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New Zealand central bank to take into account HPI in inflation target?


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Big news! 

https://www.bloomberg.com/news/articles/2020-11-24/n-z-government-proposes-adding-house-prices-to-rbnz-s-remit

New Zealand’s government has proposed adding house prices to the central bank’s remit to rein in an overheating property market, prompting investors to reduce bets on lower interest rates. The local dollar jumped.

“We looked to see if there were any mandates that explicitly look at house prices, and we couldn’t find one,” said Jarrod Kerr, chief economist at Kiwibank in Auckland. “There was obviously a lot of political pressure on the government to at least acknowledge the concerns people had about affordability and inequality.”

The change in policy would be pretty huge.

First, it would mean we have some CBs straying away from the general downward trend of having interest rates going negative.

Second it comes from the central bank that first implemented "forward guidance". NZ used to have an inflation problem in the 90s and was the first one to set a target rate at 2% to curb anticipation. We all know now that this tool / communication has been widely replicated. 

I won't delude myself into what will happen for us, or even them. CBs are officially independent and can easily push back any request. Big joke currently since they are pretty much acting Treasuries. Just a note on this last point BoE is one of the worst offenders. At the worst of the Covid meltdown, it was buying back directly UK's bonds instead of the mocked up secondary market.

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What is interesting is the "save the boomers" asset if flailing. News are more and more about this. A government is saying: "our citizens are facing hardship, and we believe you played a part in it". I am not saying this request from the gvt of NW will change anything. I mentioned it before. But there is a pushback and it is starting to materialise, this is a good example. 

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This is more likely a sign that they think the market has topped and they want to use falling house prices to suppress inflation figures and justify more money printing/interest rate repression.

Expect something similar to happen in the UK should house prices look like falling against a backdrop of an inflationary recession.

 

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This is more likely a sign that they think the market has topped and they want to use falling house prices to suppress inflation figures and justify more money printing/interest rate repression.

Expect something similar to happen in the UK should house prices look like falling against a backdrop of an inflationary recession.

 

So far the market players think this could predict tightening

bond%20yields%20NZ.jpg?itok=VTylS_8u

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This is more likely a sign that they think the market has topped and they want to use falling house prices to suppress inflation figures and justify more money printing/interest rate repression.

Expect something similar to happen in the UK should house prices look like falling against a backdrop of an inflationary recession.

 

Housing costs aren't in CPI inflation figures

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What is interesting is the "save the boomers" asset if flailing. News are more and more about this. A government is saying: "our citizens are facing hardship, and we believe you played a part in it". I am not saying this request from the gvt of NW will change anything. I mentioned it before. But there is a pushback and it is starting to materialise, this is a good example. 

https://time.com/5719674/ok-boomer-new-zealand/

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First country to control COVID, first country to get to grips on HPI.  Makes me want to move.

My wife is a kiwi and I have permanent residency. We have been watching in horror as prices have run away worse than the UK in the past 6 months, but this is very good news indeed. I watched the announcement by the finance minister yesterday on Youtibe and he was pretty clear that this was just one of a number of measures they were considering to bring prices DOWN. He was very specific about addressing both supply and demand side of the equation, and that reducing availability of credit and increasing the cost of credit was a part of suppressing demand. They understand the harm it is causing younger generations...good on them.

We will move there when my parents are gone...if our pounds are worth anything. Although, many think that Cindy will destroy the economy now she has an outright majority and no need to pander to Winston Peters. 

Edited by HovelinHove
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We will move there when my parents are gone...if our pounds are worth anything. Although, many think that Cindy will destroy the economy now she has an outright majority and no need to pander to Winston Peters. 

The good old fear mongering about the left not being able to run finances. Like Clinton, Schroeder, the current PM of Portugal and all the scandinavians countries and their social democracies. A real collective dissonance on the subject by the Anglo world. 

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It is a great country went 12 years ago for 5 weeks did North and South Islands. Plentyu of space you could drive for an hour and see next to no cars. A guy I know visits his daughter regularly told me there is a huge drug problem amongst the young. he tried emigrating to be with her, he was turned down due to his wifes medical issues.

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Big news! 

https://www.bloomberg.com/news/articles/2020-11-24/n-z-government-proposes-adding-house-prices-to-rbnz-s-remit

New Zealand’s government has proposed adding house prices to the central bank’s remit to rein in an overheating property market, prompting investors to reduce bets on lower interest rates. The local dollar jumped.

“We looked to see if there were any mandates that explicitly look at house prices, and we couldn’t find one,” said Jarrod Kerr, chief economist at Kiwibank in Auckland. “There was obviously a lot of political pressure on the government to at least acknowledge the concerns people had about affordability and inequality.”

The change in policy would be pretty huge.

First, it would mean we have some CBs straying away from the general downward trend of having interest rates going negative.

Second it comes from the central bank that first implemented "forward guidance". NZ used to have an inflation problem in the 90s and was the first one to set a target rate at 2% to curb anticipation. We all know now that this tool / communication has been widely replicated  https://dating-polish.com/ dating polish girl.

I won't delude myself into what will happen for us, or even them. CBs are officially independent and can easily push back any request. Big joke currently since they are pretty much acting Treasuries. Just a note on this last point BoE is one of the worst offenders. At the worst of the Covid meltdown, it was buying back directly UK's bonds instead of the mocked up secondary market.

Why we never hear bad news from NZ and Australia? haha

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It is a great country went 12 years ago for 5 weeks did North and South Islands. Plentyu of space you could drive for an hour and see next to no cars. A guy I know visits his daughter regularly told me there is a huge drug problem amongst the young. he tried emigrating to be with her, he was turned down due to his wifes medical issues.

When I lived there they thought they had a bad drug problem ( it was meth and weed) we have drug problems here far worse.

 

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