Carrying higher interest rates over the past few years has left NZ in a far stronger position than we would have been otherwise, and caused a smaller boom in property than what we potentially would have occured if interest rates had been lower. As a result our slump isn't going to be anywhere near as bad as other countries and out credit market won't fare as badly.
You endured the critisicm but persisted with your plan. That deserves top marks.
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Comment by grant_k, on 27-Oct-2008 10:22
Carrying higher interest rates over the past few years has left NZ in a far stronger position than we would have been otherwise...
That is highly questionable. Ask any of NZ's exporters and I very much doubt that they would agree with you. High interest rates have caused a lot of Uridashi and Euro-Kiwi bonds to be issued which have pushed up our exchange rates drastically for the past few years. In the past few weeks, a lot of that money has been exiting which is why the NZ:US rate has fallen to about 0.56 from 0.70+ not so longer ago. Had our interest rates been lower, exchange rates would quite possibly have remained a lot lower than they have which would have enabled some manufacturers such as F&P Appliances to remain based in NZ. Now that they have moved to Thailand, they are unlikely to ever return, so permanent damage has been done by the high interest rate policy.
...and caused a smaller boom in property than what we potentially would have occured if interest rates had been lower.
Conversely, as you say, the policy has moderated NZ's housing bubble, but that is the only good point I can think of, other than paying depositors very high rates on their savings for the past few years.
As a result our slump isn't going to be anywhere near as bad as other countries and out credit market won't fare as badly.
I seriously hope that you are right with this prediction, but TBH, the jury is still very much out on this one.
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