Tag: RBNZ

Inflation Fears Still Haunt (Especially Australia)…

The Washington-based IMF just published In its biannual world economic outlook, which said that central banks had scored a major achievement to return inflation to the pre-pandemic average without inflicting a global recession.

They go one to say that economic developments over the past four years have had a lot to do with how individual countries have deployed fiscal and monetary policies since the pandemic.

Australia’s choice to hold rates lower, whilst lifting government debt (across states and federally) with most new jobs created in the public sector, thus crimping productivity. This plus high migration has kept inflation well above band, and with little prospect of cuts any time soon, but so far have avoided a technical recession, although many households still are feeling the pinch.

New Zealand lifted rate faster and higher, and hit a recession, but is now cutting, has cut migration, and did not pump-up jobs in the public sector as Australia did. It will be interesting to see which strategy provides the better long-term outcomes.

But for now, the fear of entrenched inflation and higher interest rates for longer suggests that the inflation battle in Australia has yet to be won. And with an election due by May next year, this could well spell trouble for the current Government, though I am not sure the other mob are any better!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Today’s post is brought to you by Ribbon Property Consultants.

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Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Inflation Fears Still Haunt (Especially Australia)…
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Inflation Fears Still Haunt (Especially Australia)…

The Washington-based IMF just published In its biannual world economic outlook, which said that central banks had scored a major achievement to return inflation to the pre-pandemic average without inflicting a global recession.

They go one to say that economic developments over the past four years have had a lot to do with how individual countries have deployed fiscal and monetary policies since the pandemic.

Australia’s choice to hold rates lower, whilst lifting government debt (across states and federally) with most new jobs created in the public sector, thus crimping productivity. This plus high migration has kept inflation well above band, and with little prospect of cuts any time soon, but so far have avoided a technical recession, although many households still are feeling the pinch.

New Zealand lifted rate faster and higher, and hit a recession, but is now cutting, has cut migration, and did not pump-up jobs in the public sector as Australia did. It will be interesting to see which strategy provides the better long-term outcomes.

But for now, the fear of entrenched inflation and higher interest rates for longer suggests that the inflation battle in Australia has yet to be won. And with an election due by May next year, this could well spell trouble for the current Government, though I am not sure the other mob are any better!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

New Zealand Rates Held Higher For Longer As Hawks Fly!

The Reserve Bank of New Zealand left the Official Cash Rate at 5.5% on Wednesday, saying that Restrictive monetary policy has reduced capacity pressures in the New Zealand economy and lowered consumer price inflation. Their statement on Monetary Policy had a decidedly hawkish tone, signalling rate cuts will be delayed until around August 2025, which is implying that markets are pricing cuts about 12 months too soon. This is important as we will see, later.

And folks, 5.5% is significantly higher than the weaker 4.35% in Australia, suggesting that we could be facing higher for longer too.

The report said annual consumer price inflation is expected to return to within the Committee’s 1 to 3 percent target range by the end of 2024. That said, in an economic note, ASB says they continue to expect the RBNZ will remain on hold until early 2025, but the risks are tilted to a later start. The RBNZ’s forecasts have inflation holding up higher for longer, with inflation not back to 2% until 2026 (though it is a rounding error from that mark over the second half of 2025).

The RBNZ did discuss the possibility of lifting the OCR at this meeting but didn’t see the need given inflation is still expected to be comfortably back in the target band over the “medium term” i.e. the next couple of years. The clear conclusion, though, was that interest rates need to hold up for longer – as the forecasts showed.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
New Zealand Rates Held Higher For Longer As Hawks Fly!
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New Zealand Rates Held Higher For Longer As Hawks Fly!

The Reserve Bank of New Zealand left the Official Cash Rate at 5.5% on Wednesday, saying that Restrictive monetary policy has reduced capacity pressures in the New Zealand economy and lowered consumer price inflation. Their statement on Monetary Policy had a decidedly hawkish tone, signalling rate cuts will be delayed until around August 2025, which is implying that markets are pricing cuts about 12 months too soon. This is important as we will see, later.

And folks, 5.5% is significantly higher than the weaker 4.35% in Australia, suggesting that we could be facing higher for longer too.

The report said annual consumer price inflation is expected to return to within the Committee’s 1 to 3 percent target range by the end of 2024. That said, in an economic note, ASB says they continue to expect the RBNZ will remain on hold until early 2025, but the risks are tilted to a later start. The RBNZ’s forecasts have inflation holding up higher for longer, with inflation not back to 2% until 2026 (though it is a rounding error from that mark over the second half of 2025).

The RBNZ did discuss the possibility of lifting the OCR at this meeting but didn’t see the need given inflation is still expected to be comfortably back in the target band over the “medium term” i.e. the next couple of years. The clear conclusion, though, was that interest rates need to hold up for longer – as the forecasts showed.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Reserve Bank Of New Zealand Inflicts More Interest Rate Pain!

The RBNZ Monetary Policy Committee voted to raise the Official Cash Rate (OCR) from 5.25% to 5.50%.

They said:

The combination of weaker demand and improved supply has reduced inflation in New Zealand. Annual consumers price inflation declined from 7.2% in the December 2022 quarter to 6.7% in the March 2023 quarter. Prices for some goods and services that change a lot — such as petrol prices and airfares — have also declined.

Inflation declined by more than expected, but it remains too high. While many measures of inflation expectations have declined in the last 3 months, they remain elevated. Most measures of persistent or ‘core’ inflation have stayed near recent peaks. Inflation is expected to take some time to return to the mid-point of the MPC’s 1 to 3% target range.

Inflationary pressure continues to be supported by a tight labour market, with employment above its maximum sustainable level. The unemployment rate remained very low at 3.4% in the March 2023 quarter. Although most indicators show that labour market pressures have eased since last year, they remain strong.

Overall, high interest rates are still needed to further slow demand. This will help to reduce upward pressure on prices, leading to lower headline inflation.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The New Zealand Hawk Stands Alone…

A significant gulf has opened up between New Zealand and Australia in terms of monetary policy, after RBNZ lifted another 50 basis points, while Australia held. Underlying this are a series of conflicting assumptions about how the economies will fare – but the risk of recession in New Zealand is now highly likely – some would say certain; while in Australia, the protection of the housing market appears to be front of mind, with the RBA willing to let inflation burn hotter for longer. Both cannot be right!

New Zealand’s Central Bank Lifts Interest Rates by 0.5%!

Adrian Orr, RBNZ Governor said they were listing the Official Cash Rate by 0.5% today, with a peak of 5.5% still on the cards. The recent Cyclone may also add additional inflationary pressure.

He also highlighted the importance of cash – and branches – at a time of crisis, like when the power goes out. And the risks to social cohesion when this is ignored. Just wow!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

More Aggressive Rate Tightening Says RBNZ As Rates Rise to 2%!

Rates were lifted today in New Zealand as the Reserve Banks tries to tame inflation. But will they break something as pressures on households rise?

https://www.rbnz.govt.nz/news/2022/05/monetary-conditions-tighten-by-more-and-sooner

Go to the Walk The World Universe at https://walktheworld.com.au/

Half A Percent Cash Rate Rise Drives Another Nail into New Zealand Property Falls

The New Zealand Reserve Bank’s Monetary Policy Committee dropped a 50 basis point hike today by lifting the official cash rate to 1.5% from 1% Wednesday in Wellington, the first time it has delivered an increase of that magnitude since 2000, its biggest hike in 22 years.

So the question is, does the 50 basis point hike represent a stitch in time, or a nail in the coffin of the property market?

The move wrong-footed 15 of 20 economists who expected a quarter-point adjustment. However, investors had assigned it a 70% probability.

“The Committee agreed that their policy ‘path of least regret’ is to increase the OCR by more now, rather than later, to head off rising inflation expectations,” the RBNZ said. “It is appropriate to continue to tighten monetary conditions at pace.”

Go to the Walk The World Universe at https://walktheworld.com.au/

Will Banks Be Stressed Too?

We just got the results of the Reserve Bank New Zealand Stress Tests, and this year the RBNZ undertook both its regular solvency stress test, challenging the resilience of banks’ capital to a severe downturn, and also put the spotlight on banks’ liquidity and funding resilience through a liquidity stress test ahead of next year’s review of the RBNZ’s liquidity policy. The solvency stress test included the five largest banks – ANZ NZ, ASB, BNZ Westpac and Kiwibank – and the liquidity stress test featured those five plus Co-operative Bank, Rabobank NZ, Heartland, SBS and TSB.

https://www.rbnz.govt.nz/news/2021/12/stress-tests-show-strengthening-bank-resilience

Large banks fared worse than the smaller banks. However, banks were able to identify actions that, if effective, would considerably improve the outcome.

Now the banks is at pains to highlight the stress test scenarios are hypothetical and don’t represent its view of the most likely future path for financial stability risks. And the RBNZ doesn’t release individual banks’ stress test results. Unlike the results from the Federal Reserve in the US, where individual banks results are disclosed. In this respect New Zealand is following the opaque strategy APRA also executes, which is a pity. Not least because in New Zealand, Bank Deposit Bail-In is a thing via the Open Banking Resolution, and the RBNZ has warned people to do due diligence on the individual banks – so why don’t they disclose the detail we ask?

Go to the Walk The World Universe at https://walktheworld.com.au/