KEY POINTS:
Here is an earlier selection of Your Views:
Nat
Interest rates are the price of money - when money is plentiful rates go down. Inflation is more money chasing the same amount of goods, so more money = lower rates = higher inflation. The RBNZ monitors the CPI to see if they are injecting the appropriate amount of money into the banking system. Turning control of the money supply over to politicians risks disaster, as the temptation to print money can be overpowering (e.g. check out the current situation in Zimbabwe). I sincerely hope Dr Cullen leaves the RBNZ alone.
Larry (Mt Eden)
If Bollard doesn't lift interest rates this time, he'll have to do it some other time and the buyers of our money know this. High inflation is on the agenda for the next few years. I think what Mr Bollard wants is help from the NZ Government, which he is not getting. Probably because there is an election year coming up and it is about this time Governments start acting irresponsibility The last few years has shown there are fundamental flaws in the way we control our economy. It is time for Cullen to address them. I see Mr Bollard becoming the Government's (and people of NZ)) scapegoat.
Colin England
The government does need to step in and change the way that the RB can adjust some of the factors that influence inflation. Allowing the RB to set banks reserve ratios will be a lot better (and faster) than having them set the OCR. The OCR is most effective in a closed economy and we have one of the most open economies in the world. Both, though, are needed for effective monetary control of the local economy within a globalised economy. Raise or lower the OCR to affect foreign investment and raise or lower the banks reserve ratio to affect local inflation. The banks won't like it but as they are the main drivers of inflation I don't think anyone is going to be overly concerned if their record profits take a hit.
KiwiJohn
Listen to Steve H. Hanke. Professor Applied Economics. The Johns Hopkins University. Baltimore. Prof Hanke was interviewed on morning report this morning at 08:09 on his views regarding the current NZ economic crisis:
http://www.radionz.co.nz/national/programmes/morningreport
The Audio link is:
http://www.radionz.co.nz/__data/assets/audio_item/0005/1028552/mnr-20070719-0809-The_New_Zealand_Economy-wmbr.asx
Its worth listening to.
Bren
If that bench monkey Cullen listened to just half of the organisations regarding Labours consistent overspending, the dollar wouldn't need to be tampered with. Grandpa Cullen retire we don't require you lack of talent any longer.
D.A. Matthews
Cannot understand the urge to send most of the money earned by exporters to Japan.They are having a ball at our expense.How does redistributing money from borrower to lender help anything?Recent events prove it does not but the people in charge behave like stunned mullets anyway.
Possibily, too little - too late!
It seems to me that we (the New Zealand public) are currently in the employment of the foreign investors. The majority of us are increasing their wealth at a sheer cost to our own. This self-inflicted trend is certainly affecting the lustre and diminishing the potential of the Kiwi Saver initiative.My advice is: stop worrying about votes and take the necessary measures to rectify the current situation before it becomes irreversible.
Buzz
Michael Cullen continues to show his lack of understanding of the impact his comments make around the world, I believe he has no intention of intervening in the markets, as he would be fully aware that our credit rating would end up looking like Bridgecorp(before the collapse) junk.
Paula
The Government should intervene. The raise in interest rates is affecting working families with a mortgage. We have had our interest rates (floating) increased three times since we got it in September last year. This is really hurting our pockets.
Murray
Dr Cullen, get real. We live in the 21st century and communism fell with the tearing down of the Berlin Wall. Where were you at the time? Why not get Madame Trotsky to call a snap election and get a lesson in reality?Of course you realise that you will not replace her as leader of your soundly defeated party.That job will go to Phil Goff.
Jan (Auckland)
Raising the interest rates actually increases inflation by increasing the supply of money available to the banks to on-lend because overseas investors are happy to buy NZ dollars in order to receive the high interest rate.
The banks then have a large amount of money available to lend and as residential property is the safest security, the banks are willing to lend up to 100 per cent on it. If banks were required to lend only 70 per cent - 80 per cent of the value on first mortgages (as originally required by legislation but removed I guess by politicians advised by economists unaware of the consequences), this inflation of property prices would not have occurred. Residential property purchasers would have required to put up larger deposits or take second mortgages at higher interest rates which would have slowed the rate of increase in the value of the property market. Now NZ is facing a huge problem.When the dollar does drop, probably like a stone, and probably because of some external event which requires the overseas currency investor to repatriate their funds, we will have a second round of inflation because of the increased cost of imports (having killed our own manufacturing base we are now dependent on overseas products). At this point, there will also be a huge jump in fuel prices which will add to inflationary pressure.Inflation cannot be controlled by interest rates alone. The Reserve Bank should be stopped immediately from raising interest rates before more damage is done to our exporters.If our interest rate had been kept below that of Australia, we would not have had the huge influx of money and the resulting availability of money to inflate house prices nor would we have had the increase in the value of the dollar and the resulting impact on our exporters.
Roger Peters
Of course they should interfere and stop further interest rate rises - the people are paying for it and if for no other reason - to give them a maybe at the next election.The question is: is the govt trying to kill our economy? They have it wrong!
Bill
Cullen is like the little boy who cried wolf 3 times. No one believes a word he says now. He has lost all credibility. Cullen would like Labour to get re-elected again. I hate this communist / state intervention where they meddle in people lives, family economy etc. We are under Culllen's thumb. It is intolerable. Anything he says is pointless. The currency markets move in extremes. The markets will fall. Has anyone looked at the US? The y are bloated and overloaded US$ 8 trillion in debt. No one wants to invest their money in the US with the currency being debauched. I would advise Cullen to stock to his social engineering of the poor. Leave the rich alone. We pay the taxes. I will keep going long on the NZ dollar until the trend reverses and bank my profits whaving bough at US63 cents. Did you see Warren Buffett made on NZ150 million going on NZ dollar and shorting the US dollar.
Andrew Dancer
It would appear that the National Bank has no social conscience or interest in the devastating personal effects of its successive interest rate rises. It would be more sensible to wait for the impact of the previous rate rises to take effect in the economy before raising rates further. The government would be right to intervene to prevent the National Bank rushing ahead without first establishing the resulting effects of the interest rate rises to date.
Peter Thompson
The Kiwi dollar's high exchange rate is being sustained my offshore currency speculators taking advantage of New Zealand's highly liberalised financial conditions. Since currency speculators trade on expectations not fundamentals, any action or statement which increased speculators' uncertainty about the Reserve Bank's offical cash rate may help to dampen their willingness to trade the dollar even higher. Dr. Cullen doubtless understands the significance of his public statements. And in fact it is the impact of his statements on the speculators' expectations which matter, rather than any direct intervention by the government in Reserve Bank policy. Government intervention is of course regarded as heresy by the neoliberals who believe in free market fundamentalism. But if the National Party wishes to dissociate itself from the excesses of Rogernomics, then it might do well to suggest what it would do differently were it in government. It is hypocritical to blame Labour for letting the high dollar harm exports and them blame Labour again for trying to rectify that situation. The free market is the culprit here.
Mike Hayman
Cullen should cut his massive increase in government spending. That is a significant driver of inflation and hence interest rate increase and the high kiwi dollar. This is the required intervention.
Sid
It's obvious that Cullen is just trying to scare off overseas currency investors who have heard that there might be another rate increase. He won't do it, and nor should he. If the government really wants to intervene they should have been spending the last 3 years developing a strategy for this rather than reacting in a panic once the horse has bolted.
Richard Brown
Anyone even slightly gifted with intelligence knows that high interest rates brings foreign investors to these shores simply to skim off the 'difference'. These investors add nothing to the country. Lower the interest rates, stop worrying about housing, and give our exporters some hope. Forget about the value of the dollar, it will settle at a figure deemed reasonable globally once we have removed the current 'international investment' through lower interest rates.
Dennis (North Shore)
Inflationary pressure now is just the result of Labour's lolly scramble to win the next election. They are also the result of Bollard's lack of determination to kill them a couple of years ago. Both the government and the NZ public do not really understand the meaning of "there is no free lunch".
KiwiJohn
Just in case Dr Cullen isn't up with the play, he should make every effort to save large sectors of the economy and individual business owners from financial ruin and effect the following:
1. Lower the OCR by two, possibly three per cent - next week.
2. Peg the NZD to a currency basket - within 90 days.
3. Enforce existing legislation to curb abuse of housing investment and allocate additional enforcement funding if required - as soon as practicable.
4. Revise the Reserve Bank Act and related legislation to broaden the Governors terms of reference for Monetary Policy - within 90 days.
5. Investigate and openly debate which corporates, and possibly individuals or classes of individuals, have benefited from this nefariously contrived exchange rate debacle.
Debbie
Yes, as a fairly new home owner it has increased the stress financially and without suitable pay increases to balance this out it will become even harder for families to survive. Unlike the politicians who automatically receive huge pay increases, the "average" employee receives a lot less if not none at all. Also with the high increases in petrol pricing, rates increases, insurance increases, these factor needs to be considered as well.
Rod Harvey
We are right on the threshold where further interest rate rises not just kill economies but tear apart all major GDP contributors whether constructors or exporters. Witness Nigel Lawson's black Wednesday and NZ's 1987 famous 21 per cent hikes where we all spent the next 15 years in damage repair mode. How wonderful in contrast was Greenspan's "lowering" of the interest rates in the US to favour and induce industry to become more competitive and as a by product take the emphasis and heat out of their housing markets. Which it has. An example to us all.
Barry (Christchurch)
Virtually every commentator of note is telling Cullen "stop spending". This man has a pathological denial issue hard wired in his embittered brain. I am convinced that Cullen and Clarke remain convinced that "they know best" and attempts by anyone else to convince them otherwise will be meet by the usual sneer of contempt. That this economy is being dictated over by a bunch of professional bureaucrats whose ambitions are limited to "staying in the job come what may". They despise ambition, they are hell bent on maintaining a low-net wage economy so they can continue to dish out money to those they deem worthy (and whom will return them to power). It's quite tragic and as usual when the party is over those who can least afford it will suffer-again.
Scott Chapman
I do not think that the Government should be involved in dictating Monetary Policy decisions. However, over the past 18 months, we have become desperately aware that Monetary Policy is not a tool that controls inflations, consumer spending, and the exchange rate effectively. We all know that we cannot stop the government spending, particularly coming into election year. If the government is to intervene, this should be through introducing a policy to help the Reserve Bank control inflation through other means. The "Silver Bullet" in this fight is not initially apparent. Moreover, Monetary Policy is not an effective tool in the current environment. Hence, new measures and policies need to be examined rather than stepping in and stopping Dr Bollard from doing his job.
Darron
Absolutely the Government should step in, interest rate rises will only continue to hurt those at the bottom of the pile that can least afford the payments on their borrowing currently, and do little to stem the commercial and investment side, where greater tax rates are absorbed through loss adjustment against tax. To complain about the strength of the dollar whilst making it more attractive for foreign investors to invest in it, is ludicrous. All the while the NZ interest rate is out of line with global rates the NZ dollar will remain over invested and go from strength to strength.
John (Wellington)
It's time the government started managing the economy, rather than leaving it in the hands of Asian FX speculators. They've had their fun, now it's time to preclude areas of inflation that we can't control, such as the price of petrol which attributed 0.6 per cent. Removing that, and we don't have a problem and therefore, no need to raise interest rates. I only wonder why it's taken him this long to address. They need to take action on the dollar now, and leaving interest rates needs to be just one action of many. The country's in dire straights, and as finance minister he's got to prove he can manage us back to stability because it's what we pay him to do.
Graeme Doull
With the current philosophy I can see no end in sight of a high NZ dollar. If the dollar drops this will fuel inflation (as now most of our goods are imported) this is turn will pressure the Reserve Bank to keep the interest rates high and the dollar high as a consequence. Something needs to change perhaps a higher tolerance to inflation?
Lindsay
Yes please! They want us to save but we can't save if our spare cash is gobbled up by increased mortgage interest rates!
Sweetpea (North Shore)
Those of us with mortgages about to roll over have worked out how much we can afford before cutting into critical spending or having to extend the term. Some fixed rates are already above that.