RBNZ printed 71 Billion during Covid Response

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Forums › Finance and wealth management › RBNZ printed 71 Billion during Covid Response

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#2994755 11-Nov-2022 15:47

KrazyKid:

Of all of this the reserve bank can only change interest rates (QE and FLP to banks decreases interest rates basically).
The rest is external factors.

They also seriously undermine your ability to address external factors if you get them wrong as well.

If anything, the external factors making having your own house in order even more important.

Again there is some desire to designate a lot of these things as something only obvious with hindsight, when former RBNZ governors and commentators were questioning it at the time, openly, and in public.

I'm not buying it, sorry.

On National's objections, Michael Reddell writes:

UPDATE: Having been sent a copy of the National letter of 30 September, it is now clear that National did not raise any substantive concerns about Orr, and focused wholly on the non-existent “convention” about not appointing a substantive Governor even 6-7 months out from an election.

https://croakingcassandra.com/https://croakingcassandra.com/2022/11/10/the-spencer-precedent/

He seems fairly convinced that Orr should not have been reappointed for a wide variety of reasons.

As far as RBNZ's report into how RBNZ handled a crisis, I would be extremely reserved (heh) about basing anything off what is fundamentally an internal piece of work where RBNZ is effectively tasked with grading its own homework. Extreme grains of salt about the size of your head are probably required.

mattwnz

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#2994756 11-Nov-2022 15:47

IMO they may have been better just to give everyone in NZ $14,000 as a helicopter payment. Instead house prices increased substantially benefiting only some. Many people don't really benefit from high house prices if they only have the one house they live in and they are usually buying and selling in the same market.

mattwnz

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#2994759 11-Nov-2022 15:51

Earbanean:

mudguard:

So pick a number. If the amount was half that, would we still be running at current inflation levels, or would it be halved as well? Seemingly governments all around the world all printed various amounts and as far as I can tell NZ still has one of the lower levels of inflation?

Ha ha, I think you're missing the tone of the thread. People aren't happy and they want to blame someone. That just happens to be Adrain Orr and/or Jacinda Ardern. The fact that this has happened all over the world, and as you point out, is much worse than NZ in many countries, is completely lost on most people here.

Liz Truss anyone?

England was a basket case well before covid with massive debt etc. Likelwise Europe also have problems with energy costs which is a big part of their inflation, which NZ doesn't have. NZ shouldn't really be comparing ourselves with other countries, however this is the first time NZ did money printing, and there were going to be consequences as a result. . But if we are, then Australia is probably the most comparable and they have faired better than NZ.

wellygary

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#2994761 11-Nov-2022 15:53

KrazyKid:

We were one of the first to start rasing out cash rate this year. We raised our OCR in Feb, the reseve bank in the US started their rate rises in Arpil.

Yes we were one of the first but it began in October 2021, but it was in grannystep 0.25 increments, April 2022 saw the start of the 0.5 step hikes,

By November 2021 CPI was 4.9 per cent ....

https://www.rbnz.govt.nz/monetary-policy/monetary-policy-decisions

mattwnz

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#2994763 11-Nov-2022 15:58

wellygary:

KrazyKid:

We were one of the first to start rasing out cash rate this year. We raised our OCR in Feb, the reseve bank in the US started their rate rises in Arpil.

Yes we were one of the first but it began in October 2021, but it was in grannystep 0.25 increments, April 2022 saw the start of the 0.5 step hikes,

By November 2021 CPI was 4.9 per cent ....

https://www.rbnz.govt.nz/monetary-policy/monetary-policy-decisions

Yes, they didn't increase then by large enough steps. I understand the next one is likely to be a 0.75% increase. But historically rates are still very low. The problem is the massive house price debt some people took on. The RB did warn people over the last few years about taking on this sort of debt, but I think many people didn't expect rises to this extent. Especially when there had been talk of interest rates going down to zero or negative at one point.

insane

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#2994782 11-Nov-2022 16:10

GV27:
RBNZ is still also making cheap cash available to banks through FLP at the same time as it is hiking the OCR, I might add. It's insane.

This didn't get enough attention, as if no reporters understood what the programme did for banks and the impact it has had on term deposits.

Can just imagine how to convo went:

Govt: Please don't call in people's mortgages when they default.

Banks: With a suitable FLP programme we can find it in our hearts to provide a loan holiday to everyone who needs it and take the 'hit' for the team.

Govt: Yeeha!
Banks: Yeeha!

GV27

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#2994787 11-Nov-2022 16:28

insane:

This didn't get enough attention, as if no reporters understood what the programme did for banks and the impact it has had on term deposits.

I don't fully understand the LSAP program but I do understand it's cost us $9b so far. Makes the comments about tax cuts being unaffordable look a bit silly when people seem to be falling over themselves to not mention that some of these decisions have come with a pretty big price tag.

But I think this gets way beyond all but the most specialised reporters, interest.co.nz (and two or so Herald reporters) aside, it's really hard to get your head around how the thing works in the first place, let alone when you injecting steroids into parts here and there.

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Handle9

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#2994811 11-Nov-2022 17:12

MikeAqua:
Wow. Just wow. Leading to massive inflation and a cost-of-living crisis we haven't seen since the oil-shock of the 1970's.

Nah. That was mainly caused by imported inflation but it hasn’t helped.

GV27

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#2994828 11-Nov-2022 18:28

Handle9:

Nah. That was mainly caused by imported inflation but it hasn’t helped.

You tend to have a lot more imported inflation when your currency tanks.

Handle9

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#2994831 11-Nov-2022 18:41

GV27:

Handle9:

Nah. That was mainly caused by imported inflation but it hasn’t helped.

You tend to have a lot more imported inflation when your currency tanks.

The Ukraine is the root cause of the currency tanking relative to the USD. The fed hasn't helped either.

GV27

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#2994836 11-Nov-2022 19:46

Handle9:

The Ukraine is the root cause of the currency tanking relative to the USD. The fed hasn't helped either.

We've lost ground against the AUD to a significant extent as well, that started before Vlad rolled across the border.

Our drops against the USD only really took off in April/May - after the war started.

Our currency dropping is the result of our tightening cycle being too little, too late.

Handle9

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#2994894 11-Nov-2022 19:54

GV27:

Handle9:

The Ukraine is the root cause of the currency tanking relative to the USD. The fed hasn't helped either.

We've lost ground against the AUD to a significant extent as well, that started before Vlad rolled across the border.

Our drops against the USD only really took off in April/May - after the war started.

Our currency dropping is the result of our tightening cycle being too little, too late.

Nah. Every currency has dropped massively against the USD.

The NZD has recovered against the AUD in the last two months and is approaching its 5 year mean value.

networkn

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#2994928 11-Nov-2022 21:46

Handle9:

Nah. That was mainly caused by imported inflation but it hasn’t helped.

Imported Inflation was more than $71B?

How is that measured?

Handle9

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#2994930 11-Nov-2022 21:59

networkn:

Handle9:

Nah. That was mainly caused by imported inflation but it hasn’t helped.

Imported Inflation was more than $71B?

How is that measured?

I guess you need to figure out the difference between quantitative easing and inflation.

matisyahu

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#2995683 14-Nov-2022 05:53

GV27:
mudguard:

But I guess what was the alternative? Lock down, close up and any business that didn't have the reserves to weather the storm got shut down?

To not print as much $71B.

There's conceivably middle ground between printing a huge portion of cash and printing none.

There was no need to ditch LVRs for investors either. No part of the Covid response justified doing that.

The alternative would have been not to cut interest rates below 1% or better still, they should have pushed up interest rates to 2-3% which would have given them room when it came to the monetisation of debt. What we're seeing is the result of 14 years of interest rates that have been too low for too long and eventually it was going to come back to bite the RBNZ in the backside at some point. Lowering interests either leads to one of two things - asset bubbles (see housing) or inflation, oh how I wish the lower interest rates flowed through to businesses so they could invest in new plant equipment but unfortunately banks aren't interested in unless it involves property or a house some where in the equation.

"When the people are being beaten with a stick, they are not much happier if it is called 'the People's Stick'"

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