RBNZ engineering our next recession

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

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5429 posts

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#3002205 27-Nov-2022 16:24

insane:

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.

The RBNZ doesn't have the ability to pick winners when it comes to this stuff, and it's not an excuse to move as slow as they in lifting the OCR - which is still deeply negative in real terms relative to inflation, and they're still underwriting cheap lending for banks with FLP at the same time as they're hiking the OCR.

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tweake

1043 posts

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#3002212 27-Nov-2022 17:14

GV27:

insane:

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

.....

this is a the big issue.

kiwis are over invested in property. way to much money tied up and not being used. this of course has led to the boom and overpricing, to which the govt has had to kick the property market over the edge before it crashed and burnt the entire economy to the ground.

the silly thing is no govt wants to be the bad guy and fix it so it doesn't happen again. so the cycle will simply repeat unless you guys do something about it.

Batman

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#3002232 27-Nov-2022 17:27

tweake:

kiwis are over invested in property. way to much money tied up and not being used. this of course has led to the boom and overpricing, to which the govt has had to kick the property market over the edge before it crashed and burnt the entire economy to the ground.

however i am interested to know if they caused it in the first place

Handle9

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#3002233 27-Nov-2022 17:28

Batman:

tweake:

kiwis are over invested in property. way to much money tied up and not being used. this of course has led to the boom and overpricing, to which the govt has had to kick the property market over the edge before it crashed and burnt the entire economy to the ground.

however i am interested to know if they caused it in the first place

Who caused what?

insane

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#3002238 27-Nov-2022 18:02

GV27:
insane:

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.

The RBNZ doesn't have the ability to pick winners when it comes to this stuff, and it's not an excuse to move as slow as they in lifting the OCR - which is still deeply negative in real terms relative to inflation, and they're still underwriting cheap lending for banks with FLP at the same time as they're hiking the OCR.

Yeah they certainly waited to see what other nations did before copying. Only after having his job reconfirmed for another 5 years has Adrian Orr admitted to getting it wrong.

That FLP programme is pure BS, especially given it didn't have regular review periods! They say NZ isn't corrupt, but our corruption is in plain sight.

I also found it a bit ritch of Orr telling people to not pursue pay rises and take one for the team. He's highly insulated from any interest rises, and will no doubt accept any pay rises his review committee suggest. I hope someone is tracking his personal spending.

tehgerbil

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#3002265 27-Nov-2022 21:55

gzt: Household savings rate in NZ has always been amazingly low. Governments have talked about it for half a century. At this point it's just accepted as an unusual feature of our economy.

https://www.gfmag.com/global-data/economic-data/916lqg-household-saving-rates

not to derail this post, but I was always told it's largely due to the Muldoon Government 'raiding the retirement savings of everyday people'.

Often wondered how accurate this was, i.e. It's "Muldoons fault."

The truth is probably more like our Parents like to this they were more fiscally frivolous and history smiles fondly upon their wasteful spending.

Kiwisaver is sincerely one of the best things our Government has done for the people imo.

GV27

5429 posts

Uber Geek

#3002334 28-Nov-2022 06:36

insane:

Yeah they certainly waited to see what other nations did before copying. Only after having his job reconfirmed for another 5 years has Adrian Orr admitted to getting it wrong.

That FLP programme is pure BS, especially given it didn't have regular review periods! They say NZ isn't corrupt, but our corruption is in plain sight.

I also found it a bit ritch of Orr telling people to not pursue pay rises and take one for the team. He's highly insulated from any interest rises, and will no doubt accept any pay rises his review committee suggest. I hope someone is tracking his personal spending.

The cynical reframing of 'maybe that wasn't the right thing to do' as 'hindsight' is the worst for my mind.

People have been talking about structural and governance issues with RBNZ and leaving interest rates too low for years now - pundits, columnists, former senior RBNZ staff. They were roundly criticised at the time when inflation blew past 3% and now we are expected to accept that there is only contemporary criticism of those decisions after the fact.

More recently so, they have been criticised for lifting at 50bps when the Fed and others have been lifting at 75bps or even 100bps. Forecasts for things are still well out, including peak OCR and timeframe, which has moved many times now, and again recently the rate of wage growth.

There has definitely been a tone shift after Orr was reconfirmed and for my mind, this raises further questions. Commentary shouldn't be contingent on whether the Governor has been reappointed for another term. This is really what we needed to be hearing in 2021. But better late than never, I suppose.

Geektastic

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#3002335 28-Nov-2022 06:43

tweake:
this is a the big issue.

kiwis are over invested in property. way to much money tied up and not being used. this of course has led to the boom and overpricing, to which the govt has had to kick the property market over the edge before it crashed and burnt the entire economy to the ground.

the silly thing is no govt wants to be the bad guy and fix it so it doesn't happen again. so the cycle will simply repeat unless you guys do something about it.

Over invested only because it’s the only tax efficient way to save money available.

Uniquely, we tax retirement saving. If putting money in your pension was tax free as it is in almost all the western world, there would be an alternative to buying houses.

GV27

5429 posts

Uber Geek

#3002341 28-Nov-2022 07:39

Geektastic:

Uniquely, we tax retirement saving. If putting money in your pension was tax free as it is in almost all the western world, there would be an alternative to buying houses.

Most places will tax retirement saving at some stage; the difference here is you're taxed year-on-year on it, as opposed to other places (like Aus) where you get the benefits of the gross amount compounding over time and then get taxed on exit e.g. when you retire and it gets paid out to you.

100% this needs to change. This is one of those slam-dunk tax policies like indexing income tax brackets to inflation that are inexcusably left on the back-burner while people have loftier philosophical arguments about things like 'fairness'.

I suspect as with indexing, governments have grown accustomed to having the extra money to help pay for things or to help move them towards surplus so they can crow about how great their fiscal management skills are - when in reality it's just the result of maintaining a really crappy status quo.

tweake

1043 posts

Uber Geek

#3002682 28-Nov-2022 16:27

Geektastic:
tweake:

this is a the big issue.

kiwis are over invested in property. way to much money tied up and not being used. this of course has led to the boom and overpricing, to which the govt has had to kick the property market over the edge before it crashed and burnt the entire economy to the ground.

the silly thing is no govt wants to be the bad guy and fix it so it doesn't happen again. so the cycle will simply repeat unless you guys do something about it.

Over invested only because it’s the only tax efficient way to save money available.

Uniquely, we tax retirement saving. If putting money in your pension was tax free as it is in almost all the western world, there would be an alternative to buying houses.

agreed.

tax free is a huge incentive. there is also a few other incentives over the years like transferring your tax to your property so in effect taxpayers are paying for your property upgrades and then you pay no tax when you sell it. so you don't even pay income tax. (these days that loop hole is almost closed).

take the money out of housing and kiwis could invest for retirement other ways, or start a business, invest in other businesses etc. why isn't national pushing this? they are usually promoting business etc. this would be huge.

evilengineer

441 posts

Ultimate Geek

#3002746 28-Nov-2022 17:10

tweake:

take the money out of housing and kiwis could invest for retirement other ways, or start a business, invest in other businesses etc. why isn't national pushing this? they are usually promoting business etc. this would be huge.

I'm sure Christopher Luxon owning seven properties has nothing to do with it. 😁

Seriously though, National's policies on the ring fencing of rental "losses" and the like will do nothing to encourage people to find more useful ways to put their money to work

tweake

1043 posts

Uber Geek

#3002755 28-Nov-2022 17:54

evilengineer:

tweake:

take the money out of housing and kiwis could invest for retirement other ways, or start a business, invest in other businesses etc. why isn't national pushing this? they are usually promoting business etc. this would be huge.

I'm sure Christopher Luxon owning seven properties has nothing to do with it. 😁

Seriously though, National's policies on the ring fencing of rental "losses" and the like will do nothing to encourage people to find more useful ways to put their money to work

hes already said they will undo those policies. which if course will make the housing market boom again, which will then end up crashing massively and possibly taking out the entire economy with it.

Aaroona

3130 posts

Uber Geek

#3002765 28-Nov-2022 19:17

tehgerbil:

Kiwisaver is sincerely one of the best things our Government has done for the people imo.

It annoys me that I agree with you. I don't like the inflexibility of Kiwisaver, but those same guardrails are exactly why it's a reasonably good "baseline" for everyone.

I would love to see more options in relation to specific stock picks, or ability to opt out for those that are a bit more savvy and invest elsewhere. However if given the option, I suspect a lot of people who should be in it, would not participate.

I would also like to see some more tax advantages for contributing to Kiwisaver. If I had an opportunity to have a tax advantaged account I might be inclined to dial up my contributions, but as it stands, we are still taxed as normal and are locked to specific approved investment funds which don't always fit what I want to do.

tweake

1043 posts

Uber Geek

#3002769 28-Nov-2022 19:46

Aaroona:

tehgerbil:

Kiwisaver is sincerely one of the best things our Government has done for the people imo.

It annoys me that I agree with you. I don't like the inflexibility of Kiwisaver, but those same guardrails are exactly why it's a reasonably good "baseline" for everyone.

I would love to see more options in relation to specific stock picks, or ability to opt out for those that are a bit more savvy and invest elsewhere. However if given the option, I suspect a lot of people who should be in it, would not participate.

I would also like to see some more tax advantages for contributing to Kiwisaver. If I had an opportunity to have a tax advantaged account I might be inclined to dial up my contributions, but as it stands, we are still taxed as normal and are locked to specific approved investment funds which don't always fit what I want to do.

the catch is they let people use it to buy a house. that adds fuel to the housing market, the market simply ups the price to take advantage of it and takes away their retirement fund. first home buyers have to give away a huge part of their retirement so someone else can retire a bit more comfortably.

using it to buy a house was the worse thing they ever did.

GV27

5429 posts

Uber Geek

#3002897 29-Nov-2022 06:48

tweake:

using it to buy a house was the worse thing they ever did.

While I don't disagree that this was something that shouldn't have been allowed from the start, it ended up being the only way many people could actually get a deposit together in the first place.

Also, from interest.co.nz:

APOLOGY FROM A CENTRAL BANKER
At and Australian Senate hearing, RBA governor Philip Lowe has offered an unprecedented apology to Australians who took out home loans based on the central bank’s failed guidance that interest rates were unlikely to rise until 2024.

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