TLDR & TLDL: Former PM John Key has warned the housing boom is over because rising interest rates will hit very-heavily-indebted home owners hard, land supply is opening up and high migration has finished. He also wants tighter Govt spending and lower public debt.
I argue below and in my podcast above it’s premature to say house prices won’t keep rising, that home owners will be stressed and that migration has finished. Actually, extra land supply is not a given, mortgage stress is low and there’s plenty of political and economic reasons why high net migration will fire up again in the coming years. Public debt is also nowhere near being a problem. (See my fuller argument below for paid subscribers)
Elsewhere in the political economy here, Covid-19 Minister Chris Hipkins, Finance Minister Grant Robertson and PM Jacinda Ardern have put out a jumble of mixed and subtly conflicting messages over whether and how porous (and clogged) Auckland’s borders might become. That is opening the Govt up to ridicule and eroding faith the ‘classic Kiwi summer’ is coming. For the first time, the Govt’s kitchen cabinet or ‘tight five-to-eight’ (Ardern, Robertson, Hipkins, Andrew Little, David Parker, Michael Wood, Megan Woods, Nanaia Mahuta) is looking ragged and tired.
Overseas overnight, the Bank of England surprised everyone by not increasing interest rates and the US Federal Reserve preached patience in dealing with a ‘transitory’ inflation spike it still sees fading later next year. Longer term wholesale interest rates fell sharply overnight on hopes (and fears) the world’s central banks will be able to quash inflation without big and fast rises in short term interest rates. The debate about whether inflation is transitory and interest rates are about to reverse 30 years of falling is not decided at all.
Coming up today, watch out for Robertson and Ministry of Health Director General Ashley Bloomfield in the first 1pm presser in a couple of days. I’ll be there and welcome your questions below. I’m interested in where the Govt’s long-promised extra income support for the low paid is, who’s right on the Auckland border, and, what options Cabinet has if Tairawhiti, Northland and Whanganui aren’t 90% fully-vaxxed until February, if at all, as the latest projections show.
I’ll also be doing my weekly ‘hoon’ zoominar around the week’s events with Peter Bale at 4pm for an hour (link below the fold in the sign off for paid subscribers to jump on and ask questions for discussion in the last 15 minutes). I’d also like to experiment with an ‘Ask Me Anything’ on the week’s events here in a comment thread on The Kaka at midday for an hour. I’ll send a primer for that out to paid subscribers at midday.
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