Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


RBNZ's Wheeler warns on housing, holds OCR at 2.5 percent

RBNZ's Wheeler warns on housing, holds OCR at 2.5 percent

By Paul McBeth

Jan. 31 (BusinessDesk) - Reserve Bank governor Graeme Wheeler singled out rising house prices as a threat to the country's financial stability and kept the official cash rate at 2.5 percent, as expected, saying the overvalued New Zealand dollar was holding consumer prices below the bank's target band.

"The bank does not want to see financial stability or inflation risks accentuated by housing demand getting too far ahead of supply," Wheeler said in a statement. The bank is closely watching house price inflation and household credit growth, which it expects will get a boost from the Canterbury rebuild, he said.

Wheeler is facing increasing pressure to use macro-prudential tools, such as limiting loan-to-value ratios or increasing banks' capital requirements, to deliver looser monetary conditions and take some pressure off the strong New Zealand dollar. The governor has been reluctant to accept this lobbying, saying the tools, which are still under construction, are to protect the country's financial stability, not influence monetary policy.

The governor is scheduled to deliver a speech to the Canterbury Employers' Chamber of Commerce in Christchurch tomorrow, entitled 'Improving New Zealand's economic growth'. On Feb. 20 he will speak to the New Zealand Employers' and Manufacturers' Association on export issues, including the impact of the exchange rate.

The strong currency is seen as the main cause of the consumers' price index tracking outside the bank's 1 percent to 3 percent annual target band for inflation, and is "directly suppressing inflation on traded goods" and "undermining profitability in export and import competing industries," Wheeler said.

New Zealand's CPI unexpectedly shrank 0.2 percent in the final three months of 2012, taking the annual rate of inflation to 0.9 percent.

Mike Jones, currency strategist at Bank of New Zealand, said in a note before the release, the bank has stepped up its currency trading in December, which marked "the resumption of the passive intervention the bank employed successfully through the 2008 period of currency strength" and that the Reserve Bank "believes the NZD is overvalued."

The bank softened its expectation for a pick-up in inflation, saying it expects economic growth over the coming year to "slowly" bring the CPI back to the target 2 percent midpoint.

An improving global economy and lift in international market sentiment had also contributed to lower bank funding costs, some of which filtered through to local retail interest, Wheeler said.

"On balance, it remains appropriate for the OCR to be held at 2.5 percent," Wheeler said.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: Alex Swney Pleads Guilty To $2.5M Fraud Charge

Alex Swney, former chief executive of the Auckland city centre business association Heart of the City, has pleaded guilty to dishonestly using documents to obtain $2.5 million. More>>

ALSO:

Petrol Burns Prices: Second Consecutive Quarterly Fall For CPI

The consumers price index (CPI) fell 0.3 percent in the March 2015 quarter, following a 0.2 percent fall in the December 2014 quarter, Statistics New Zealand said today. The last time the CPI showed two consecutive quarterly falls was in the December 1998 and March 1999 quarters. More>>

ALSO:

Scoop Business: NZ Broadcasters Launch Battle Against Global Mode ISPs

New Zealand broadcasters have confirmed they’ve launched legal proceedings against internet service providers who give customers’ access to “global mode”, which allows customers access to offshore online content, claiming it breaches the local content providers’ copyright. More>>

ALSO:

Sanford: Closure Of Christchurch Mussel Processing Plant Confirmed

The decision comes after a period of consultation with the 232 staff employed at the Riccarton site, who were told on 9 April that Sanford was considering the future of mussel processing in Christchurch. Recent weather patterns had impacted on natural spat (offspring) supply... More>>

ALSO:

Price Of Cheese: Dairy Product Prices Fall To The Lowest This Year

Dairy product prices fell in the latest GlobalDairyTrade auction, hitting the lowest level in the 2015 auctions so far, as prices for milk powder and butter slid amid concern about the outlook for commodities. More>>

ALSO:

Houston, We Have An Air Route: Air New Zealand To Fly Direct To The Heart Of Texas

Air New Zealand will fly its completely refitted Boeing 777-200 aircraft between Auckland and Houston up to five times a week opening up the state of Texas as well as popular nearby tourist states such as Louisiana and Florida. More>>

ALSO:

Scoop Business: Reserve Bank’s Spencer Calls On Govt To Rethink Housing Tax

The Reserve Bank has urged the government to take another look at a capital gains tax on investment in housing, allow increased high-density development and cut red tape for planning consents to address an over-heated Auckland property market. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news