By Gareth Vaughan
With three months between the Reserve Bank's last monetary policy review of 2022 and first one of 2023, it will be watching "high frequency data" during the break closely, says Karen Silk, Reserve Bank Assistant Governor and General Manager of Economics, Financial Markets and Banking.
Speaking in a new episode of interest.co.nz's Of Interest Podcast, Silk, also a member of the Monetary Policy Committee responsible for making monetary policy, says if the Reserve Bank's current hawkish outlook is to moderate it needs to start seeing a slowdown in the level of household spending.
Thus the likes of electronic card transaction data, retail spending, credit card survey data, plus manufacturing and services data will be watched closely.
In the podcast Silk also explains why inflation forecasts from businesses are important to the Reserve Bank, how close the Reserve Bank came to making a 100 basis points increase to the Official Cash Rate last week (it went for 75), and why core inflation when volatile food and energy costs are stripped out is such a concern.
She also talks about what needs to happen in the labour market for the Reserve Bank to consider employment to be reined in from beyond what's deemed to be its maximum sustainable level, and more.
31 Comments
Now we concentrate the boom on investors who get to cash out and the bust on home owners who get stuck with the increase mortgage repayments and plummeting disposable income for someone else's sins.
It's far more efficient this way... at least... it must be, or else why would they do it? Make no mistake, the slowdown in spending is going to come predominantly from mortgage-holders. People already living paycheque to paycheque like many renters are keep spending because they literally do not have a choice.
IMHO its going to be hard for retail numbers to beat last years (after inflation correction) people are feeling the pinch, even Blind Freddy.
Anyone else notice Black Fridays sales seem to be extending 24 hours, then another 24 hours, I suspect there is a lot of inventory still to move.
Either way rates will continue to go up, Nurses about to get a decent back dated pay rise, I am sure police and teachers will want some as well. People will strike for 5-6 minimum. Expectations cannot be talked down Mr Orr, we are going to have to have friends made redundant before we will believe we should not get a pay rise here. Another 50 at least is baked in next meeting.
I wonder if we could return to the "usual" trend where low tradable inflation, mostly mass-manufactured items from Asia, starts pulling down headline CPI, as it has done for decades until 2021?
Certainly this would be the ideal scenario for central bankers and governments, so cash rates can go down again and the "default" debt-driven growth can resume.
Just imagine the circus if goods from China start to get more and more EXPENSIVE. Almost every non-food thing we buy comes from China, or through China.
If China gets involved in a real war,
or if lockdowns or unrest continues,
or if our dollar keeps falling,
or if globalization keeps sputtering...
I can see many reasons to be wary of a lot more inflation in the price of Chinese produced goods.
If Chinese stuff gets too expensive we can just go back to making our own stuff. We can start the very second it becomes cheaper to do so, rather than import from overseas. It is what we used to do. Clothing factories all over the country. A golf tee manufacturer in Porirua, from memory. Not a big deal.
The life I lead doesn't involve Black Friday sales. Only the easily led sector of the community are ever involved in such things. The same people who are sucked by any sort of scam that comes along. My favourite is the Jacinda and Ashley show on TV sandwiched inbetween the KFC and Burger King ads. Great audience read by the marketers. Apparently some people are influenced by what all of them said.
On a) I was making the important point, and you might have gleaned it from the interview answers, that Silk is not, despite her title and senior position, an economist. But yes, you would hope someone qualified in her team would be looking at the data.
On b) read https://croakingcassandra.com/ (Reddell). It seems know one knows whether the entire MPC are actually providing any meaningful input into the process.
Blah blah. The RBNZ have, and will, primarily be following the actions of the US Federal Reserve. The bulls generally have no idea how the market will rally - they just want a rally either way. Yeah go ahead and end the interest rate hikes and you'll see inflation skyrocket again. There hasn't been an inflation cycle in history that ended without the Federal Reserve raising rates above the rate of inflation. The Fed are not going to cut rates prematurely. The Fed, and most certainly the RBNZ, have very little wiggle room here.
So the RB can do what it likes as long as house prices are rising, but when they start correcting for their gross incompetence, having caused the problem of insane house prices, we have to change the process because we cannot possibly have lowering house prices. Their job is to be even handed and the job will not be finished until the house prices have returned to a sane price to income ratio.
I doubt that this will happen and between the RB and the incoming National government our economy will return to the ponzie scheme driven by ever increasing house prices and rampant immigration.
Young couples hoping to bring up their families in an affordable reasonable home with a back yard. would be well advised to leave NZ. To sum up the risks of staying
- You may never be able to afford a home, let alone a decent one.
- your children will receive a poor education as indicated by our PISA ratings which continue to fall.
- If you or your children need first world medical care, you are increasing unlikely to receive it with our collapsing health care system.
- you will have to raise your family in an increasingly violent and crime ridden society. Largely due to the increasing economic and social disparity.
-you will have to put up with increasingly over stretched infrastructure and all the frustrations that come from that. (largely due to the fact that we cannot keep up with the demands of our immigration fueled population explosion)
- Ultimately your are going to end up having to live in something like a South American banana republic and all the poverty, political turmoil and violence that go with that.
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