Reserve Bank says tide turning for housing's 'one way bet'; I doubt that; Kiwifruit, fish & honey exporters win big in trade deal with EU, but dairy & meat exporters unhappy; BNZ sees recession
excellent stuff. the evidence between what they say and what they do is undeniable. And all around the 🌎, the facade largely built on the bullshit narratives, interventions and jawboning of Central Bankers over the last 15 years, may finally be exposed as the house of cards it is. Bring it on.
> The last time expectations about prices (CPI inflation) were out of control was in the 1970s and 1980s. The collective response then was to rewrite the Reserve Bank Act, give it independence and allow it to create a brutal recession to drive expectations lower.
You have to give credit to the 4th Labour Government for having the stomach to weather political storms after they’d committed to a course of action.
Imagine a modern government making a decision to do something like take the training wheels off the ETS and just letting the price of petrol go over $6 or something. It would be mind boggling!
I have trouble believing asset owners will be swayed by the predicament of their children when they've happily leveraged the situation on their tenants without any sort of meaningful sympathy.
Thanks for this Bernard, it is somewhat hysteric in how much this rhymes with past.
One thing missing from your analysis is how we are now in a more unpredictable global environment with large irrational actors. How this impacts New Zealand is a large topic of discussion which I haven't seen anyone outside of the wonky foreign policy circles attempt to discuss. Even then, there still is a lack of nuance in discussion.
The PM's NATO speech was largely the same panic for the rules based order which our largest partners and markets have since long been undermining and thrown away. Uncomfortable as it is, it really is coming to a point where our politicans need to do some actual introspection in what they want for New Zealand.
Just had the awful realisation that higher house prices are an effective way to combat climate change thanks to this quote:
"younger people and future generations, who have to spend more to buy land. This means that they save less, reducing the amount of alternative capital they own and possibly lowering lifetime consumption"
Lowing lifetime consumption is exactly what's needed to reduce emission & planetary destruction. Not exactly the thought I want to be having as someone in their mid-30s who doesn't own a home. Nor do I think its the healthiest way to reduce consumption / emissions. But just a thought.
"For example, a cut of $1t in household net wealth (which would equal the rise seen since Covid) would see a $50b reduction in consumption, equivalent to a 15% cut in GDP, which would be the equivalent of a depression;"
Yeah, nah.
Can we actually cut our consumption by $50b? Is there that much 'fat' in the economy?
Where did the $25b in extra consumption go from the $1t in wealth growth? A fair whack of it probably went into buying more housing at higher prices. It certainly didn't go into overseas holidays.
The banks(boards/management/shareholders) rapidly increasing mortgage interest rates and the rapidly increasing cost/price of fuel(diesel/oil/petrol) are driving/forcing/plunging New Zealand to a recession.
Most leafy low population density NIMBY Auckland suburbs (such as Devonport) are disinclined to share access to natural resources, shopping villages, free parking and other public amenities including proximity to the CBD. Their residents often offer spurious arguements about protecting the environment ignoring the fact that low density areas are already well endowed with facilities such as parks and open spaces that provide that protection. Often they facitiously argue for heritage status, on the basis of the existance of a few older run down building when it is clear that many of the distinctive heritage homes have long been replaced by modern buildings. Perhaps the solution lies in amending the city’s rating system so that low population density privileges are properly reflected in the costs that others have to bear when when they are forced to live in concentrated housing developments in inconveniant locations. In Auckland the increased rate charge could be easily implemented through an appropriate definition of the assessed “Natural Environment – Non Business” rate to reflect an accurate valuation of the advantages of being a NIMBY
Hi Bernard - genuine question, when you talk about the RBNZ and Govt baulking at the idea of including housing affordability in their mandate, preferring instead, housing sustainability - what does that actually mean for us, the people of NZ?
Hi Bernard. You keep referring to the (unfair?) wealth 'banked' in housing assets and how this gain should be capital gains taxed, but until that asset is actually sold, then the current owner is no more better off from a day to day living and cash perspective. There'll be plenty of older folk who might be 'asset rich', but who still to struggle to pay the bills especially in times of higher inflation and rising mortgage interest rates. As an own home owner and a small sole-trader franchise business (with a few investment rental properties) I don't feel particular rich, especially at tax return time.
At election time I’d love to see a hard nosed interviewer ask candidates what they see as affordable housing as a DTI ratio and not wriggle away. Then push for how they propose achieving this. The media is largely sycophantic to politicians of both sides. Except Hosking and Du Plessis who I respect for getting into the dirt with interviewees.
As international politics continues to focus on China, I've wondered how much of the problem Sri Lanka is facing, can be sheeted home to China's loans. Here's an interesting article. https://economictimes.indiatimes.com/news/international/world-news/sri-lanka-crisis-gives-india-chance-to-gain-sway-vs-china/articleshow/92562347.cms
Should this be instructive for Pacific Island nations?
excellent stuff. the evidence between what they say and what they do is undeniable. And all around the 🌎, the facade largely built on the bullshit narratives, interventions and jawboning of Central Bankers over the last 15 years, may finally be exposed as the house of cards it is. Bring it on.
> The last time expectations about prices (CPI inflation) were out of control was in the 1970s and 1980s. The collective response then was to rewrite the Reserve Bank Act, give it independence and allow it to create a brutal recession to drive expectations lower.
You have to give credit to the 4th Labour Government for having the stomach to weather political storms after they’d committed to a course of action.
Imagine a modern government making a decision to do something like take the training wheels off the ETS and just letting the price of petrol go over $6 or something. It would be mind boggling!
I have trouble believing asset owners will be swayed by the predicament of their children when they've happily leveraged the situation on their tenants without any sort of meaningful sympathy.
Thanks for this Bernard, it is somewhat hysteric in how much this rhymes with past.
One thing missing from your analysis is how we are now in a more unpredictable global environment with large irrational actors. How this impacts New Zealand is a large topic of discussion which I haven't seen anyone outside of the wonky foreign policy circles attempt to discuss. Even then, there still is a lack of nuance in discussion.
The PM's NATO speech was largely the same panic for the rules based order which our largest partners and markets have since long been undermining and thrown away. Uncomfortable as it is, it really is coming to a point where our politicans need to do some actual introspection in what they want for New Zealand.
Just had the awful realisation that higher house prices are an effective way to combat climate change thanks to this quote:
"younger people and future generations, who have to spend more to buy land. This means that they save less, reducing the amount of alternative capital they own and possibly lowering lifetime consumption"
Lowing lifetime consumption is exactly what's needed to reduce emission & planetary destruction. Not exactly the thought I want to be having as someone in their mid-30s who doesn't own a home. Nor do I think its the healthiest way to reduce consumption / emissions. But just a thought.
Great insights on the 'back to the future', thanks for digging those old quotes out, and using the percentage shifts alongside this.
"median-voting homeowners" and "home-owning median voters" ?
These expressions/terms are perplexing. Who are they? Do not correlate
with median income New Zealanders (although some may have median income).
"For example, a cut of $1t in household net wealth (which would equal the rise seen since Covid) would see a $50b reduction in consumption, equivalent to a 15% cut in GDP, which would be the equivalent of a depression;"
Yeah, nah.
Can we actually cut our consumption by $50b? Is there that much 'fat' in the economy?
Where did the $25b in extra consumption go from the $1t in wealth growth? A fair whack of it probably went into buying more housing at higher prices. It certainly didn't go into overseas holidays.
The banks(boards/management/shareholders) rapidly increasing mortgage interest rates and the rapidly increasing cost/price of fuel(diesel/oil/petrol) are driving/forcing/plunging New Zealand to a recession.
Most leafy low population density NIMBY Auckland suburbs (such as Devonport) are disinclined to share access to natural resources, shopping villages, free parking and other public amenities including proximity to the CBD. Their residents often offer spurious arguements about protecting the environment ignoring the fact that low density areas are already well endowed with facilities such as parks and open spaces that provide that protection. Often they facitiously argue for heritage status, on the basis of the existance of a few older run down building when it is clear that many of the distinctive heritage homes have long been replaced by modern buildings. Perhaps the solution lies in amending the city’s rating system so that low population density privileges are properly reflected in the costs that others have to bear when when they are forced to live in concentrated housing developments in inconveniant locations. In Auckland the increased rate charge could be easily implemented through an appropriate definition of the assessed “Natural Environment – Non Business” rate to reflect an accurate valuation of the advantages of being a NIMBY
Hi Bernard - genuine question, when you talk about the RBNZ and Govt baulking at the idea of including housing affordability in their mandate, preferring instead, housing sustainability - what does that actually mean for us, the people of NZ?
Hi Bernard. You keep referring to the (unfair?) wealth 'banked' in housing assets and how this gain should be capital gains taxed, but until that asset is actually sold, then the current owner is no more better off from a day to day living and cash perspective. There'll be plenty of older folk who might be 'asset rich', but who still to struggle to pay the bills especially in times of higher inflation and rising mortgage interest rates. As an own home owner and a small sole-trader franchise business (with a few investment rental properties) I don't feel particular rich, especially at tax return time.
Excellent, Bernard. I'd support this being opened up, it's an important reality check that most of NZ should have.
At election time I’d love to see a hard nosed interviewer ask candidates what they see as affordable housing as a DTI ratio and not wriggle away. Then push for how they propose achieving this. The media is largely sycophantic to politicians of both sides. Except Hosking and Du Plessis who I respect for getting into the dirt with interviewees.