OCR rise likely amid ‘runaway inflation’ – economist
Another rise in interest rates by the Reserve Bank (RBNZ) seems certain this week. The only issue is how large will it be.
As TDB has been warning from the beginning, the economic shockwave of Covid is here driven by supply side inflation caused by just in time global capitalism grinding to a halt.
The knock on effect of 5% inflation plus mortgage hikes caused by interest rates being forced up over the ocean of private debt is a fucking maelstrom of damage.
I argue we will face 10% inflation by December.
KiwiSaver accounts will diminish, mortgage rates and rents rise, food and petrol prices to continue to skyrocket as Russia’s war and China’s zero tolerance to Covid combine to create a force multiplier of risk, economic shockwaves and inflationary pressures.
Small business owners who have been alphas all their life and have grown attached to the liberty that liquid gives them are about to go belly up and that bitter resentment will feed ACT.
The poor are suffering beyond the financial fears of the middle classes, food banks are spiking 500% more demand and their overcrowded existence is ripe kindling for covid.
So can Orr’s bazooka help the economy as the real pain starts?
If all Orr has is a sudden jump in the interest rate to try and slow the almost 5% inflation, the ramifications of the true gravity from all that private debt becomes realized.
The problem as I see it is the inflation is being caused by unique supply side constrictions, so the only tool left is the ‘bazooka’, which Adrian Orr used last time with a .75 cut. If he needs to get ahead of a sudden spike in the cost of basics because ports are jammed solid it would need to be one enormous hand break.
Today saw a 50 point rise, if Orr is going to use the Bazooka to any effect, it’s next month with a 75 point or 100 point rise.
If he has to pull that hand break, we best hope there are airbags for everyone.
The steep rise in repaying the ocean of debt will suck money directly out of the pockets of people, many of whom are on the tipping point between functioning and desperate.
Today’s rise will see the average mortgage holder paying an extra $200 per month. When it rises again next month, that’s another $200 to find. With the majority of mortgages being rewritten this year, people will be walking from historically low mortgage rates to steep jumps in monthly payments for a house suddenly losing value.
This leads to a plunge in consumer confidence, enormous financial pressures and the economy built on hospitality, tourism & retail withers as wave after wave of sickness and death trips the country back into a deep recession and brutal self imposed lockdown.
Without some radical package to help everyone rebuild from this pandemic, the economic carnage will mutilate whatever survives.
All of this was predictable and my only criticism of the Government’s response was the lesson we didn’t learn from the 2019 measles epidemic and that was the failings of their community outreach.
Maori and Pacifica health providers can reach communities that cracker DHBs can’t. When they are directly funded, public health goals can be achieved, that it’s taken so long to get them resourced is the main mistake and problem we have right now.
Otherwise, I applaud this Government’s desire to put people before money but taking that road means we have an obligation to help those damaged economically.
It’s time to think about taxation aimed at the wealthy, the banks and speculators to fund the rebuilding we need.
A financial transaction tax is that solution and Labour must consider it in a post Omicron economy where Billionaires are flying to space on self funded rockets.
The true political division in a Capitalist Democracy is not the colour of your skin or gender identity or genital tribalism, it’s between the 1% richest, their 9% enablers and the 90% rest of us!
Labour must think big on funding universal provision of services to survive the economic downturn and the new post-Covid reality in a climate warming world!
To fund these big services we need a new tax system. A Financial Transaction Tax penalises those who are the greediest while funding the services that benefit everyone.
-Free Public Transport: Rather than welfare increases that the cruel and insidious MSD clawback, put money back into the pockets of the poorest with free public transport, while reducing climate pollution AND making roads more free for those who need to use them. Free Public Transport would make voters care.
-Free Dental Services: Our lack of free Dental is a disgraceful outcome of free market neoliberalism over public health.
-Free Breakfast and lunches in all schools: Again, rather than welfare increases that the cruel and insidious MSD clawback, put money back into the pockets of the poorest with free Breakfasts and Lunches at school. With inflation and mortgage rates soaring even the children of the middle classes will benefit.
-Legalise Cannabis: FFS, it generates half a billion in revenue and justice system savings, just do it for Christ’s sakes you gutless wonders!
-30 000 State House Build: Rather than simply trying to fund flawed models of a rigged property market built for speculators, do mass State Housing builds for only State House tenants and owner occupiers with rent to own options. Build these on Golf Courses we seize back from Auckland and Wellington using the Public Works Act.
-4 day working week in all public services: Build a post growth movement by adopting it in the State sector first. Employ more state servants.
-Basic Pharmaceutical Industry: The continued post Covid world of geopolitical threats demands a level of self sufficiency we are no where close to.
-Tidal Energy Production: Towards our 100% renewable energy target.
-Universal Free Internet: Available through all Churches, Marae, Libraries.
-First $20 000 Tax Free: Most people earn barely $40 000, making the first $20 000 tax free would benefit the poorest first and most.
-Vice Tax on all Gambling, Tobacco & Booze: A special super tax on top of the total tax paid for products that are a blight upon society. Why should the Gambling Booze Vape Barons peddle their harmful products with the barest of responsibility?
-Sugar Tax: The Big Sugar Drug Dealers have been allowed to sell their highly addictive drugs directly to market with no penalty for too long. Time to pay punks.
-Remove GST from fresh fruit and vegetables: Make healthier choices cheaper, works best with a sugar tax.
-30% Stake-hold in Supermarket Duopoly: The broken market is creating a million dollars additional profit each day to the Duopoly. Fuck them. A new supermarket chain will reduce cost and voters need to see that in an inflation explosion.
A Financial Transaction Tax, Sugar Tax and a taxed Cannabis Market could fund new services, old services PLUS take the tax take off the poorest and put it on the richest.
It’s time to be radical because hoping Orr can kneecap a red hot economy addicted to the meth of quantitive easing is beyond optimistic, it’s delusional!
Ohh, and why does Labour have to fix it?
Because they broke it…
Wealthy nearly $1 trillion richer since Covid began – Hickey
An economic and political commentator says since the Covid-19 pandemic reached Aotearoa, the rich have become richer and the poor have become poorer – in part due to the Government’s policies.
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“I argue we will face 10% inflation by December.”
And the ocr will hit 8.25% by then too. 2007 all over again.
Oh deary deary me. How fucked up can this LINO caretaker government fuck things up so badly with a majority government!
Don’t be surprised, Labour always drive the economy into the shitter
Oh shit. I probably shouldn’t have put that flat screen on the toilet door and the SUV on the mortgage – in this space going forward.
Yea nah, moi bad. Treats and trinkets
WTF are you on about timoncewas?
the big guy with the Manson flash boat and 4wd will be shitting themselves and squealing from the roof tops
A lot of people are going to be wiped out by this. I really think this is just the RBNZ reverting to protecting the rich pricks, by yet again sticking the poor.
Rents will go up
Mortgages will go up
Jobs will be lost
Wages will be cut.
there has been a credit party since 2008 ultra low interest rate only added fuel to the fire and i disagree speculator and investors will be the first to default on there obligations we partied with reckless lending and borrower irresponsibility did they not stop to think the party could stop all they have ever known is decreasing interest rates oh and banks have borrowed a shit load of funds offshore exposing NZ borrowers to the international credit market i expect a lot toys (4wd jet skies) will end up at the auctions houseing has been used as a atm sooner or latter the piper wants paided the party is over and the squealing begins
they’ve really wholeheartedly and with great gusto applied themselves to doing nowt
Orr and Robbo just couldn’t resist making their mates millions in tax free capital gain, now we are all fucked.
The whole of the western world is in for major problems because of various factors, a major one of which will be a direct result of backfiring sanctions imposed on Russia.
Actually Russia is going to come out on top, of this shambles. In fact the whole “west” is going down the gurgler by coat tailing uncle sam.
One thing is for certain, the strain and stress for that increasing layer of society affected by the housing disaster in this country is about to get worse.
There are constant reports of police seemingly trying to fill in the widening cracks attending to mental health call outs and a wide range of other non police matters that are all symptoms of collective governments failure in housing. And our vacant politicians best believe the police ain’t going to make it go away, either!
I’m wonder how much longer our seemingly earnest PM can look the other way and pretend there’s nothing to see here? Or her equally useless Housing Minister? Or the Minister of Finance?
Wake up!
fact is we can’t actually do oppression here..not enough cops or squaddies…maybe we’ll go with ‘farmers militias’ again…
Fuck me. This is all on Robertson and Orr in the first place. Beetroot is finally realizing he’s unlikely to get a new gig if he leads the country into stagflation.
It’s going to be extremely amusing listening to all those so called economic experts such as Liam Dann try to explain this after blowing smoke up poor man’s Gordon Brown’s ass for 24 months and talking how “resilient” our economy is.
It’s not and it wasn’t.
Like covid our actions just delayed the inevitable.
Frank is mostly correct, we have some inflation caused by supply side constrictions but these are limited on the whole. The most significant driver are the decisions made by Labour to flood the economy with cheap money.
Add to that an insane increase in public sector numbers and pay increases, endless minimum wage increases and profligate spending with no benefits (bike bridge, te Huia train, a fucking slide in parliament…)
If you disagree, why then is it that Australia is running at about 3.5% vs out 6% rate? Also, why is NZ’s inflation the second highest out of 20 OECD countries?
It’s a joke and entirely the fault of labour. As for Bomber’s suggestions, we can’t tax our way to prosperity. It doesn’t work.
no this is a private debt mess fueled by reckless lending standards and borrower irresponsibility the borrowers need to take personnel responsibility fpr there own actions and obligations nobody made them buy multiple homes or us the home as an ATM bloody stupid asses
It was only two years ago that Labour was slapping itself on the back for printing money to cover up the consequences, not of the virus itself, but of their response to the virus; the lockdowns. This bought of inflation was always going to happen.
Consider this thought experiment: If a farmer can only can only harvest half of his cabbages because of lockdown rules, then the price of cabbage must double. And so it has come to pass. We will see:
> General inflation on basics – food & energy
> Higher interest rates in order to protect the currency. Bad for those in debt but OK for savers with term deposits. Most Kiwisaver accounts are in the ‘moderate risk’ category and are heavy in cash & bonds so will do OK.
> A few mortgagee sales but mostly just a temporary stall in house sales
> A thumping great big retail recession as people cut back. One that the current government will deservedly own, like a concrete overcoat. So it’s not all bad news LOL.
That sounds like the good old days under lockdown!
Cut off consumption! That’ll do it! It might kill the patient but hey …
and ‘walkback luxtons’ alternative strategy is? don’t worry in 24hrs he walks back on every statement he makes.
Walking. That’s his ‘new’ ‘Public Transport’ plan.
He doesn’t need one silly!
He’s in opposition and just has to sound presidential and pick holes in Labour policy, which really isn’t that hard. For example: Under Orange I have to wear a mask at Bunnings but not on a nightclub dance floor.
Andrew
Wrong! It was the previous govt. Never forget that!
Ha Ha quite right. Labour deserve to be flogged over this, however the depressing thing is the likely political result will be Natz/Act in power next term. And they will make it worse, if that’s possible!
i dont want my tax money used to bail out bloody debtors who did it to themselves
I stand corrected 😉
On board with all of Bombers suggestions other than increasing tax on alcohol – understand why but just don’t want to pay any more than I have to for beer.
No way anyone Labour or otherwise will implement anything sensible / anything that will be of any benefit to anyone other than the already rich.
I thought everyone wanted cheaper house prices.
When people can no longer afford their mortgage repayments or when their asset value falls below what they owe, the banks will foreclose
Isn’t that good news?
it will give me personally a degree of pleasure but measures will be taken to bail out the middle class you can bet your bottom dollar(and by that time it will be your bottom dollar) on that….once again we pay for their debts.
professor Steven keen has done a lot work on what a debt jubilee should look like in the event of a mass insolvency event its not what you think you cant write off the debts of the reckless at the expense of those who have been re-possible it needs to be fair to both groups
As we are reopening our borders, our economy is set to take off again, especially the tourism sector. Even hospitality and retail will get boosts. I read a lot of complaints online about high food and petrol prices, yet I have many friends and family members who still find it difficult to get a car park at the various shopping malls in the Christchurch area. Canterbury is the region that’s most been adversely affected by the coronavirus pandemic lately, isn’t it?
Higher interest rates means that homeowners will need to find extra money to cover their mortgage repayments and renters will have to pay more as well, but this isn’t a doom and gloom scenario because as the handbrake is applied on the economy just as we are reopening to the world, it places us in a better long term position.
In my humble opinion the best thing the New Zealand government could do at the moment is to impose tighter restrictions on New Zealand land for foreign investors. That would really be a great long term strategy for New Zealand residents and citizens, you know, those people regardless of their ethnicity who actually work here, earn here, and are taxed here. If you want to prevent an impending Brain Drain, then seriously think about it.
” To fund these big services we need a new tax system ”
Bomber we had the tax working group which cost a fortune and most of its sensible ideas were ignored !
NZ is small and controlled by powerful vested interests and foreign leeches. We gave away any real control three decades ago. Even the commerce commission’s recent wish list for controlling the food barons was stymied thanks to the intense pressure being applied to not alter anything.
This administration is trapped by the powerful forces that actually control this country and Helen Clark and Michael Cullen found that out when they went to implement what people had voted them in to do.
And our dear brother’s and sisters in Australia actually have a back bone and would never have tolerated an ECA which removed their protections and cut their real pay.
Australian employers see paying people decent wages as an investment not a cost like here. Sure the union movement is still proactive but their approach is years ahead of NZ A.
I worked for an Aussie boss here back in 91 and I asked him did he support a tory government or a Labour one and he took a few seconds to reply and said I will always support Labour because they put more money in people’s pockets to spend which is good for me.
As the ECA was being rolled out here he said I don’t understand what it is about this insanity to cut wages and conditions and take all of this disposable income out of the economy. It is utter lunacy and no good will come of it in the years to come.
How right he was.
The rightwing policy of a low wage economy and trickle down never works, never has, yet they keep doing the same thing and getting the same results, years of left wing governments trying to catch up for the majority of New Zealanders. The rich, business owners and high income earners never lose, they could be labelled a Casino where ” the house always wins”.
It was the previous govt. Just be prepared for next year when we say…it was the previous govt.
neat summation mosa
They also make the absolute most of their mineral wealth whilst we would rather sit in a smug cloud of virtuous poverty despite the fact we have trillions of dollars worth of coal just sitting there.
how about we stop investing i housing (the fire economy ) start putting our money to work in the productive side of the economy and go value added as for coal its a stranded asset the big pension funds are dumping fossil fuel personnel i wouldn’t be comfortable with my kiwi saver funds invested in coal chasing the quick buck has caused this mess
Totally agree Mosa, over in the Oz they are always prepared to get up on their hind legs & defend themselves if anybody came’s knocking to reduce wages & conditions.
They are streets ahead of us when it comes to organising, look at the debacle when the E C A was implemented, the CTU did not even call for a general strike, just rolled over & we all got royally rogered & have never recovered.
i managed to cut all ties to the Aussie banks and haven’t noticed any difference but its easy when there is no debt involved
cheap money is over, highly leveraged speculators are in trouble, the only question is how will the blairite subsidise her demographic at the expense of other new zealanders?
compound gains can turn into compound losses all the way back to original family home that was put up as collateral
Exactly Gagarin. A large group of people will be in real trouble because of rising interest rates. You are starting to see it now with small time developers going to the wall, a trend that will likely worsen in the next 18 months. Expect people to scream for lower interest rates and some form of government assistance to bail them out. The best solution will be to let the system wash out the overexposed and let people fail and property price increases to stall for the next 20 years. The price we will pay for years of insanity and crony capitalism.
And pray tell just who is going to pay for all this free stuff? Free public transport, free dental services, first $20k tax free, free school bksts and lunches, four days working week for public servants (what about the rest of us), more public servants … you guys are living in cuckoo/la la land and proof positive of your devotion/belief in the John Frum cult.
Ross
Won’t be a problem to find money for all the free stuff. After all NZ has 46 million taxpayers.
just like roads, we all are it’s called civilised society
incidentally the poppy doesn’t add anything, looks a bit like virtue signalling.