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 War Crimes And The Afghan Insurgency

Truly, with friends like former defence Minster Wayne Mapp, the SAS does not need enemies. At the very least, the Hit and Run book has raised the possibility that the New Zealand SAS committed war crimes in the attack they led in Afghnistan upon the villages of Naik and Khak Khuday Dad...

Mapp’s attempted defence of the SAS on RNZ this morning unintentionally indicated that collective punishment was baked into the planning exercise for the raid, and also into how the raid proceeded on the ground. More>>

 
 

Little Heading For Court: Apology Over Donation/Hotel Contract Claims Not Accepted

Today I want to publicly apologise unreservedly to Mr Hagaman for any hurt, embarrassment or adverse reflection on his reputation which may have resulted from my various media statements. I have offered that apology to the Hagamans. More>>

ALSO:

Biscuit Tin Of Democracy: World Heritage Site Protection, Ombudsman and Equal Pay Bills Drawn

On Thursday, 23 March 2017 three places are available on the Order Paper for the first reading of a Member’s bill. The ballot was held, and resulted in the following bills being drawn... More>>

ALSO:

Emissions Plan: NZ Needs More Science, More Trees, Fewer Beasts

A combination of technology breakthroughs, much more plantation forestry, and a big switch away from pastoral, particularly dairy farming, are identified as the key elements of any approach New Zealand takes to reducing its carbon emissions to a net zero level, according to a new report sponsored by the New Zealand chapter of GLOBE, a multi-party, global parliamentary grouping. More>>

ALSO:

"Backed To Win Seats": Labour Māori Seat MPs Won't Stand On List

The Labour Party is backing a request from its Māori seat MPs to stand as electorate MPs only, says Labour Leader Andrew Little. More>>

OutsKey: John Key's Valedictory Speech

I rise to address this House for the very last time. It has been a huge privilege to have served the people of Helensville as their member of Parliament, and, of course, the people of New Zealand as their Prime Minister. More>>

ALSO:

Productivity Commission: New Models Of Tertiary Education Are Coming

The report is a broad-ranging inquiry into how well New Zealand’s tertiary education system is set up to respond to emerging trends in technology and the internationalisation of education, and changes in the structure of the population, and the skills needed in the economy and society... More>>

ALSO:

PM's Press Conference: Water Everywhere

Monday's Post-Cabinet press conference focused on water, with the Prime Minister fielding questions about the possibility pricing water taken for export. Mr English said the government was directing their water allocation technical advisory group to include export water in considerations. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news