done enough and the evidence is coming through.

“The RBNZ is still looking in the rear vision mirror going, ‘No, we haven’t done enough and we need to see more evidence’. That is what I call killing the patient before getting to the operating theatre.”

Bolton says wage inflation is the key problem for the RBNZ because it is a cost of business that needs to be passed on to consumers.

While monetary policy is definitely working, independent economist Tony Alexander says, there is just one element needing to fall into place to allow the Reserve Bank to start cutting interest rates.

“Businesses need to cut back on their price rise plans.” Unfortunately, he says, that has yet to happen and that means no cut in the official cash rate until late this year at the earliest.

Bolton says the wage inflation spiral is fundamentally what the central bank is trying to get the country out of.

“The way to stop it is pain – get the unemployment rate up, squeeze things tight so people stop spending. It puts a lot of pressure on businesses, they don’t relent and hold tight. It is not good for business/employee relations.”

Alexander says the weakening labour market is because monetary policy was belatedly and aggressively tightened over 2021-2023 as the RBNZ fought 7.3% inflation created by the excessively loose financial conditions during the pandemic. 

“In an historical sense, unemployment at 4.3% is not bad, but the trend is up.”

He says the RBNZ’s management during 2021-2023 in hindsight, can be considered a failure but unfortunately the price of their poor decisions is borne not by anyone at the central bank but by householders with debt and especially those who bought a property late in 2021.”

Crisis for youth

For Bolton, unemployment is interesting. I think we have an emerging crisis, particularly in youth unemployment, Bolton says.

The number of teens not in the labour force lifted by 6.8%.  According to Stats NZ, youth not in employment, education or training (NEET) has lifted to the highest in three years at 14.1%.

“One business had an opening for a young person just starting out and they got 1,000 applications.

“We knew the unemployment rate had to go up to deal with inflation and it feels sad to make people unemployed to correct the economy but that is conventional economics.”

He says every day regular Kiwis are basically paying the cost of bureaucratic incompetence.

Kiwibank chief economist Jarrod Kerr told the NZ Herald there is a close correlation between unemployment rates rising and people being forced to default on their property. It’s not going to snowball like we saw in the 1990s, but it will increase.”

He is expecting mortgage defaults to increase alongside the unemployment rates. “We are now at a point where businesses are being forced to lay off staff, which is concerning.”

He says even with the Reserve Bank’s harsh measures, New Zealand is still suffering from a critical imbalance between supply and demand in the housing market which showed no signs of abating and was being exacerbated by continued regulatory hurdles and infrastructure deficiencies.

Tags: RBNZ

« Adviser's share of BNZ's new lending dipped in latest six monthsWestpac NZ added $1.44b of mortgages in the six months ended March »

Special Offers

Comments from our readers

On 6 May 2024 at 1:13 pm valkyrie6 said:
David is wrong, Australia is poised to increase its OCR, petrol prices have gone up, insurances have gone up, these are all inflationary, dropping the OCR will also be inflationary, there is no gain without pain and unfortunately, we can't wiggle a magic wand after 14 years of property values going up and not expect a downturn. NZ is not immune like living in some fairyland.
With the average property purchase still hovering around the 1ml mark the affordability if just not there, property prices need to drop, we need a correction.
On 7 May 2024 at 12:58 pm Amused said:
Well said valkyrie. Anybody who thinks that an OCR cut from the RBNZ is now imminent clearly doesn’t understand the economic environment we are currently in. As one economist said last year 2023 was the entrée stage in terms of us getting inflation back under control. 2024 is the year that we get served the main course. Hopefully dessert won't also be on the menu for 2025 however if you look now at what is happening across the Tasman I would not be at all surprised.



Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.94 - - -
AIA - Go Home Loans 8.49 ▼6.19 ▼5.69 ▼5.69
ANZ ▼7.89 6.79 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 6.19 5.69 5.69
ASB Bank 8.39 ▼6.19 ▼5.69 ▼5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.90 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 6.19 5.79 5.79
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One ▼7.94 - - -
BNZ - Rapid Repay ▼7.94 - - -
BNZ - Std ▼7.94 6.45 5.89 5.79
BNZ - TotalMoney ▼7.94 - - -
CFML 321 Loans 6.70 - - -
CFML Home Loans 6.95 - - -
CFML Prime Loans 8.75 - - -
CFML Standard Loans 9.70 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼5.99 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 8.15 ▼6.19 ▼5.75 5.69
Co-operative Bank - Standard 8.15 ▼6.69 ▼6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.60 6.10 -
First Credit Union Standard 8.50 7.20 6.70 -
Heartland Bank - Online 7.99 6.69 6.35 6.15
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 6.15 5.69 5.69
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 8.25 7.19 6.69 6.59
Kiwibank - Offset 8.25 - - -
Kiwibank Special - 6.29 5.79 5.79
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.75 6.69 6.19 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.49 ▼6.95 ▼6.29 ▼6.29
SBS Bank Special - ▼6.35 ▼5.69 ▼5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.94 5.45 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
TSB Bank 9.19 7.09 6.59 6.59
TSB Special 8.39 6.29 5.79 5.79
Unity 8.64 6.29 5.79 -
Unity First Home Buyer special - 6.20 - -
Wairarapa Building Society 8.50 ▼6.50 ▼5.89 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 8.39 6.47 6.10 5.79

Last updated: 11 October 2024 9:33am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com