There is an inevitable “correction” coming with the inflationary storm being unleashed by late capitalism. This will lead to higher interest rates, and the weak links on the debt mountain will be toppled one by one.
In Aotearoa this inevitably will include housing debt. At the moment housing values equal about 4.8 times our total economic activity as measured by Gross Domestic Product. This compares to 1.7 times in the US.
The sharemarket in Aotearoa by contrast is only worth 0.6 of our GDP compared to 2,2 times for the US.
Current household debt as a share of income has doubled over the last two decades from 80 to 160%. That means any increase in interest rates will have a dramatic impact on people’s ability to service those debts.
Some people will be forced to sell their homes. If that becomes a cascade then a deep price “correction” and broader economic crisis is inevitable.
New Zealand has ‘bet the house’ on housing and it is the biggest thing propping up our economy from around 1997. Forget dairy and tourism – the ‘on paper’ gains from house price increases (and the extra debt as well) far outweighs them.
It is the market that every Kiwi has bought into because they know the NZ Government will never let them lose money.
We are one of the world’s wealthiest nations per capita because – on paper – our houses are worth so much. But drive our roads, visit our hospitals or be on a benefit and you won’t agree we are a wealthy nation.
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GDP is just bullshit, measuring the movement of digital money from one place to another, as speculative bubbles get blown by central banks.
Now it is all unravelling fast, with energy prices rising fast (expect the next fuel price rise later today or tomorrow) and food prices rising fast -oops, wheat up 23% year-on-year- and all the speculative bubbles are found to have nothing supporting them, other than yet more bullshit and devaluation of money in the system.
But you won’t get ANY politician to admit any of that because it is their job to lie to the masses about EVERYTHING.
The dominant economic-financial system has been propped up for decades via all sorts of chicanery, and now the writing is on the wall.
I see Brent crude is up another $2 overnight, and the 10Y US Treasury has surged to 1,84%. Meanwhile, actual inflation (devaluation of money in the system) approaches 15% annual rate in western nations.
But politicians will keep up the fake mantra about inflation it being 3% for as long as they can. Which will probably be another month or two. Just more lies.
The collapse of the neoliberal fraud system foisted on NZ decades ago by corrupt liars is going to be very ugly.
Awaiting the treason trials.
As long as Councils artificially ration the supply of land for building, there will be a housing stock shortage. Even if the central government overruled them now, it would take many years to correct the imbalance in supply & demand.
Higher interest rates would dent the rise in house prices and maybe even push them down a few percent, but history shows that when times get tough and cash is a little short, people hang hard on to their properties and instead cut discretionary spending. Typically there is a drought in house sales and a recession as people batten down the hatches and get on top of their debt. Meanwhile inflation slowly nibbles away at the remaining debt until the situation is corrected.
You hope, Mike was mild in suggesting possible downsides to the high household debt. There is a possibility that debt defaults will spread from households to highly leveraged corporates, when disasters increase insurance companies will fold due to excessive claims, superannuation plans reduce in value etc.
Ask the people in Tonga how they feel about life continuing to go on as normal.
Ahhh lefties LOVE doom and gloom, love it for no other reason than they believe THEIR politics is the correct way to run a country and gleefully rejoice when working people will suffer be it mortgage rates, inflation price rises….how delightfully nice for you all.
Now tell us all again why a socialist govt/policies would have us all living in utopia!
Keeping in mind Labours ‘rogernomics’ policies you all hark back to was never reversed by Labour.
All [we] have to do is wipe the floor with the four parasitic Australian banksters then audit our reserve bank spanning generations. Let a team of forensic accountants loose on the bastards and the traitors here who enabled our NZRB to feed off us.
Wipe out all Mortgage debt and section 501 the Aussie Banksters to back home to the blast furnace that’s Australia’s becoming. A little irony can’t hurt anyone, right?
I know what’s going on. I do. The last century’s worth of criminal behaviour by ripping off our farmers is becoming a lie too big to hide so facades of fake crisis must be assembled around the scenes of the crimes. A bullshit housing price scam is a good one I must admit.
If foreign bully banksters start throwing their blubbery jowls around? Kick them out. We don’t need them at all like they think they have is hypnotised into believing we do. Aye boys?
Agree, but how Nz is caught by the short n curlies as it relates to the Banking trades.
It is what is needed to wake the sheep up in NZ.
Even without the side effects of the ‘jab’, NZders have been sleep walking closer and closer to the edge. Now that we’re here and there isn’t anyone in this current Labour government who is ‘onto it’ enough to stand up and say taihoa ehoa! We’re pretty much fuck’d.
Buy hey, the loopy latte Labour middle-classes will willingly follow the widdle princess all the way over the cliffs edge.
Leave PM Jacindaalone Denny P. She is holding the wild sheep in a flock so they don’t dart off and get run over or fall down a cliff. But whether she is a huntaway or an eye dog. she is reliable and on the job. We would be worse off without her and so would Labour. Perhaps she could take on National and smarten them up while Labour go to a boot camp and find themselves.
We are worse off with her. Remember the Crisis?
Housing, Homelessness, Health, Terrorism, Education, Poverty and now a debt mountain and another round of Austerity on its way because Robo shovelled more than $67b into the economy into the hands of the middle classes and the rich and made them all $400b wealthier.
It’s that Neoliberalism disease that is much worse than covid, delta, omi and the next couple of variations.
The herd is split. 39% for – 61% against.
Get real denny p. National are infected badly with the neoliberal disease. They belong to the group that stuff tells us is fighting amongst itself in Hampton NY over who should have prime rights to the airfield there, the millionaires or the billionaires. Eat the rich was a leading slogan a while ago, but there is a smorgasbord there. As a millionaire says those people aren’t at my level ie google hyper-wealthy etc.
National understnds those concerrns, genuflecting. Labour isn’t quite there yet, we can still find holes in the electronic curtain to them.
I was looking on a comedy website and came across this quote from Jacinda Ardern that was apparently spoken with a straight face at the recent Labour party’s caucus retreat in Oakura near New Plymouth.
““Labour has demonstrated our ability to manage challenges and change, and we will continue to demonstrate our ability to manage challenges and change when it comes to climate, housing, poverty and everything that we continue to face as a nation,”
Labour managed the challenges on housing? haha. I love Jacinda’s sense of humour.
Thw smart conperson knows that if you can’t make it, you can fake it. And Labour has kept on top of change, luike holding down the staeam vent on a pressure cooker.
Where in the country are you living? there’s housing development everywhere. From the upper well clad home in what will become a leafy suburb to the upper dressed down affordable in a virtual copy cat of coronation street style metropolis. The banks have the squeeze on people wanting to own their own home. $40g is a lot of capital for a potential home owner to save and prove a track record. The future of owning and or keep owning a home is dependent on persons employment, on going income. This is often not a grantee depending on the trade or profession a person is engaged in. Its possible for any person to become redundant, due to sickness, accident, or movement/change in business, but more so for people working as manual labourers.
Like the rest of the western world we have more then our fair share of low income workers, wage workers, Are those likely to be out of work once the contract is done. These are the people less likely to obtain bank loans towards home ownership.
Given that the banks are not Nz owned or controlled, tell us how does a Govt, dictate to these organizations, what and who they should loan money to? Also given that the Govt, is not as powerful in the great business scheme of things as people would give them credit or blame them for when it comes to who, what and how, the money is doled out get people into a home. The country is over flowing with new home builds people, take a look around.
one of the problems with our GDP calculation is house price inflation goes into the plus column, however that notional profit isn’t realised until the asset is sold…possibly at a lower price…but it’s too late then the GDP figures have been applauded, fraudulent accounting if you ask me.
when the tulip bulbs come home to roost the middle classes will be bailed out and a policy of ‘austerity’ will be introduced that we can all pull together on a team of 5million if you will, kiwis suffering will bail the middle classes out…..well some of us will suffer, there will be ‘protected groups’.
All these weird and wonderful theories! Yet it’s so basic – NZ is a nice place to be. Every desirable place in the world is bloody expensive. Simple truth. You want houses to be cheap? Make NZ like Beirut. Or Detroit. There you go.
that was helpful.
“… the entire small business economy of New Zealand relies on its working capital from residential property that’s probably the favourite form of borrowing for small businesses because it’s really hard borrowing any other way.” In https://www.rnz.co.nz/news/business/459813/incredibly-prescriptive-lending-code-ruining-lives-mortgage-broker
So, does this mean that if the housing market tanks, it’s 1932 all over again for the small business sector as well?
Perhaps we will be able to buy at least one of our banks back for a NZ$1? Buy ’em up while the price is down – good financial market tactics. I’ll put in up to $100 if others will.
Phew what a relief I live in New Zealand and not Aoteoroa
I’ll be fine 🙂
Have you heard of Xin Xilan?
Yep its noo zeeland in pinyin, so what?
Phew what a relief, you live in Holland.
Don’t pull that terminology thing. We all know what New Zealand is and it has had a good name for accomplishing many good things. Let’s call ourselves Aotearoa for our own consumption even if there is another one in Hawaii or somewhere that Maui visited. New Zealand is a good name which means something real, we are relatively new and we have zeal, or a lot of us do, and if the Dutch take a modern interest they can be considered tauiwi like the rest of the world is.
Think of another country’s name – the United States; not good, no actual location, states not united and not a good example for a new country like us. Let’s keep looking to the future under our own good name starting with New, and check out the old for highs and to make sure not to fall in the same lows.
” policy of ‘austerity’ will be introduced ”
It was started a long time ago and never reversed and will only hurt the same victims who have the boot firmly on their head.
I mean that’s what it will officially be called ‘austerity’ to give it a ‘wartimey feel’ by the spin merchants to get us to all buy in and pull together
(insert 10 meaningless catch phrases here)
1 Resilience?
All these weird and wonderful theories! Yet it’s so basic – NZ is a nice place to be. Every desirable place in the world is bloody expensive. Simple truth. You want houses to be cheap? Make NZ like Beirut. Or Detroit. There you go.
again so helpful it really bore repetition
Why Detroit?
“There is an inevitable “correction” coming with the inflationary storm being unleashed by late capitalism.”
Money printing isnt capitalism. None of this would have happened… the large bubbles etc if there was no govt intervention since 2008. We should have let it pop back then.
People have panicked about these sorts of statistics before. We aren’t to forget, though, that a lot of the wealth belongs to our oldest generation and will be passed on as time goes on. This “trickle down” economic marvel has worked well for New Zealand at least twice previously, and in Australia at least once. While the theory did not work well, ultimately, in the US 1980’s Reaganomics era, it was due to the fact that the taxation system was geared towards the wealthy businessmen of the time. There’s still scores of people who can recall the Prosperity Teaching in Christianity, which funded the lavish lifestyles of televangelists; the prominent New York City hoteliers and industrialists, who got generous tax breaks; etc.
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