Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 


Go slow on interest rate rises

Go slow on interest rate rises


“The Reserve Bank should be very cautious about any increase in interest rates when considering its Official Cash Rate announcement on Thursday,” says CTU Economist Bill Rosenberg. “For many households, especially those on floating rate mortgages, it will go straight into higher housing costs. There is pressure from financial markets to raise the rate by at least 1 percentage point (from 2.5% to 3.5%) by the end of the year and a further percentage point (to 4.5%) by the end of 2015.”

Each percentage point rise costs a family $20 per week for each $100,000 of their mortgage. So a family with a $300,000 mortgage could face $60 a week in extra costs by the end of the year, and $120 per week by the end of 2015.

“For families still struggling after several years of income increases barely meeting other price rises, and many going without pay rises year after year, this is a large additional cost to face”, Rosenberg says.

“In addition, some businesses looking to borrow to fund expansion, will have to consider whether they can meet higher borrowing costs. That could reduce job growth and improvements in productivity.”

“While the economy as a whole is recording strong GDP growth, remove the boost from the Canterbury rebuild and the growth looks very modest. Unemployment is still at 6.0% with 147,000 people unemployed, 257,100 jobless, and 122,600 part time workers wanting to work more hours. Wage growth is still very slow.”

Inflation is still low – at 1.6% in the last year, but 1.5% outside Canterbury where it was 2.4% in 2013. The biggest contributions to the increase were increased taxes on cigarettes and tobacco, housing, including rents, home ownership and energy. Insurance costs are also rising, as are some government-related charges such as for medicines, and tertiary education fees. “These do not look like a general increase in price levels and are better addressed directly rather than hurting living standards and job growth through cross-the-board interest rate rises,” Rosenberg says.

He says there is also a risk to the exchange rate and New Zealand’s international indebtedness if interest rates rise faster here than in other countries where they are mainly still very low with rises months or years off. “Rising interest rates, with the difference between New Zealand and the rest of the world growing, will attract an influx of money, raising the exchange rate and hurting exporters. It will encourage banks to use overseas borrowing to fund mortgages, raising overseas indebtedness – and making the Reserve Bank’s actions less effective.”

“If the bank sees house price inflation as the main danger, it should address that directly. It has started to do that by restricting how much people can borrow towards a house (Loan to Value Ratios), but has aimed that mainly at financial sector stability, not at house price stability. It could use other policies such as raising bank capital requirements for housing loans, tightening core funding ratios, or more directly restricting use of overseas funds. Any of these must be accompanied by much stronger government action to ensure they don’t end up hurting those who need good housing the most – such as first home buyers and people needing to rent good quality low cost houses”, said Rosenberg.

ENDS

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On Last Night’s Debate, And The Collins Accusation

Debating is a peculiar discipline in that what you say is less important than how you’re saying it. Looking poised, being articulate and staying on topic generally wins the day – and on that score, Labour leader David Cunliffe won what turned out to be a bruising encounter with Prime Minister John Key last night on TVNZ.

Cunliffe marshalled his points better, kept Key off balance and – more often than not – was in control of the general tenor of the contest. Labour supporters would have been heartened, and given some belated reassurance that maybe the change of leadership last year had been the right decision. More>>

 

Parliament Today:

Gordon Campbell: On Winston Peters' Latest Bout Of Immigrant Bashing

It is only one poll, but rather than cannibalising each other's vote, Colin Craig and Winston Peters do seem to be managing to find the room to co-exist... Few are questioning how Peters got to this happy place, and what it says about the mood of the electorate. More>>

ALSO:

More Immigration News: First People Trafficking Charges

The first people trafficking charges in New Zealand have been brought by Immigration New Zealand (INZ)... The defendants have been charged under the Crimes Act 1961 for arranging by deception the entry of 18 Indian nationals into New Zealand. More>>

Collins 'Misinterprets Media Reports': "Too Compromised To Remain Justice Minister"

Bizarre claims by Judith Collins this morning that she had been cleared of inappropriate behaviour by the Privacy Commissioner demonstrates she is too compromised to remain Justice Minister, Labour MP Grant Robertson says. More>>

ALSO:

Labour On Climate Change: Focus On The Now For The Future

A Labour Government will put in place a comprehensive climate change strategy focusing on both mitigation and adaptation, establish an independent Climate Commission and implement carbon budgeting, says Labour Climate Change spokesperson Moana Mackey. More>>

ALSO:

Gordon Campbell: On National’s Housing Assistance Plan

So, as many as 90,000 people could derive some benefit from National’s housing assistance plans for low and middle-income earners... Yet in reality, the benefits seem likely to be insignificant, and they will be skewed towards those at the top end of the income group that’s supposedly the target. More>>

ALSO:

Election Data Consortium: National’s Worst Case Scenario At Stage One?

A month out from the general election and ipredict traders are still forecasting National’s vote to slip below current polling levels and there is potential for it to fall further. More>>

ALSO:

From The Scoop Video Archive: PM Says SIS "Told Me" About OIA Release

In a press conference immediately following an controversial OIA release of notes on an SIS briefing to then Labour leader Phil Goff, Key said "at that point [Tucker] told me he'd release it ...". Since the release of Nicky Hager's 'Dirty Politics' Key has denied being personally informed and said references by officials to 'the PM' being told briefed referred to his office. He now says the same about his own statement. More>>

ALSO:

  • Scoop Video in the news - New questions over Key claims | NZ Herald News - Stuff.co.nz
  • Earlier - Felix Marwick: Laying out facts over SIS documents - Newstalk ZB
  • Labour - Director’s letter contradicts Key’s claims
  • ACT - The Letter - 26 days to go
  • TV3 Video - Housing issue nudges Dirty Politics aside - David Cunliffe: Key's SIS explanation 'defies belief' - SIS leak came from Key's Office - Goff - Key 'categorically denies' Slater OIA discussion - Video: Key faces more Dirty Politics questions

  • TVNZ - Winston Peters: ‘Dirty Politics' is a new low
  • The Nation - Debate Between Grant Robertson And Russel Norman
  • NZ First - “The Words Mean What I Say They Mean”
  • Get More From Scoop

     

    LATEST HEADLINES

     
     
     
     
     
     
     
     
    Politics
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news