TLDR: The Reserve Bank has warned mortgage rates could rise to 6% and house prices could fall 15% from their peaks last November over the next year or so, disconcerting some fearing the ‘squeezed middle’ and the economy more broadly can’t handle such shocks.
However, Governor Adrian Orr rightly pointed out home owners are not squeezed much at all, sitting on massive cash piles, huge amounts of equity and still enjoying relatively low interest rates. He said the economy was even set for a soft-ish landing and barely any homeowners would be in financial stress or slip under water with negative equity.
The central bank also dismissed Opposition claims that loose fiscal policy was to blame for the steeper and higher track for interest rates, and said its new employment mandate made no difference to how it ran monetary policy. Paid subscribers can see more of my reporting and analysis from yesterday’s Monetary Policy Statement and news conference below the paywall fold and in the podcast above.
Elsewhere in the news this morning:
Reuters reported overnight China has offered a dozen Pacific nations a region-wide security, policing, data-sharing and free-trade deal that dramatically increases the strategic tensions with ‘western’ countries seeking to maintain control of the region;
China’s Premier Li Keqiang warned overnight that China’s economy could contract in the current June quarter because of widespread lockdowns to try to preserve its Covid elimination strategy; and,
Financial markets read comments released by the US Federal Reserve this morning as increasing the chances of the need for a pause in rate hikes late this year.
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