The decision will make jobs more precarious, depress house prices even more and potentially create a higher summit for mortgage rates … just as the peak appeared to be in view.
If mortgage costs will be higher, or at best this high for longer, that’s bad news for many households in what National used to call - and will again - “the squeezed middle”.
The central bank’s fight against inflation is fuelling inflation for those people. A case of “take your medicine now to avoid a worse dose in future”.
It is a gift to National’s election campaign. While it may not go so far as praising Reserve Bank governor Adrian Orr, it must be feeling the love right now.
Meanwhile, across the Tasman, in the land of higher nurses’ pay and a strong demand for workers, the inflation rate is not that different from here. Ours was 7.2% in the December quarter against 7.8 in Australia, though theirs fell to 6.8% in February. But in sharp contrast to the NZ case, the Reserve Bank of Australia last week held its cash rate at 3.6%.
Further cash rate rises in Oz are not off the table, but RBA Governor Philip Lowe’s decision to hold fire was to give the bank time to assess the impact of its previous 10 increases. Governor Orr and the RBNZ decided to shoot first and assess the impact later.
For Robertson and his Cabinet colleagues, it presents a new headache as they look towards the Budget economic and fiscal forecasts (normally finalised around mid-April) and, soon after Easter, the final Cabinet meeting to nail down Budget decisions.
Alongside the recovery from the recent floods and cyclones, the cost of living crisis is the hungriest beast in the Cabinet room and Adrian Orr and his team have made it harder to feed.
There is only so much that half-priced public transport fares and petrol excise cuts can do.
We may already be in a recession. The 50-point boost to the OCR, taking it to 5.25%, made that downturn longer and more certain. And where recessions go, so go falls in government revenue and increases in costs.
So on Wednesday afternoon, as Labour luvvies bewailed the exit of former Prime Minister Jacinda Ardern, teeth were gnashing on the upper floors of the Beehive.
Robertson’s public response was telling. Prevented by convention from criticising the independent central bank’s decision, he instead focussed on the likely market response; that the new OCR rate had been built in to current lending rates, and the RBNZ was aiming to preempt falls in mortgage rates, not to engineer further rises.
Well, maybe.
But surely lending institutions had come to expect rises would be more gradual or that the overall interest rate track would be lower?
Still, Robertson probably figured if you can’t jawbone the Reserve Bank you can at least jawbone public sentiment and the big lenders....to continue reading, please click HERE:
Vernon Small is a former journalist and advisor to the Attorney General. He now writes a weekly column for the Sunday Star-Times.
The central bank’s fight against inflation is fuelling inflation for those people. A case of “take your medicine now to avoid a worse dose in future”.
It is a gift to National’s election campaign. While it may not go so far as praising Reserve Bank governor Adrian Orr, it must be feeling the love right now.
Meanwhile, across the Tasman, in the land of higher nurses’ pay and a strong demand for workers, the inflation rate is not that different from here. Ours was 7.2% in the December quarter against 7.8 in Australia, though theirs fell to 6.8% in February. But in sharp contrast to the NZ case, the Reserve Bank of Australia last week held its cash rate at 3.6%.
Further cash rate rises in Oz are not off the table, but RBA Governor Philip Lowe’s decision to hold fire was to give the bank time to assess the impact of its previous 10 increases. Governor Orr and the RBNZ decided to shoot first and assess the impact later.
For Robertson and his Cabinet colleagues, it presents a new headache as they look towards the Budget economic and fiscal forecasts (normally finalised around mid-April) and, soon after Easter, the final Cabinet meeting to nail down Budget decisions.
Alongside the recovery from the recent floods and cyclones, the cost of living crisis is the hungriest beast in the Cabinet room and Adrian Orr and his team have made it harder to feed.
There is only so much that half-priced public transport fares and petrol excise cuts can do.
We may already be in a recession. The 50-point boost to the OCR, taking it to 5.25%, made that downturn longer and more certain. And where recessions go, so go falls in government revenue and increases in costs.
So on Wednesday afternoon, as Labour luvvies bewailed the exit of former Prime Minister Jacinda Ardern, teeth were gnashing on the upper floors of the Beehive.
Robertson’s public response was telling. Prevented by convention from criticising the independent central bank’s decision, he instead focussed on the likely market response; that the new OCR rate had been built in to current lending rates, and the RBNZ was aiming to preempt falls in mortgage rates, not to engineer further rises.
Well, maybe.
But surely lending institutions had come to expect rises would be more gradual or that the overall interest rate track would be lower?
Still, Robertson probably figured if you can’t jawbone the Reserve Bank you can at least jawbone public sentiment and the big lenders....to continue reading, please click HERE:
Vernon Small is a former journalist and advisor to the Attorney General. He now writes a weekly column for the Sunday Star-Times.
2 comments:
wood for brains.
Does Aussie have a labour shortage as here? Are they so foolish as to index all benefits to inflation? What was the peak rate here 30 or so years ago?
If all the employment positions related to non productive amori twaddle were disbanded there would ba a surplus of labour, although most of the academics might struggle to drive a bus.
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