Today, David Cunliffe and I have announced Labour’s plan to upgrade New Zealand’s 25 year old monetary policy system for the 21st century.
National will hate this. Their version of monetary policy is that whenever inflation gets too hot, they leave it to the Reserve Bank to bang up the Official Cash Rate.
The result: high interest rates by international standards, higher mortgage payments, and an over-valued currency that forces our exporters out of business and gets our businesses undercut by artificially cheap imports at home.
The only people who get rich out of that the are overseas lenders.
Labour’s got a smarter approach.
We’ll broaden the Reserve Bank’s objectives so that it’s got to try to help balance our current account and contribute to a healthier economy – rather than myopically focusing on inflation alone.
We’ll make sure the government plays its part by tackling the sources of inflation. KiwiBuild, Capital Gains Tax, and restrictions on foreign investment in housing will stabilise house prices. NZ Power will bring power prices down. And KiwiAssure will keep the insurance market in check. Together, those three sectors account for nearly half the inflation we see today.
Finally, we’ll give the Reserve Bank more tools for controlling inflation without hiking interest rates. The biggest of these is variable Kiwisaver. When inflation needs dampening, rather than put up interest rates, we’ll let the Kiwisaver contribution rate be adjusted – that means you’ll be putting more money in your savings, rather than overseas.
So that’s Labour’s plan: we’ll deliver lower mortgage rates, a fair exchange rate, and more jobs. The people who oppose that will have to explain why it’s fair to hurt families and businesses to makes bankers rich.
Some nice ideas here.
But to really make a break with National’s policies, how about lowering mortgage rates by setting up a (direct or indirect) government lender? If households can borrow for 20 years at around 3% (as they can in the US), this would avoid the impact of RBNZ actions on households and curtail the drama of interest rate movements. (I have heard NZ used to have such a scheme until the 1970s at least…)
Being a NZ government lender, it would also keep the money in NZ and not flowing to the bottom line of banks based in Australia.
Now THAT would be bold policy.
How do you respond to the allegations that giving the RB the power to change mandatory KiwiSaver contribution rates will disproportionately impact poorer households?
After all, an increase of 1% can mean a lot to a family who is struggling to make ends meet as it is, but probably won’t mean much to those with a healthy amount left over at the end of each week.
Could this policy make life harder for poorer communities in the short term?
That is a very good question. I have heard from Parker himself that there will be an exemption for ‘low’ income earners, but when pressed he would not reveal how that was defined. If that exemption is generous (such as the ‘baby’ bonus’ number of $150,000), the policy will have grave difficulty having any impact. If the number is restrictive, low income families will really suffer.
Parker is probably keeping tight-lipped on the matter so that National can’t steal the idea.
He may well be, but either way the policy flops.
Given the calibre of your previous comments on this and other posts, I’ll take your view as a good sign that this policy of Labour’s is a very good one.
🙂
Oh it’s great for me! I have a comfortable income and standard of living. I can easily thwart any attempt to reduce my disposable income in the manner suggested by reducing my other savings by the amount the Govt. ratchets up my KS contributions by. I own more than one property, the values of which will all increase as inflation rises faster under this policy. And to top it al off, I’ll go out and buy some overseas shares while the Kiwi $ is high, and then cash in on the value of dividends in NZ$ when the Kiwi drops the 15% Mr Parker wants to.
Come to think of it, the greatest threat this will be to national is that it may attract some ACT voters!
Considering that you know bugger all about the policy, Anonymous IV, that shows your knee-jerk opposition to anything other than National-ACT.
If Key took it on, you’d be flip-flopping to support it.
Considering that Northern Employers and Manufacturers’ Association’s chief executive, Kim Campbell , is more open to the idea (http://www.radionz.co.nz/news/political/242861/labour-makes-monetary-policy-change), it seems you’re out on your own.
I know what is in the policy Frank. Same as anyone commenting here, of which there are quite a few. Are we all engaging in a ‘knee jerk’ reaction?
Nope. Just you and a few other National toadies, Anonymous User IV.
You haven’t heard the detail of this policy yet and already you are parrotting National’s line.
At least Northern Employers and Manufacturers’ Association CEO, Kim Campbell, was open-minded to the idea;
http://www.radionz.co.nz/news/political/242861/labour-makes-monetary-policy-change
You’ve made your mind up without knowing any of the detail.
Q: What does that make you, Anonymous User IV?
A: A well-trained, loyal, National-ACT supporter. No thinking on your part required.
*pffft!*
…”it seems you’re out on your own.”
Oh I don’t think so. The critique is starting already. I suggest this will be another policy that national won’t need to say much about, it will simply implode on itself like all the other Labour have dreamed up recently.
Excellent. It means Labour has grabbed the high-ground with media attention, and setting the agenda.
As I wrote earlier, this will be a game-changer.
Once this is analysed by other business groups, they, too, will see the inate logic of this policy.
The only questions I have;
* Why has no one thought of this before?!
* Will the Nats steal this policy as well?
Judging by Bill English’s lame response earlier tonight, the Nats have been caught on the back-foot.
No, it means Labour are once again being found out to be the policy muppets most NZ’ers believe they are.
“I have heard from Parker himself that there will be an exemption for ‘low’ income earners, but when pressed he would not reveal how that was defined. If that exemption is generous (such as the ‘baby’ bonus’ number of $150,000), the policy will have grave difficulty having any impact.”
You’re a complete moron if you thought the baby bonus was designed for ‘low’ income earners. Cunliffe said at the time it was a near universal policy. Your comparison shows nothing more than complete ignorance IV. You might think you’re intelligent being whaleoil’s echo, but most people just think you’re a dumbass.
Google institutional welfare vs residual welfare.
TDB needs better trolls
“You’re a complete moron if you thought the baby bonus was designed for ‘low’ income earners. ”
I didn’t. But given that’s the threshold for the baby bonus, that appears to be the level at which labour thinks people need assistance.
As Parker pointed out this morning on “Nine to Noon”, rising interest rates also impact disproportionately on poorer households.
So RBNZ policy on interest rates (the OCR) ” make[s] life harder for poorer communities in the short term ” regardless.
Labour’s policy is different in that we keep the money, in our Kiwisaver accounts, and it doesn’t disappear down a fiscal wormhole, never to be seen again.
But if Labour can “tweak” the policy to make low income/fixed income families/individuals escape the worst effects of rising Kiwisaver rates, then all the better.
But Frank, interest rates are far lower under National than they were under Labour. One of the biggest contributors to interest rates is Govt. spending, but instead of limiting that, Labour want to limit OUR spending. It’s a joke, and will become increasingly exposed as such over the coming days.
Despite your obvious ignorance, IV, even you must be aware that the OCR has risen, and is expected to rise further still. Interest rates are expected to rise to 7% to 8% in about a year.
Well considering you can fix for 5 years at under 7% Frank, I suggest you are exaggerating just a touch. But even your predictions would still a hell of a lot lower than the 10%+ they were under Labour Frank.
…and you can fix for 2 years at under 6%.
And you might want to look at this graph on mortgage interest rates under Labour and National.
Cunliffe and Parker really have no idea.
http://www.rbnz.govt.nz/statistics/key_graphs/mortgage_rates/
IV.
Why on earth do you believe the numbers that this current govt use, when English has been proven to be very wrong several times in the past.
I don’t trust any of the Nats, as people, and I don’t trust any of their numbers either.
This is my opinion and belief.
My cite was the Reserve Bank, and contained an historical data set that you can attempt to falsify if you wish. Good luck with that.
Surely you mean ‘hysterical’ data set!
This data is gathered by an independent government agency. Unless you are implying it has been infiltrated by National party sympathisers. In which case why isn’t the Opposition making a big issue of this as it would be a huge issue. Are they incompetent?
So the economists who are picking interest rates at 7% to 8% are wrong?
What do you base your assumptions on, IV?
By your own admission you are a property speculator, not an economist. So you know nothing except what you read on ACT, National, and rightwing blogs.
As I’ve pointed out, the OCR is expected to rise further throughout the year. As it has risen twice already (and which you’ve ignored).
By the way, higher interest rates signalled a growing economy. So said your Dear Leader, recently.
Conversely, lower interest rates showed a depressed, stagnant economy. Surely someone as wedded to Friedmanite economics, like you, must know this?
If you think I’m wrong, find me an economist to say so. Because your views count for nothing.
“So the economists who are picking interest rates at 7% to 8% are wrong?”
What economists?
“By your own admission you are a property speculator, not an economist.”
I’m a businessman. I run a group of businesses across Asia/Pacific and a small private rental property portfolio. My business qualifications and experience in the real world give me ample understanding of how economies work. How about yours?
“As I’ve pointed out, the OCR is expected to rise further throughout the year. As it has risen twice already…’
…and yet interest rates are still way lower than they were under Labour.
“By the way, higher interest rates signalled a growing economy.”
“Conversely, lower interest rates showed a depressed, stagnant economy.”
No, not necessarily, and this is precisely what the left just don’t understand. Low interest rates can reflect a growing economy with low Govt. expenditure (as we have now), just as high interest rates can reflect a stagnating economy with Govt. overspending (as we had in 2008).
Don’t need to be an economist to see that. Even Cullen, an historian, would agree.
*yawn*
John Key seems to disagree with you, Anonymous Usder IV;
Source: http://www.stuff.co.nz/business/money/9822918/Mortgage-pain-time-OCR-rises-to-2-75-per-cent
You are trying to maintain that high interest rates are good whilst National is in government, but bad when Labour is in office.
Is that it?!
As you, your sophistry is laughable.
John Key most certainly would agree with me, Frank, and everything he said in your quote above is consistent with what I have been saying. High interest rates CAN be a reflection of a growing economy, as they are now. Conversely they can be the sign of an economy in real trouble, as they were in 2008. In 2008 we had an economy going into recession, high inflation and high interest rates. That’s a remarkable combination of incompetence.
A heartfelt thank you to Mr Parker and Labour, this policy among the others you have released gives me a great deal of confidence that you are actually acknowledging and thinking about the problems that people are suffering and actually trying to fix them. GOOD ON YOU.
I really will conclude that New Zealand has become a bunch of sad-sack, mean-spirited, short-term-visioned, narrow-minded lot if the left-wing do not win a complete landslide victory in this year’s election.
Totally agree. This is the best policy so far! It now makes complete sense when taken with the others where Labor are taking New Zealand. This takes out the financial middle men and places people at the heart of the economy. This will be true trickle down!
Well it’s not exactly draining the swamps where neoliberalism breeds, but a modest step in the right direction nevertheless.
Reversing the costly failure that was rogergnomics? Reducing gst? Taxing extractive capital flows? Not this time.
These policies are for the prosperous middle class rather than the precariat created by three decades economic charlatanry. It will take larger steps than these to avoid the quagmire presently engulfing Cameronite England.
But as with all policies there are some issues;
This means KiwiSaver needs to be compulsory. That would help capture more of the population but it does mean that people renting are also paying bigger contributions to KiwiSaver and therefore financially worse off, while those people with more than one house benefit from lower interest rates and benefit from this.
How does this work for self-employed? Self-employed people have for years been able to structure their affairs to reduce personal taxable income and/or pay tax within companies and trusts. The current National Government have spent a lot of time and effort to ensure that there is no benefit in paying tax within a company or trust versus in your personal names, but I guess this proposed policy would make most self-employed people retain profits within their companies and trusts so they can benefit from the lower interest rates and not have to pay more into KiwiSaver.
Of course, this policy would favour any non-resident property owners who also get the benefit of lower interest rates and are not contributing to KiwiSaver.
I have only touched on a few issues that I can see from the limited information, but it really makes you wonder if this has been thought through.
It seems to favour the wealthy which goes against what I believed Labour were all about…
John Key has slowly but surely been dismantling Kiwisaver during his tenure. I believe National are genuinely afraid of this policy, having to fall back on the old crime and punishment issue that seems to win them so many right wing votes. I heard Bill English almost lost for words, the very idea of using the wealth (savings) of your own people to combat inflation rather than relying solely on the banking sector hadn’t occurred to him. He then said that it could work! He just didn’t know because it hadn’t been tried before. This is exciting for the working poor when you also take into account Labor’s policy of increasing the minimum wage. This could be the transition we need to start to move to a higher wage economy!
” The Proof of The Pudding is in the Eating . ”
What ? Me ? Cynical ? You fucking betcha .
I pray I’m wrong now prove I’m wrong . I dare you .
I will go so far as to say that, to use a cliche, this is a game changer.
This will be the “circuit-breaker” which will result in people sitting up and taking notice of Labour as a serious potential government.
(Please, I beseech the political gods – don’t let a loose-cannon in Labour’s MP ranks fuck this one up.)
Once TPPA is signed half of Labours “plans” (if they even manage to dislodge Key and his regime )will end up in lengthy tribunal hearings .
Investor vs. State ,Investors wins because Investor own the Tribunal.
Let’s recap what the Reserve Banks primary objective is: price stability. That won’t change under Labour.
Labours policy claims that price stability can be achieved by reducing disposable income, when appropriate, via compulsory Kiwi Saver contributions being introduced, and raised during an economic upturn. They are wrong, and here’s why:
1. By necessity, and Labour have admitted this already, there would have to be exemptions for low income earners. The fact is that high income earners will, even after compulsory KiwiSaver, still retain ample disposable income to spend. The result is a considerable reduction in the size of the group being targeted, and correspondingly the policies effectiveness.
2. Those already in savings schemes who have not chosen to join KiwiSaver will simply transfer their savings into the new KiwiSaver scheme if they want to preserve their disposable income. This will negate any savings benefit, and reduce the impact on spending.
3. Labour have added two other considerations to the RB’s brief, the current account and the value of the dollar. Despite their assurances, this will inevitably lead to a compromise on the concentration on inflation, and therefore inevitably to an increase in the rate of inflation. This will erode the very savings the policy seeks to encourage, will contribute to further erosion of net real incomes, and heighten upward pressure on house prices.
4. Bringing down the value of the NZ dollar by warrant will fuel inflation, and further negatively impact the current account, as import prices surge.
When labour left office in 2008, mortgage interest rates were around 11%. They are now a little over half that. Inflation was 5.1%, it is now just over 1%. The Current Account deficit as % of GDP was 8.8%, it is now 4.3%.
In summary, this is a policy that won’t work, designed to address challenges the current Govt. is already successfully addressing.
Certainly it fell short of expectations in not requiring the RB to consider the unemployment rate – there will be no mercy for those previous Labour governments sacrificed to the failed idols of neoliberalism.
But seriously IV – this government has not and is not addressing anything successfully. It’s not really a government so much as gang of looters. They have done nothing comparable because nothing is the only thing they are competent to do.
Done nothing?
Mortgage interest rates, inflation, the Current Account deficit, the internal deficit, GDP growth, and household debt are all in better shape now than they were when National took office.
National inherited an economy in recession, with a high internal deficit and a further decade of projected deficits. 5 years later the economy is growing, and the internal deficit has been turned into a surplus. We have a trade surplus, and the highest export receipts on record. Our economy is recovering faster than virtually any of our trading partners, and yet you consider the Govt. has done ‘nothing’?
Mostly to do with the GFC; recession; and the global economy emerging from recession.
As usual, you continue to mis-represent the situation.
Misinformation and lies. Same shit. Different blogpost. *Yawn*
National have produced nothing but an abundance of excuses.
And no, we do not have a trade surplus. Ozzie bank profit repatriation has seen to that.
This is why all your numbers are meaningless, and Bill English can get no purchase with his ‘rockstar’ piffle. The currency anomaly and the housing bubble soak up more liquidity than the increased earnings from the momentarily good dairy prices. Record export receipts – but no-one is getting a pay rise, and their living costs are going through the roof.
The government has done nothing useful. Their success is technical, not real. I guess Treasury get bonuses based on technical success – clever them – but the public are spewing.
“This is why all your numbers are meaningless…”
Oh of course they are if you chose to main wilfully blind to the obvious.
Statistics are a powerful tool but in the hands of fools they reveal no truths.
When the statistics and reality are at variance it is not reality that lies.
I can understand the appeal though to intellectual bankrupts like yourself IV: the truth has nothing affirming to offer you. It must make you feel insecure.
How can statistics and reality be at variance? Only if the statistics are false. So prove it. Gon on.
Since you believe Bank profits contribute significantly to the current account deficit you obviously have seen the data on this. Can you provide a link to how much of the profits of the banks are being repatriated offshore?
So basically, IV, what you’re advocating is that people pay higher mortgage rates to Aussie banks, which will disappear overseas, rather than into our Kiwisaver accounts – which will be returned to us upon retirement?!
Is that what you’re saying?
Jeez, I hope you’re getting a commission for advocating on behalf of banks.
You pillock. Interest rates were high in 2008 because the Reserve Bank ratcheted up the OCR, because the economy was in hgigh growth mode, averaging 3.5% pa. Interest rates are determined by the RBNZ, not governments.
How many times do you have to be told that?!
And even John Key recently admitted, on 13 March,
Source: http://www.stuff.co.nz/business/money/9822918/Mortgage-pain-time-OCR-rises-to-2-75-per-cent
If you want to fudge that, take it up with Key.
And while interests rates are lower than in 2008, they are not “half that”. Mortgage rates are now past the 6-percent mark, with ANZ’s floating rate at 6.24% p.a. – http://www.anz.co.nz/ratefee/interest.asp
By next year they will be at 7% to 8%.
As for the current account deficit and inflation – of course it lower now. You can thank a depressed economy caused by the GFC/Recession which also saw unemployment doiuble.
Are you basing National’s “success” on the dampening effects caused by the Recession?! What a joke!
So as usual, you’re mis-representing history and the current situation. But then, lies have been your debating technique of choice, that much is clear to readers of this Blog.
But it beggars belief that you are so wedded to National-ACT that you can’t see the benefits of lower interest rates and a lower dollar for exporters.
Are you really so blissfully blind?
Your devotion to National-ACT verges on psycopathy. No wonder you hide behind a pseudonym.
“what you’re advocating is that people pay higher mortgage rates to Aussie banks, which will disappear overseas, rather than into our Kiwisaver accounts – which will be returned to us upon retirement?!
Is that what you’re saying?”
No idea what made you think that. And a reminder – banks only make the margin, whether rates are high or low.
“Interest rates were high in 2008 because the Reserve Bank ratcheted up the OCR, because the economy was in hgigh growth mode,”
No, it wasn’t. Growth in NZ starting tanking in early 2006 (b4 the GFC), and by 2008 was already heading into a technical recession. http://www.tradingeconomics.com/new-zealand/gdp-growth
“And while interests rates are lower than in 2008, they are not “half that”.”
Misquoting me again Frank? What I actually said was “When labour left office in 2008, mortgage interest rates were around 11%. They are now a little over half that.” Take a look at this graph Frank. http://www.rbnz.govt.nz/statistics/key_graphs/mortgage_rates/
“Are you basing National’s “success” on the dampening effects caused by the Recession?! ”
Recession? NZ has had GDP growth in all but 2 of the last 18 quarters, and all of the last 11.
Frank I think you’ve just surpassed even your own record for factual inaccuracies.
Re your April 29, 2014 at 8:48 pm post – Nah. You are repeating the same bullshit covered elsewhere. Your selective mis-use of information is now pretty well known. (Who are you trying to convince?)
Your cherry-picking, distortions, and outright lies makes your “facts” laughable. In fact, very little of what you say is actually true, Anonymous User IV.
For example, there was no early recession in NZ. There was one quarter in 2006 that dipped to -0.3%.
That is your “recession”.
Lying prat.
But just to drive the point home, as Treasury reported;
“Recent Economic Performance and Outlook”
– http://www.treasury.govt.nz/economy/overview/2012/09.htm
Meanwhile, back to Labour’s plan.
http://tvnz.co.nz/business-news/labour-s-mortgage-policy-wishful-thinking-5943421
You seem to be out on a limb, Anonymous User IV?
Your friends in the business world appear to recognise the logic and economic common sense of Labour’s policy.
It won’t be long before the public picks up on it.
And let me tell you this, my nameless, faceless, friend; all your bullshit, distortions, and lies, won’t save your precious National Party from being thrown out of office. 😀
That is why you’re resorting to your usual deceptions; you are desperate.
No-ones fooled by your bluster Frank. Or your dishonesty.
“For example, there was no early recession in NZ. There was one quarter in 2006 that dipped to -0.3%.
That is your “recession”.”
Here’s what I actually said (and supported with the cite):
{No, it wasn’t. Growth in NZ starting tanking in early 2006 (b4 the GFC), and by 2008 was already heading into a technical recession. http://www.tradingeconomics.com/new-zealand/gdp-growth }
Why are you misquoting me so frequently Frank?
And you OWN cite quotes: “The New Zealand economy entered recession in early 2008,”
Shot yourself again Frank.
The fact is that growth in NZ tanked from early 2006, well before the GFC.
@IV
I reckon everything you’ve said here a large pile of junk. You need to stop mimicking the ostrich, and take a look around you.
Can you see the homeless? The hopeless? The increasing sexually violent crime? and these victims and survivors? Malnourished children? Suicide rates? Unemployment? The top-heavy costs of bureaucracy? The insurance companies and banks making even more profit this year than last year, while families cannot even pay their electricity bills, or rent, or feed themselves with a healthy diet? Can you see all this? This is real! National have made it so!
Can you keep your head out of the sand for long enough, and just take a really good look around yourself, or are you past that state of human evolution?
Can you fix all this please Labour.
My opinion and belief.
“Can you see the homeless? The hopeless? The increasing sexually violent crime? and these victims and survivors? Malnourished children? Suicide rates? Unemployment? The top-heavy costs of bureaucracy? ”
Yep. And I see the generous social welfare system and Working for Families and I rightly conclude the Govt. can only help those who can help themselves. I see the continuing decline in overall crime and realise this country is far safer than it was 5 years ago. I see the declining unemployment rate and realise that National are building an economy capable of generating jobs without the Govt playing employer.
That’s what I see.
Federated Farmers are the latest employer-group to voice interest in Labour’s plan, Anonymous User IV.
http://www.fedfarm.org.nz/publications/media-releases/article.asp?id=1454#.U2AJXFfNuM8
You are out on a limb, as usual, Anonymous User IV.
Do you seriously want to get into a cross fire about what people think about Labour’s plan?
OK. “Households struggling to keep on top of their mortgages would be the winners under Labour’s proposed interest rate shake-up, but at the expense of those who can’t afford to get a foot on the property ladder, a budgeting service warns.”
http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=11246479
“Now there are a couple of things flawed about this, even if it is a populist political proposition.
The first is, if you’re stretched to make ends meet and can’t afford a house and subsquently no mortgage, you’ll end up paying more for Kiwisaver without getting a break through lower interest rates, which will mean nothing to you anyway.
And the other is that the Reserve Bank’s always been fiercely independent of the Beehive. It’s the envy of the world for that, but this policy would bring politics into the process.
Labour’s also arguing low interest rates will lower the value of the dollar. But for the past five years, we’ve had record low interest rates but a record high dollar. It’s a little hard to follow Labour’s logic.”
Looks like other people are starting to ask the same questions I am Frank!
http://www.newstalkzb.co.nz/auckland/opinion/poly-report-for-apr-30
@ Anonymous User IV; at least Barry Soper has asked the right questions.
You have simply knee-jerked opposition to it without due consideration.
But a couple of Soper’s comments can be addressed;
If you’re renting rather than paying a mortgage, you’re simply paying someone elses’ mortgage. (You should know this, by the way.)
So it’s a bit disingenuous to say that those who rent “can’t afford a house and subsequently no mortgage, you’ll end up paying more for Kiwisaver without getting a break through lower interest rates, which will mean nothing to you anyway” – a higher OCR will, in many cases, lead to higher rents.
Because most landlords will ultimately pass on mortgage increases. Just as they do now.
And higher interest rates have a flow-on effect throughout the economy. Again, something you should know.
Rubbish.
The RBNZ’s 20% LVR was signed of by Bill English. That was a direct political decision which affected RBNZ monetary policy. So don’t be more stupidly naive than you usually are.
It may be hard for Soper to follow Labour’s logic because Soper is thick. Like you, IV.
As I pointed out to you in my April 29, 2014 at 8:50 pm post;
Probably because our OCR was still at 2.5% – higher than the US “Fed” rate at nil percent and the Bank of England rate is at 0.5%.
Only, you’re too ideologically intransigent to understand this.
(And by the way, your mis-use of facts simply reinforces your reputation as being *tricky*.)
“If you’re renting rather than paying a mortgage, you’re simply paying someone elses’ mortgage. (You should know this, by the way.)”
Wrong! 1. Rentals in Auckland are presently only covering interest payments, not principal. 2. Not everyone wanting to buy a home are renting. Some are living with families.
“The RBNZ’s 20% LVR was signed of by Bill English. That was a direct political decision which affected RBNZ monetary policy.”
This is a deliberate attempt to mislead. The LVR’s can be used by the RB without Govt. permission. The Labour plan requires Govt. sign off on a case by case basis. That is political interference. Remember KiwiRail Frank?
“Probably because our OCR was still at 2.5% – higher than the US “Fed” rate at nil percent and the Bank of England rate is at 0.5%. ”
Oh you were well and truly caught out on that last night Frank. But I’m happy to go again!
Every time I catch you out with your misquoting and lies your friend Martyn edits out my posts. Why is that?
‘scuse moi?!
Since when have you ever shown the remotest interest in the welfare for low-income families?!
Answer: never.
Your entire list of ramblings has been anti-beneficiary; anti-unemployed; anti-poor, anti-everyone who doesn’t fit your narrow National/ACT-paradigm.
So spare us your crocodile tears, Anonymous ACT supporter. They count for nothing.
Anyway, you “forget” to mention that even those renting are impacted by higher OCR interest rates. A higher OCR means fewer jobs; depressed wages; and higher interest rates elsewhere (credit cards, hire-purchase, etc).
Just thought I’d point out the obvious.
“Since when have you ever shown the remotest interest in the welfare for low-income families?! ”
Pretty much as long as I can remember.
“Anyway, you “forget” to mention that even those renting are impacted by higher OCR interest rates. ”
Really? Well my tenants are paying any more in rent since the OCR went up, because I know they can’t afford to. You really need to get out more often Frank.
“A higher OCR means fewer jobs; depressed wages; and higher interest rates elsewhere (credit cards, hire-purchase, etc).”
Well then you should vote National. Because over the past two decades the OCR has, almost without exception, been lower under National than under Labour. LoL.
Here is Fran O’Sullivan’s take on it.
http://www.nzherald.co.nz/fran-osullivan-on-business/news/article.cfm?c_id=1502864&objectid=11246420
She shares my view that this is an interesting extra option for consideration in the battle to control inflation but it has some flaws and certainly is not the panacea to higher interest rates Labour makes out it to be.
In short this is no game changer but does show Labour are at least thinking of stuff.
What you see is dependent on where you live I guess.
No, what you see is how often you get out Win.
So you don’t get out much?
@IV
You are blind as a bat!
Not everyone can help themselves. Some are so damaged, or too young that they need a hand up. This is what we all pay our taxes for – to give and receive help when it’s needed – not further abuse, as National deem fit.
I think you are a right oddball antagonist – Most of what you post is so out of touch with the reality of life in NZ for NZers.
My opinion and belief.
Yep, and those who can’t help themselves are well and truly catered for within our current system. They aren’t the problem. The problem is with those who CAN help themselves and are too damn idle. And there are lots of those.
There is another fundamental flaw in this policy. The policy assumes that lower interest rates will, by necessity, lead to a lower exchange rate. So can David Parker please explain why over the past 5 years of low interest rates the currency has remained stubbornly high?
Probably because our OCR was still at 2.5% – higher than the US “Fed” rate at nil percent and the Bank of England rate is at 0.5%.
Fairly fucking obvious, don’t you think, Anonymous User IV.
Wrong, because those differentials don’t justify the exchange rate risk Frank.
Try again.
Geez – even you know the answer to this – the NZ interest differential remained. Our low rates were still higher than the very low rates offered in many places. With growth stagnant in the US and small European countries looking soft, where could the money go? NZ and Australia. And the inflow was sufficient to pump the currency through the roof. Once investors realised that NZ had no capital gains on property there was no stopping them.
But none of this considered the derogation of prospects for New Zealanders who must make their living in the real economy – it’s a kind of false accounting.
Spot on, Stuart. Anonymous User IV is either too thick or too blinded by neo-liberal dogma to understand this.
I suspect the latter.
Thanks Frank, I find your perspective very reliable too – and your links.
I’d have liked to have seen more – but Parker has shown English what a better job looks like. And Bill is embarassed.
Labour are finally making the move from failed technocracy to successful technocracy. If they can sustain the workload we shall see NZ moving forward again at last.
Once the economy is no longer a slow motion train wreck we might see some decent social and environmental policy too.
No Stuart, at such low differentials the risk of exchange rate fluctuation after buying the kiwi $ is too high. You’ll have to try again.
“With growth stagnant in the US and small European countries looking soft, where could the money go? ”
Plenty of places you conveniently overlook, and with potentially lower exchange rate fluctuation risk.
Oh and you might want to ponder Australia, whose OCR is currently at around 2.5%, and has been since around August 2013 (http://www.tradingeconomics.com/australia/interest-rate), yet whose exchange rate has declined (http://www.x-rates.com/graph/?from=AUD&to=USD&amount=1.00)
The correlation Labour are trying to make, and you are trying to affirm, is simply not a given, and anyone with an iota of economic understanding knows that.
Here are examples of countries with higher OCR’s than NZ, where there is no consistency of correlation between interest rates and the exchange rate:
South Africa: OCR = 5.5% (http://www.cbrates.com/), exchange rate UP on US$ cross from 8.99 to 10.56 over the past year (http://www.oanda.com/currency/historical-rates/).
Iceland: OCR = 6%, exchange rate DOWN from 116.256 to 111.939.
Mexico: OCR = 3.5%, exchange rate UP on US$ cross from 12.1413 to 13.0729 over the past year.
India: OCR = 8.0%, exchange rate UP on US$ cross from 52.6235 to 60.6738 over the past year.
Russia: OCR = 7.5%, exchange rate UP on US$ cross from 31.0576 to 35.7172 over the past year.
In four of the above five examples, the countries are more attractive to currency speculators than NZ.
Of course their OCR are higher than ours, IV. They need to, to attract foreign capital. Because as usual, your dishonest little tory, you’ve left out a salient point: their credit ratings!
You’ve compared five countries with credit ratings far worse than ours! That is why their OCR are higher than ours;
South Africa
S & P: BBB
Moodies: Negative Baa1
Fitch: Negative BBB
Iceland
S & P: BBB-
Moodies: Stable Baa3
Fitch: Stable BBB
Mexico
S & P: BBB+
Moodies: Stable A3
Fitch: Stable BBB+
India
S & P: BBB-
Moodies: Negative Baa3
Fitch: Stable BBB-
Russia
S & P: BBB-
Moodies:Negative Baa1
Fitch: RUR- BBB
By comparison, our credit ratings are;
New Zealand
S & P: AA
Moodies: Stable Aaa
Fitch: Stable AA
http://www.tradingeconomics.com/country-list/rating
Rubbish. Those five countyries have credit ratings that make them far riskier propositions than a country like ours.
Try five countries with credit ratings similar or better than ours;
Australia
S & P: AAA
Moodies: Stable Aaa
Fitch: Stable AAA
OCR: 2.5%
Canada
S & P: AAA
Moodies: Aaa
Fitch: Stable AAA
OCR: 1%
Denmark
S & P: AAA
Moodies: Stable Aaa
Fitch: Stable AAA
OCR: 0.2%
Hong Kong
S & P: AAA
Moodies: Stable AA1
Fitch: Stable AA+
OCR: 0.5%
Norway
S & P: AAA
Moodies: Stable Aaa
Fitch: Stable AAA
OCR: 1.5%
OCR sources: http://www.cbrates.com/
Each OCR is less than ours, whilst their Credit ratings are equal or better than ours, making our OCR rate more attractive to foreign currency speculators.
As usual, Anonymous User IV, your dishonest (mis-)use of information requires every “fact” you present to be checked and verified. Too often you are found to be misrepresenting/cherry-picking evidence to suit yourself.
Are you proud of yourself?
Huh?? You’ve really got confused on this one Frank.
Let me try to make this simpler. I began my post with these words:
“Here are examples of countries with higher OCR’s than NZ, where there is no consistency of correlation between interest rates and the exchange rate: ”
Did you miss that part?
“Those five countyries have credit ratings that make them far riskier propositions than a country like ours.”
But Frank, you’ve shot your own argument in the foot when you wrote “They need to, to attract foreign capital.”
Risk is precisely what international currency traders deals in. The higher the rate differential, the more they will risk. All of the five countries I quoted had considerably higher OCR’s, and 4 had stengthening exchange rates. That makes them far more attractive to currency traders than NZ, yet one of those countries suffered a currency value decline. You need to explain why, or at least David Parker does.
“Because as usual, your dishonest little tory, you’ve left out a salient point: their credit ratings!”
Ah, now I see where you are confused. You see credit ratings matter for people wanting to invest in a country, but not so much for currency traders. Their main concern is the interest rate differential and the exchange rate risk. Currency traders can move funds very quickly, because they don’t invest in bricks and mortar (businesses or infrastructure).
And there endeth Franks economics lesson for today.
“Australia
S & P: AAA
Moodies: Stable Aaa
Fitch: Stable AAA
OCR: 2.5%”
Exchange rate UP in past year from .9701 to 1.0743
“Canada
S & P: AAA
Moodies: Aaa
Fitch: Stable AAA
OCR: 1%”
Exchange rate UP in past year from 1.0105 to 1.1026
“Denmark
S & P: AAA
Moodies: Stable Aaa
Fitch: Stable AAA
OCR: 0.2%”
Exchange rate DOWN in past year from 5.6871 to 5.4014
Note: The HK currency is pegged to the US$
“Norway
S & P: AAA
Moodies: Stable Aaa
Fitch: Stable AAA
OCR: 1.5%”
Exchange rate DOWN in past year from 5.84675 to 6.0052
So Canada, with an OCR lower than ours, has experienced a strengthening currency. Yet Denmark and Norway, also with a lower OCR than ours, has a weakening currency.
As this is your data, and it proves my point, I can only conclude you really didn’t understand that the point was precisely what I stated in my post:
“Here are examples of countries with higher OCR’s than NZ, where there is no consistency of correlation between interest rates and the exchange rate:”
“Each OCR is less than ours, whilst their Credit ratings are equal or better than ours, making our OCR rate more attractive to foreign currency speculators.”
“Because as usual, your dishonest little tory, you’ve left out a salient point: their credit ratings!”
These two comments encapsulate beautifully the contradictions in your position.
On one hand you are arguing that people will invest in NZ $$ over those with higher OCR’s because of those nations poorer credit ratings. Yet at the same time you claim that those same people will invest in NZ$$ over those with lower OCR’s with BETTER credit ratings.
Which is it Frank?
IV – you’ve been caught out (again) with your cherry-picking and deliberate mis-use of facts and now you’re covering your arse.
Truth is, you misrepresented OCR with those five countries by not mentioning that they had worse credit ratings than us.
You compared apples with oranges and tried to pass it of as apples and apples.
That is how you operate.
Mis-use of information.
Cherry picked data.
And outright lies.
You’ve been caught out. Again.
Your argument is demonstrably false since NZ is among the most traded currencies at present.
NZ is perceived as a lower investment risk because our rigid financial settings are unlikely to change suddenly under the present government. Our lack of financial controls leaves us vulnerable to speculators. You might want to think about how Mahathir avoided the ASF.
Iceland: imprisoned speculating banksters
Russia: involves a significant corruption surcharge
Mexico: perceived as unstable and corrupt
India: unsafe without local knowledge
“Your argument is demonstrably false since NZ is among the most traded currencies at present.”
By currency speculators or by merchandise and services traders? Citation please.
Learn to use Google IV. I know it’s a stretch, by you can do it with a little help. Well maybe a lot of help in your case.
I did. You were wrong.
Number 7?
The average 8 year old can teach you how to Google you know, but I suppose you shouldn’t be speaking to them – at least until you’re out of the ankle bracelet.
“Number 7?”
No, number 10. 2% of the total trade. 2%!!! Hardly “among the most traded currencies at present.”
http://en.wikipedia.org/wiki/Template:Most_traded_currencies
Six most traded currencies:
1. US$
2. Euro
3. Japan
4. British Pd
5. A$
6. Swiss F
http://www.investopedia.com/articles/general/022814/rewrite-6-mosttraded-currencies-and-why-theyre-so-popular.asp
@IV
With all the -votes you keep accumulating – do you think it might be you who has it all wrong?
Only if truth is determined by popularity on TDB
Awesome – that all sounds wonderful to me. The banks and the insurance companies already make far too much money!
What will Labour do with the most vulnerable of NZ citizens – the ones with disabilities, and injuries, and victims of crime and natural disasters, access to justice, ACC and WINZ, and how will you create more jobs for those who can work?
Will you force insurance companies to hurry up and pay out in the wake of natural or other disasters?
Can you answer this please Labour?
They have some policies out covering these things. Just need to go to their website, FB page, David Cunliffe’s FB page. etc etc
Thanks WIN.
Not everyone has facebook.
The move to make Kiwisaver compulsory and to increase contribution rates is a massive slap in the face to poor income families, especially those who rent. They are being used to effectively ensure the middle-classes can choose to save some money instead of spending it.
A variable rate won’t work. There are some families who will struggle to make Kiwisaver repayments. For instance, a single parent working might choose to not save so as to pay for retraining so as to get a better job. That person now won’t have the choice. They’ll have to contribute unless they’re exceedingly poor and get the exemption. However, you don’t have to be very poor to struggle in New Zealand.
Furthermore, you’re taking away the responsible option of New Zealanders who might want to pay off their student loans instead of starting their Kiwisaver. Sure, student loans are interest free (for now), but they’re still a shackle to many students that hangs over their head. Now, they can’t choose what works best for them: they’ll have to contribute to Kiwisaver.
Unless Labour promises to make university education free again and to increase wages -substantially- this is such a poor policy. Sure, it’s fine for someone like me who’s already in Kiwisaver, but not for those worst off in society. Hugely middle-class policy.
I won’t be voting Labour if it sticks. Hopefully the Greens will shut down this madness.
I agree with Frank, this is a game changer, except for those on lower incomes who can’t afford to feed their kids. They are going to have less to spend on the basics as they will be compelled to put more of their wages into KS. So effectively, these people will be subsidising rich pricks with large mortgages. Will the lower paid get sufficient pay rises to compensate? How do you know what your take home pay will be every six weeks or so. How can a family confidently budget? Most financial experts will tell you that if you have a mortgage you pay it off before anything else, including saving. I can see the rationale behind the policy, but I can also see some potential fish hooks.
JC –
The same can be said for rising mortgages and interest rates.
The difference being that money put into Kiwisaver stays in NZ and is returned to savers upon retirement.
Money paid to banks disappears offshore.
Families have to pay, regardless, but at least with the Kiwisaver plan, they get their money back.
I don’t think so. Those with large mortgages will be paying their own repayments. There’s no subsidisation that I can see.
“The same can be said for rising mortgages and interest rates. ”
Not if a person isn’t a home owner or mortgage holder!
“Money paid to banks disappears offshore.”
What rot. Money paid to banks is re-lent to other lenders, mostly in NZ. How do you think Banks make money Frank?
Frank has a few difficulties reconciling the difference between revenue and profits. He thought that the Dairy payout would all disappear overseas if all the farms were owned by overseas interests.
It’s truly bizarre, Anonymous User IV.
It appears that you would reather pay higher interest rates to foreign banks and never see your money again – rather than into a Kiwibank account (I assume you have a superannuation fund?) where you will get your money back?
http://www.newstalkzb.co.nz/auckland/opinion/poly-report-for-apr-30
Are you that wedded to your ideology that you’re prepared to face losing money rather than investing it and getting it back?!
That doesn’t even begin to make sense.
You are a strange one.
Never see your money again? I think you have a fundamental misunderstanding on how banking actually works if you think that.
That’s right, Gosman. It’s quite simple how it works.
1. You buy a house.
2. You borrow money.
3. You pay back the principle.
4. You pay several hundreds of thousands of dollars to the bank as well.
5. You don’t see any of that interest back again.
The profits made by banks is remitted to shareholders;
“Banks’ profit jumps 12.9pc, nears $1b”
http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=10899961
The higher the interest rate, the more we pay to banks for our mortgages.
When that mortgage is paid off, you don’t get that interest back.
I’m sorry, what part of any of this is new to you?
6. The banks pay interest to depositors, the majority of which is recirculated within NZ.
7. You own an asset that without the banks you couldn’t afford to purchase.
8. That asset’s value accumulates and, along with the compulsory saving element of the principal repayment, represents a significant part of your retirement savings.
Which part of this new to you?
What Frank also fails to understand is that people with surplus capital to save rather than spend migh be better putting it towards the mortgage and resucing it rather than putting it into a Kiwisaver account for their retirement.
“It appears that you would reather pay higher interest rates to foreign banks and never see your money again – rather than into a Kiwibank account (I assume you have a superannuation fund?) where you will get your money back? ”
You fundamentally misunderstand how the banking system works. Higher interest rates don’t ultimately go to the Banks, foreign or otherwise, they go to investors. Banks only take a margin. Not only that, but there are restrictions as to where the overseas banks can source their money; a very high % must be sourced in NZ, therefore the money is recirculated within our own economy.
But the wider point is that I would rather make my own investment decisions, not have them dictated by the Govt.
ROFLMAO!!! 😀
You dufus! You’ve just proved my point!!
The banks take your money!!
Under Labour’s plan, you get a fair whack of it back!!
You just can’t bring yourself to agree with Parker’s bold plan!
Oh my god, you are so wedded to your dogma! 😀
“You’ve just proved my point!!”
No, I’ve just proved mine.
“Under Labour’s plan, you get a fair whack of it back!! ”
No, people don’t. The plan won’t work, so people will end up paying higher interest rates (as we almost always do under Labour), and be forced to put more of their disposable income into KiwiSaver, which in turn makes the banks and financial institutions you hate so much even richer.
And Frank, all is not lost! Your friend Vernon Small thinks Labour could be on to a winner with their new monetary policy.
Question for David Cunliffe:
Please tell me what plans you have to reduce sexually violent crimes in NZ?
Another 2 questions for David Cunliffe and Labour:
Will you remove censorship from the media?
Will the press have complete freedom of speech?
David Parker’s plan sounds good to me. What I like about it is that it’s innovative and something different. Hopefully a sign of things to come. And really if people want to they can make anything work. They just need to take the blinkers off. It certainly is a game changer for me. Now National is worried about the poor people! LMFAO.
Oh it’s different all right. It’s a dog, but it’s different!
Answer me this, Anonymous User IV, why do you prefer to pay higher interest rates – rather than the Kiwisaver Variable Rate – when you get your money back with the latter, but not the former?
As a capitalist, I thought you’d be rubbing your hands with glee at the prospect of retaining money rather than needlessly paying it to banks?
Answered above. Also, given the doubts now being cast over whether the VSR would actually have any impact, it is likely we would end up paying BOTH.
I’m not sure your National Party research trolling is working today IV – the debate has moved on from David’s blog to the amazing rays of sunshine Chris Trotter has poured all over it. I appreciate that must grind your teeth, but as the details and talk continues, most grudgingly admit it’s a good idea. This can’t be good for your National Party Research trolling, best to try the Cunliffe medal thing again, or better yet some new attack on beneficiaries.
Intrinsicvalue says:
May 1, 2014 at 11:19 am
Answered above. Also, given the doubts now being cast over whether the VSR would actually have any impact, it is likely we would end up paying BOTH.
Personally, I’d like to see choice inserted into this policy.
ACT sycophants like AnonymousUser IV can pay higher interest rates to banks and lose his/her money forever.
The rest of us can pay into our Kiwisaver accounts and earn a nice little nest egg upon retirement.
I’d vote for that. And people like AnonymousUser IV can keep giving his money to the bank(s) of his/her choice.
There.
Sorted.
(Low income families must be accorded a top-up, eg; a $30,000 tax free band; nil GST on food; and a UBI.)
No, not sorted at all. Point to any evidence the VSR will work. Even Labour have admitted they haven’t investigated it. If it was implemented and didn’t work, then we all pay twice. Is that what you want Frank?
– fiercely independent of the Beehive. It’s the envy of the world –
And well it might be, it is politically active without public accountability. Nice to work for, shame about the country.
The Reserve Bank is based on a magisterial conception of economics which we know is false. NZ has not maintained even average growth since its inception. Its inflation focus is and always was excessive. The relation between inflation and economic performance is not linear. Frankly we’d be better off without it – governments need to be held accountable for NZ’s persistent decline and underperformance if this apalling shambles is ever going to be turned around.
“And well it might be, it is politically active without public accountability.”
Rubbish. The Govt. sets the inflation target band, and the Govt. is most certainly politically accountable.
If the average New Zealander knew their treacherous governments had deliberately put us 30-40% behind the Australian income growth curve the MPs responsible would not live long enough to be lynched.
Politically accountable my arse.
We’re much closer in 2014 than we were in 2008, much closer.
Wow, that is some impressive trolling there!!!
IV, you’ve pulled out all the stops this time – 112 Comments and countless hours wasted by people in the left.
Well done sir – I salute your impressive trolling!
You mean you counted my comments?
Comments are closed.