Bob Edlin: The OCR is trimmed and Govt politicians are cheered....

The OCR is trimmed and Govt politicians are cheered – but savers won’t necessarily be whooping

PoO first heard the news from RNZ: the Reserve Bank had cut the official cash rate to its lowest level in three years – by 25 basis points to 2.25 per cent – to support economic recovery.

That led us to check the announcement on the RBNZ website. This expressed confidence that inflation would ease from where it now sits, at the top of the 1 – 3 per cent target band for monetary policy:

Professor Robert MacCulloch: Any cut in the Official Cash Rate by NZ's Reserve Bank today will be Illegal.

When National came to power, the Party amended the Reserve Bank of NZ legislation, which had previously instructed the Bank to pursue the dual objective of low inflation and "maximum sustainable employment". The latter aim allows a central bank to manage how fast the economy is growing, and to influence the unemployment rate, at least in the short term. However, Finance Minister Willis, when she came to power a year ago, removed the ability of the Bank to target the state of the economy, introducing legislation that gave the Reserve Bank the sole mandate of achieving price stability. That has been defined by the government as keeping inflation in a 1-3% bracket - so preferably close to 2%. Willis, who introduced the law, said removing the dual mandate was a “highly symbolic, important act”.

Perspective with Heather du Plessis-Allan: The inflation fight is over, but the economy still suffers

Well, how good is that inflation number out today?

2.2 percent - we're there, baby! We're pretty much bang on where inflation is supposed to sit - at 2 percent, halfway between 1 and 3 in the target band.

We’ve made it. We have had inflation run out of control in this country for three years, but we have finally got it back to where it’s supposed to be. That is absolutely reason to celebrate - we're there.

Dr Bryce Wilkinson: Some puzzles about this week’s OCR reduction

This week the Reserve Bank of New Zealand’s Monetary Policy Committee (MPC) lowered the Official Cash Rate (OCR) from 5.50% to 5.25%.

Many market economists predicted this change. So did Massey University’s AI-based GDP tracker, GDP Live. Borrowers will be pleased. Those needing interest income, less so.

Point of Order: Buzz from the Beehive - 15/8/24

Disabilities shakeup is likely to draw focus from charter schools, but Seymour should explain what “accountability” means

In terms of news on the Government’s official website, we last heard from the PM on Monday when he announced he was headed to Australia until tomorrow for a series of top-level political and business engagements.

Point of Order: Plenty to ponder on economy......

.....while OCR stance softens, a widening current account deficit threatens NZ’s credit rating

It’s been an eventful week for the New Zealand economy. On one side, the Reserve Bank was seen as putting the brakes on the Official Cash Rate, with a 25 basis points increase heralded as good news for mortgage-holders. On another, NZ’s record current account deficit is seen as posing a real threat to NZ’s sovereign credit rating.

The current account deficit, reflecting we’re spending more than we’re earning overseas, rose to its highest level ever of $33.8bn last year. As a percentage of GDP, a measure of its significance in the context of NZ’s overall economy, it weighed in at 8.9%, the highest it has been since the 1970s.

Could it get worse before it gets better?

Cam Slater: Here Comes the Pain Again

Just when you thought you’d made it through the economic pain the Reserve Bank rolls out another massive hike in the Official Cash Rate. Just as people were starting to see light at the end of the tunnel the Reserve Bank announces that the light is in fact the inflation train coming to mow you down.

Mike Hosking: The Budget is looking worse with time

Now, you can pick your word - but having done a lot of reading over the weekend around the banks and financial market's reviews of the Budget, the words I'd choose range from concern, to alarm.

The bond rates jumped - that’s a bit dry for a lot of us, but believe me when I say it's bad.

Heather du Plessis-Allan: Grant has opened the money hose

Lock it in; it looks like a very good chance that your mortgage rate is going up, because Grant opened the money hose too much yesterday.

The economists at almost every one of our big retail banks have come out in the last 24 hours now predicting a bigger hike in the OCR either next week when Adrian Orr resets it, or in July when he comes back for round two.

BNZ says the Budget is the straw that broke the camel’s back re the official cash rate.

Mike Hosking: The OCR rise clearly shows our economy is failing

So here's the first realisation that we face out of the Reserve Bank's 50 basis point rise - it was 50 points.

It proves, yet again, no one seems to really have a handle on what's going on.

Secondly, and most worryingly, is it was 50 points.

Cam Slater: Reserve Bank Slams on the Brakes

The Reserve Bank yesterday announced a 50 basis points hike in the Official Cash Rate, moving it to 4.75%. Your mortgage, overdraft, equipment leases, and credit card costs just ballooned again. The Reserve Bank is trying to do two main things: stave off a recession, and defeat inflation. You can’t do both at the same time, but that is what they are trying to do.

Don Brash: Inflation: Are we out of the woods yet?

The last time inflation was over 7% was more than 30 years ago, and I was responsible for doing what Adrian Orr, the current Governor of the Reserve Bank, is trying to do now: get inflation back to the target mandated by the Minister of Finance, in my case within a 0 to 2% range, and Mr Orr’s case within a range of 1 to 3%.

A few weeks ago, there was at least some cheering when the inflation figure for the year to September was announced: it showed that the Consumer Price Index – which is how most people think of inflation – had risen by just 7.2% in the 12 months to that month, down fractionally from an increase of 7.3% for the 12 months to the end of June. Perhaps at last inflation was slowing and we could look forward to the Reserve Bank easing off the brake of steadily rising interest rates.

Point of Order: Who’s to blame for Kiwis’financial pain?

Seymour may have the answer

As inflation hits levels a generation of New Zealanders hasn’t seen, politicians are thrashing about,blaming anyone but themselves for the financial storm enveloping households and businesses alike.

The official cash rate has already risen from a Covid low of 0.25% to 3.5% and is expected to hit 5% or higher.

Grant “look, no hands” Robertson tells the Dominion-Post the banks’ social licence requires them to support borrowers “if times get tough”.

Point of Order: Latest poll: Labour takes the plunge as Official Cash Rate again is lifted to 3.5%

As the Reserve Bank raises the Official Cash Rate again to 3.5%, the eighth successive increase,with more to come, in the effort to drive down inflation, the political mood has darkened, too.

A glance at the headlines point to the symptoms why this is happening: “Housing market still firmly in retreat”, “Consumer demand for personal loans spikes as households feel the pinch”

Oliver Hartwich: Paying the price for economic mismanagement

We can reasonably expect New Zealand’s economy to enter recession after the Reserve Bank raised its Official Cash Rate again by 50 basis points.

No one likes being in recession, but current circumstances make it almost desirable. Accelerating price increases and tight labour markets are both signs of an overheated economy.

The Reserve Bank therefore wants to engineer an economic downturn to let off some steam. This would relax both the labour market and consumer price inflation.

Yet, it is not as easy as it sounds.

Mike Hosking: Plenty of questions for Adrian Orr

What I like about Don Brash entering the cost-of-living debate is he comes with knowledge, experience and he tells a different story to Adrian Orr.

We have two Reserve Bank Governors with different stories, so who is right?

If Brash turns out to be more accurate in the long run, you can quite justifiably ask a couple of solid questions of Orr. Was he up for the job? Why couldn't he see what others did? And in defending his approach which he currently is, how political has he become?

Having him on the show last week was a revelation of sorts. He was painting a picture, which to my eye, simply isn't true or real.

Don Brash: Who is really responsible for getting inflation under control?

Liam Dann (Herald on Sunday, 29 May 2022) seems very keen to absolve the Government of any responsibility for the pain which a great many people are going to endure as the Reserve Bank grapples with getting inflation back under control.

In the opening line of his editorial, under the heading “Why slashing govt spending right now would be a bad idea”, he argues that “it’s important New Zealand gets through this tough economic cycle without panicking and reaching for brutal, unnecessary and ineffective policies of fiscal austerity”.

Of course, we all hope that inflation will be reduced from its present level “without brutal, unnecessary and ineffective policies”, but as he recognises further on in his column “we have to deal with excess demand in the local economy”. The Reserve Bank has, by law, the primary responsibility for achieving that in order to return the inflation rate to the target which Government has established.

Point of Order: Mortgage holders will wince as RBNZ takes another shot at bringing inflation back into the target zone

The Reserve Bank has raised the official cash rate to 2% – but will that slay the inflationary beast roaming the countryside.?

Point of Order doesn’t think so.

Reserve Bank governor Adrian Orr made the right belligerent noises as he fired the bullet today but he needed a fiscal -policy volley from Finance Minister Grant Robertson to demolish the monster.

Inflation, according to Robertson, is all due to overseas factors — the war in the Ukraine, supply chain congestion, China’s economic problems, you name it — but little has been done to contain it in the term of the Ardern government.

Frank Newman: Auckland turns down and OCR unchanged

Three years after the tide turned on Auckland house prices, the headlines are finally announcing the new reality.

Only those with a vested interest in seeing prices higher are talking the Auckland market up at the moment. Of the independent commentators the optimists are expecting Auckland house prices to remain flat. Those with a less positive disposition are talking in terms of falls like Sydney and Melbourne where the decline from peak to trough is expected to be between 15% to 20% according to the ANZ.