Come on ease up now RBNZ, what will it take?

Come on ease up now RBNZ, what will it take?

The excruciating pain of interest rates twists its ugly knife into the heart of NZ families. But still we spend. Bread and milk is important I hear you say. If its not the citizens spending where is this inflation coming from? And what will it take? What could possibly stop this relentless eye watering horizon?

Well ill tell ya

Whats changed?

So everyone was going on about interest rates pulling back very soon, but we keep seeing the opposite even with the RBNZ doing nothing. Well its in what they say as much as what they do, not to mention the influence on wholesale rates from abroad. The RBNZ did release their thoughts in the MPS(Monetary Policy Statement), where they alluded to a forecast of higher cash rate, for slightly longer. They also mentioned what they felt was a neutral rate might be higher.

Is the pain helping?

Well yes it certainly doesn’t feel like helping but it seems to be working. Although very slightly as most of our inflation slow down happened because of prices abroad.

What could help more ?

Immigrants coming over and working, as we don’t have enough people. Usually this would mean inflation as well but this time around, I reckon there is less wealthy people making their way in. If you look at some of the immigration settings, the path way to residency includes many blue collar rolls.

House prices ahead

The only real pressure on housing going forward will be the slowdown in supply which happens usually at this point in the cycle. Hands up all the developers that want to start a project while prices are flat. A change in government might mean tax settings which make property investment a viable option again, however the RBNZ’s Debt to income ratio will dampen this somewhat I reckon. So some strength going into next year but expect more people to be held back from housing next year unless they are buying a new build through exemptions. This also means some support for developers.

In a election year though we expect some to wait on the sidelines, however this will be an interesting one. As major shift in housing policy could present some opportunities.

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