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RBNZ claims macroprudential victory
Topic Started: 24 Oct 2014, 03:23 PM (3,066 Views)
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http://www.bankingday.com/nav?idw=13&id=17623&no=111095392

Reserve Bank of New Zealand governor Graeme Wheeler has talked up the bank’s macro-prudential policies to a Bank For International Settlements conference in Wellington.

…He said house prices had risen rapidly in several Asia-Pacific countries in recent years, including Australia.

“Strong housing demand can add to financial stability risks, especially when accompanied by high household indebtedness. Housing market exuberance can be particularly problematic when interest rate responses are not warranted because economic growth is well below potential, and inflation in factor and product markets is benign,” Wheeler said.

“Macro-prudential policies can be helpful in addressing financial stability concerns in such circumstances. But the introduction of macro-prudential policy requires policy makers to be clear about its goals, the duration of the measures, and how such measures might interact with monetary policy,” he said.

…”We believe the dampening impact of LVRs on house price inflation and credit, and the diminished ‘wealth effects’ on spending associated with it, have reduced consumer price inflation pressures by an amount similar to a 25-50 basis point increase in the OCR,” he said.

“In essence, the reduction in housing pressures allowed us to delay the tightening in interest rates, thereby reducing the incentive for any additional capital inflows into the New Zealand dollar in search of higher yields.”
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peter fraser
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LOL - RBNZ used the wrong MP tools and they used them poorly.
Little wonder they got a dog.

It was the rate rises that started to put the brakes on housing, not the MP tools.

I hope that we don't copy the mistakes that NZ made.

Any expressed market opinion is my own and is not to be taken as financial advice
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miw
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peter fraser
24 Oct 2014, 05:21 PM
LOL - RBNZ used the wrong MP tools and they used them poorly.
Little wonder they got a dog.

It was the rate rises that started to put the brakes on housing, not the MP tools.

I hope that we don't copy the mistakes that NZ made.

Right. I thought the aim of MP tools was to be able to damp down the housing market without raising rates or even while lowering them.

I'm a little sceptical. China has had pretty draconian MP rules in place for years and is only now finally seeing some concrete effects.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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peter fraser
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miw
24 Oct 2014, 06:03 PM
Right. I thought the aim of MP tools was to be able to damp down the housing market without raising rates or even while lowering them.

I'm a little sceptical. China has had pretty draconian MP rules in place for years and is only now finally seeing some concrete effects.
I think that if they are really draconian it just inspires a whole new industry developed to provide a work around. EG - Low LVR's just promote additional borrowing which makes the overall borrowing less stable, which is counter to the original plan.

Like all things, used in moderation they can be worthwhile.

Any expressed market opinion is my own and is not to be taken as financial advice
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Emmanuel
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peter fraser
24 Oct 2014, 07:07 PM
I think that if they are really draconian it just inspires a whole new industry developed to provide a work around. EG - Low LVR's just promote additional borrowing which makes the overall borrowing less stable, which is counter to the original plan.

Like all things, used in moderation they can be worthwhile.
So true. But at the end of the day, nobody can defeat us. Central banks cannot stop us from making money from property. They should know their place. Australia has the most amazing central bankers in the world. So smart and clever.
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Emmanuel
24 Oct 2014, 07:21 PM
So true. But at the end of the day, nobody can defeat us. Central banks cannot stop us from making money from property. They should know their place. Australia has the most amazing central bankers in the world. So smart and clever.
In time you will see just how stupid they were.

Amazing ain't quite the word I would use.
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peter fraser
24 Oct 2014, 05:21 PM
LOL - RBNZ used the wrong MP tools and they used them poorly.
Little wonder they got a dog.

It was the rate rises that started to put the brakes on housing, not the MP tools.

I hope that we don't copy the mistakes that NZ made.

If you continue on the mindless debt path, you end up with an even bigger dog in the long run and little way forward from there. And even after seeing the results of your dent madness overseas for over six years now, You are still unable to see just how stupid and devasting it has been.

And here you are still going at it Peter.
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Lef-tee
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peter fraser
24 Oct 2014, 05:21 PM
LOL - RBNZ used the wrong MP tools and they used them poorly.
Little wonder they got a dog.

It was the rate rises that started to put the brakes on housing, not the MP tools.

I hope that we don't copy the mistakes that NZ made.

I couldn't agree more.

Though the cynic in me wonders if it was really a mistake or if it was just introduced because of mounting political pressure to be at least seen to be doing something, even if that particular something they chose was never likely to be effective.

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peter fraser
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Lef-tee
25 Oct 2014, 08:37 AM
I couldn't agree more.

Though the cynic in me wonders if it was really a mistake or if it was just introduced because of mounting political pressure to be at least seen to be doing something, even if that particular something they chose was never likely to be effective.
Yes possibly it was done to appease the critics. Some applauded it but didn't understand it.

NZ locked out the FTB's and gave the market to investors who had equity. I know that some think that may have saved some FTB's from paying too much, but in any market there are people getting good deals and others paying too much. We don't have MP controls on vehicle finance which incidentally is more than 100% of the actual value of the car in the showroom and about 200% of the value in the instant that it's driven onto the ramp that goes out the door and onto the road.

Surely the BRA and the RBNZ would rather leave individual decisions to individuals, which is where they belong. We have enough Nanny State policies to employ enough Nannies already.
Edited by peter fraser, 25 Oct 2014, 08:48 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Emmanuel
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They need to follow the Australia model. These policies are being considered around the Western world. It's just so wrong. When they are going to realize that we're collectively smarter to get around than the roadblocks.

Kiwis are living in a nanny state. They could learn from us.
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