RBNZ engineering our next recession

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Forums › Finance and wealth management › RBNZ engineering our next recession

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#3001514 25-Nov-2022 20:38

Eitsop:
RBNZ, could collect a new Tax collected by IRD, and the RBNZ get the money..

Then they can reduce cash for every person in NZ, not just the people with mortages. and better than the banks getting it in interest

They could effectively burn the money? ie the opposite to printing money

This is exactly what I've been thinking, but instead of a tax, a mandatory additional contribution to KiwiSaver.

It will also suck money out of the economy, and importantly:

- Not go into interest payments
- Not go to Aussie banks
- Still be available for true hardship
- Available to be extracted at retirement

They can fight over whether it's usable towards a first home or not.

Feels like a far smarter approach than burning good money.

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#3001531 25-Nov-2022 22:01

They could make saving for your retirement tax free like it is in most comparable countries, encouraging people to save...

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#3001532 25-Nov-2022 22:04

Batman:

question: interest rates go up. borrowers pay more interest. who pockets the extra interest? the NZ treasury? i didn't think it was supposed to be the banks but hey banks will try to milk every thousand dollars!

You if you buy shares in the banks, which your Kiwisaver will have too.

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#3001537 25-Nov-2022 22:11

insane:
This is exactly what I've been thinking, but instead of a tax, a mandatory additional contribution to KiwiSaver.
It will also suck money out of the economy, and importantly:
- Not go into interest payments
- Not go to Aussie banks
- Still be available for true hardship
- Available to be extracted at retirement
They can fight over whether it's usable towards a first home or not.
Feels like a far smarter approach than burning good money.

Yep had similar thoughts.. totally agree..

Batman

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#3001538 25-Nov-2022 22:19

so let's say RBNZ is trying to control inflation ...

who/what caused this inflation in the first place?

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#3001539 25-Nov-2022 22:22

Batman:who/what caused this inflation in the first place?

Most the reserve banks around the world, by QE and low interest rates, Ukraine war

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#3001544 25-Nov-2022 22:28

tweake:

Linux:

Great for my parents not so good for me having a small mortgage (I know people with 1 million+) I would not want to be them

I am on fixed term of 2.7% to August 2023

but you need to put it into context.

they may be going onto higher interest rates, but those interest rates should have been factored in. so really its a case of they have enjoyed low interest rates (like your doing now) and now they are starting to go back to normal rates. the only ones that will have problems are those who maxed out their ability to pay, thinking that low rates was normal.

How high do you expect people to factor in? If you can borrow at 2.5% should you factor in 5%? 10? 15%? 20%? 25%?

What we need - desperately - is the peace of mind that US homebuyers get with a 30 year fixed rate. Imagine how much less stressful life would be if we could get that.

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#3001558 26-Nov-2022 00:27

To be honest I never looked at historical interest rates when we bought in 2017. I was just relieved to have finally found something that we could still afford, having had pre-approval pulled when the 20% minimum deposit thing came in a few years prior.

Some Americans we know were utterly confused as to why our rates here are so high and why fixed lengths so short. They had a 30yr <2% setup which seemed standard to them.

Flip side is, imagine fixing today for 30years where ave rates are 6.85%, only to find that rates tumble for the next 20 years and you're stuck paying that. The break fees would be horrendous so there'd be no easy way out of that 20years of regret, unless you sold up and didn't have any early repayment penalties.

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#3001568 26-Nov-2022 07:01

tdgeek:

All I'm saying is that was all this easily foreseeable or not?

Again, whether it was foreseeable or not is irrelevant. It was clearly already happening and it took us a while to actually do something about it - you didn't need the power of clairvoyance to see something already showing up in official inflation measures or house price affordability indices.

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#3001575 26-Nov-2022 07:18

Yep. NZ inflation crossed the 3% barrier in Feb 2021 but it took the RB another year to push the OCR over 1%. The rest was history.

In the days of a single mandate the RB would have been compelled to act much more firmly and promptly on inflation.

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#3001577 26-Nov-2022 07:26

GV27:
tdgeek:

All I'm saying is that was all this easily foreseeable or not?

Again, whether it was foreseeable or not is irrelevant. It was clearly already happening and it took us a while to actually do something about it - you didn't need the power of clairvoyance to see something already showing up in official inflation measures or house price affordability indices.

It's a loose loose situation. Saw a stat that said 56% of kiwi wealth is held in property.

- Do nothing and inflation hammers low income earners and retirees

- Crank up OCR, everyone who has borrowed a lot to have a home gets hammered.

- Even worse if you fit into both camps.

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#3001578 26-Nov-2022 07:33

Handle9:

That's not really how margins work

Poorly worded from me, what I meant was higher house prices = higher volume margin

Probably FOMO in those times factored in as well

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#3001580 26-Nov-2022 07:36

Eitsop:

Batman:who/what caused this inflation in the first place?

Most the reserve banks around the world, by QE and low interest rates, Ukraine war

And Covid reducing productivity and hence supply, and when restrictions eased your had demand but low supply. Still an issue as Covid sick days continue.

Inflation? Better buy now before it gets more expensive, more demand.

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#3001585 26-Nov-2022 08:43

Geektastic:
What we need - desperately - is the peace of mind that US homebuyers get with a 30 year fixed rate. Imagine how much less stressful life would be if we could get that.

3 years ago that would be nice

Now the US 30 year fixed is 7%!

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#3001591 26-Nov-2022 09:46

johno1234: Yep. NZ inflation crossed the 3% barrier in Feb 2021 but it took the RB another year to push the OCR over 1%. The rest was history.

In the days of a single mandate the RB would have been compelled to act much more firmly and promptly on inflation.

There’s no particular reason to believe the dual mandate had any impact. Maximum sustainable employment was reached and demand for employees was supply constrained rather than demand constrained.

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