KEY POINTS:
Here is an earlier selection of Your Views:
Daisy
The Govt. should do something drastic to help first homebuyers to buy their first home. People who bought their homes earlier are now in a position to buy more homes and rent it but the ones who did not buy when the prices were low are stuck now with nowhere to go. If this continues immigrants will leave this country and go to a place where it is feasible for them to buy. With salaries low and living high and housing unaffordable no immigrant want to settle in such places. One of the suggestions to stop those with houses to buy more houses and rent it would be to introduce some laws where the house cannot be rent out (maybe one only) but here there are people saving on tax due to rental income. So the sincere ones working and paying income tax will have to keep slogging and staying on rent if the Govt. does not help first home buyers.
les charman
Dr Bollard appears to have lost the plot. With his policy, the dollar continues to rise creating major problems for exporting and now creating loss of jobs for many people who have worked conscientiously for years with a particular company. He is lining the pockets of the many foreign company who are taking advantage of his fiscal decisions to the detriment of the ordinary people of New Zealand. In the meantime the housing markets continues to meet the current demand for homes. How long does this farce have to continue?
Dublin
If Bollard wants to stunt the housing market and/or spending I wonder why no-one is talking about some kind of Stamp Duty on property sales. This is common place in the UK and Ireland and for example a 5 per cent direct tax on sales would certainly be a hit to the housing market. Something different has to be done as although the housing market may eventually slow with higher interest rates, the exchange rate will go even higher as foreigners buy our money. Great for anyone leaving NZ but there's much less incentive for anyone to come home with foreign cash.Also, once and for all NZ already has a capital gains tax on properties. Its just that the IRD is too toothless to be able to chase the offenders.
Critter Dan
Many good points in all the posts. Especially I think, increase in money supply creates an increase in inflation. Yup, more dollars chasing about the same amount of goods and houses etc. So what does Bollard do? He raises rates which draws in all the offshore investors, which does what? It increases the money supply. Which does what? Oh dear, it increases inflation. Who does Bollard think he is kidding?
martin r
For anyone, especially renters, calling for a capital gains tax, be careful what you ask for. A capital gains tax will drive many amateur and professional landlords out of the business. What happens then? There will be fewer houses and flats available to rent and rents will skyrocket. Sure, many houses would go on to be owner occupier, but the cost of that is about twice the going rate for a renter. Think rents are bad now? Just wait 'til after a capital gains tax.
Fred Z
Higher interest rates equals more foreign inflows chasing those rates. Higher foreign inflows equals a higher NZ dollar. Higher NZ dollar equals lower export earnings. Lower export earnings equals lower profits for exporters (you know, like farmers. And tourism too. NZ is becoming increasingly expensive for tourists, so fewer will come, and even more businesses will hurt). Lower profits for exporters equals lower investment in export businesses. Lower investments in businesses equals a slowdown in export business growth. A slowdown in export growth equals fewer new jobs and maybe less jobs overall. So higher interest rates equals a slowdown in NZs vitality.
Ian (Northland)
The Government could be blamed for the OCR rise.If the country is so awash with cash and unemployment is non existent why is the income tax and/or GST not being raised to mop up the surplus money in the economy? This would stop us spending so much! The money saved could be used to service debt and used to finance infrastructure at a later date.Forget about a tax cut. A tax cut is insane under the circumstances.
Eddie (Auckland)
Increasing the interest rate attracts more demand for New Zealand Dollar as more overseas investors would want to invest in risk free government bonds. This is why our currency has become so strong in the past few months. So with all this influx of foreign investment, there is more money in the economy which further leads to inflation not only in property market but also in consumer goods. Also lot of people are now prefering to stay in rental properties due to high interest rates and the expensive property market. This is increasing the demand on rental properties and attracting more property investors. There are nearly 500 new people coming to Auckland everyday and the demand is also increasing. Compared to United States and other Western countries, New Zealand and Australia have a less Average Property Price to Average Income ratio. As a result of which foreign investors who also enjoy access to low cost capital are attracted to New Zealand. There are also other benefits to invest in New Zealand Property like No Capital Gains tax or Stamp Duty and afterall is the safest country on the planet.
Ian (Sydney)
I'm so glad I moved to Sydney. Growing economy, lower interest rates and no Helen on the TV every night!
Sam (Jerusalem)
Well, after reading your comments I find myself interested in taking part.It's prudent to buy Low sell High, and it is fundamentally known: currencies move on a cycle, but the problem is the length of that cycle that can not be easily predicted. Am quite confident the cycle is gonna turn soon as Interest rate is getting so high and currency rate is over valued, thus exporters will be hurt, cost of money will be high, and thus the wheel should turn. Now, what should Bollard do is using his weapons, Words... Wording can play a role Mr. Bollard, try to comment on the exchange rate, treat the market of an intervention.
Sunil Dhall
Dr Cullen is doing the right job and saving the people a lot of misery that will follow is the asset bubble is not controlled. The record deficits and investment shortfall are leading to huge imbalances that are a result of the huge speculative boom in the housing market. When and how will it end is only a question of time and the results that will follow are going to be painful. Hopefully Dr. Cullen remains determined to win the fight over the housing bubble and make a soft landing so that the damages are not severe, even at the cost of his popularity.
Stew
Bollard & this government is so focused on housing that he can't see the wood for the trees. So what if inflation goes to 4 per cent or even 5 per cent? It seems to me that what they are doing with the interest rates is achieving the same thing, simply making this a country that is unaffordable to live in.As an investor I am simply trying to create my own retirement fund. I am certainly not buying houses for the pleasure of dealing with difficult tenants and all the associated problems & expenses. It would be easier for me to sell and start a kiwisaver account. Is that what they want - another person relying on Goverment hand outs? Let market forces do their work. Follow Australia's example and give the money back to the people to enable them to create a strong vibrant economy and stop destroying our economy with interest rate rises.
Adrien
Why do people suggest extra taxes to deal with this issue? How is taking more money off the population going to leave people with more money? People in the business of buying and selling houses are already subject to a tax on that activity.If the government / RB doesn't want people borrowing so much money on houses, why not do something like banning 100 per cent mortgages, or capping the percentage of a property value that can be borrowed against. Like say max 80 per cent mortgages.It's "easy" to buy a house on a 100 per cent mortgage, and worry about the mortgage payments later. How about targetting the thing that the RB says is actually the problem. Messing with the OCR isn't working. And if the rate goes high enough to actually do what Mr Bollard wants, then that's when heaps of NZers will lose the shirts off their backs. How will that help anyone? I'm relatively debt free (for which I'm very thankful), but we export, and the dollar is frankly killing us. We only hear about the big exporters moving off shore to deal with reduced profits. How about the smaller exporters who are now making a loss because the dollar took away more than their profit margin?
Juma (Auckland)
Most of you people obviously haven't studied economics or worked at treasury. I can't believe the level of ignorance among some people. Take 'Enough is enough' for example blaming government spending for rate rises! An extra $20b since Labour came into power in 1999, has he or she considered that the population has increased by 0.5 million? or that if you keep health/ education spending stagnant and thus have no wages increases that all our doctors, nurses and teachers will emigrate overseas because their wages will never rise! NZers always complain our education system isn't good enough or too expensive or that there are doctor/nurse shortages, well I'd like to see how many more of you will be on the waiting list when National gets into power after massive health and education cuts to fund their tax cuts for the rich!
Gerald B. (Auckland Central)
Government-spending increased by 40 per cent during the last 7 years. One-Million-Dollar-Question: Who should stop spending? a) The government. b) My dog. c) The seagulls. d) The Hobbits. - The right answer will be given at the next election.
Jerry (Auckland Central)
I feel sorry for the ones currently borrowing money. The people with savings should clearly understand the current signals: Participate in foreign exchange and convert your NZD to a stable currency with a long term perspective. The next Kiwi-crash is just a question of time. Converting the FX back to the Kiwi will result in 10-20 per cent earnings within 3 months. That's the real Kiwi-Saver!
Bernard
It's about time NZ'ers woke to Helen Clark's and Cullen's charade. Isn't a bollard something that blocks a road. Well, he's not really too aware what road he's on. He's got his head in his map. We have been robbed of basic infra-structure investment for years (SH1=serious handicap #1), we accept second-rate continuously. Look at Telecom offering services that are so second rate, railways that are as more backwards than in Eastern Europe. Basic costs way out of control, monopolistic behaviour, price gouging. Just look at the price of books! We're way over governed, get rid of local authorities, that right there would take huge spending out of the economy.Yes, we have pain to go through, but not the Bollard way. He's throwing clorox in the water to catch a fish. Get wise NZ'ers, get rid of this government, real quick. Helen Clark was saying how an energy company was an embarrassment to NZ. Well she should look in the mirror! We'll all be on respirators soon if the stench of her government doesn't fade away.
Taxpayer
KiwiSaver is kicking in next month, and now the RB is raising interest rates. Does the government want those fund managers to just buy government bonds so that the money doesn't get into the stock market?? Seems like another subtle way to control prices... do we still have a free economy here or are we back to a nanny state?
Greg from UK
Alan Bollard appears to be feeding inflation. Does he not understand that the inflationary pressure in NZ is coming predominantly from overseas investors who are finding NZ a wonderful place to invest because they are getting great returns for their investments because the interest rates are so high! Quite simply increasing the OCR using the wrong tool for the job. A different mechanism is going to be necessary to ensure that the New Zealand economy doesn't come crashing down. Then again, maybe thats the plan. Lets face it, with the way the poles are going, Labour has little hope of being the elected government at the next elections. But there's nothing stopping them stuffing it up for the next government so they are back in the pound seats for six years time.
Perdy (Auckland)
The latest increase in the Official cash rate(ocr)to 8 per cent by Dr. Alan Bollard, is totally uncalled for. This will further, push the mortgage rates higher, putting even more burden on home owners, to meet the ever increasing pressure of rising, repayments on the mortgages. It seems that the government is totally losing focus of caring for the citizens of the country.There is a urgent need for better economists, better economic policies. With no respite from ever increasing petrol prices, rates hikes, education costs & fixed or static salaries, which are amongst the lowest, in developed nations, how does the fm think, an average New Zealander can survive this menace. Why doesn't the government look at, reducing unwanted costs incurred by the ministers & MPs, for travelling overseas for unproductive purposes & wasting taxpayers money. Another good resource could be to put a stop to ever increasing salaries of MPs & ministers. After all, the elected members of the government, have a responsibility to their fellow countrymen first.
Craig
I must say I am incredibly impressed by the lack of economics knowledge exhibited on this board. Hooray for ignorance. Anyone who has even a semblance of economics education will realise that our economy is on the verge of a recession. Nothing makes sense. The economy is not reacting in the way it should- the housing market in particular. With that in mind, increasing the OCR is the wisest thing to do, knowing what we do at present. A decrease in the OCR will probably be necessary in the future when we see a certain fall in our overseas dairy market.
Raff Dellavaris
NZers will feel the interest rates kicking them soon, if not already. If demand for housing continues it is probably being fueled by investors and overseas purchasers.I think the answer to housing problems is the govt doing massive research into the world's best apartments and forcing developers to build apartments of a very reasonable size and of very high quality. In this way, people will have somewhere to live, at the very least, and apartments could become the quality state-housing of the 21st century.I think this is a better solution than carving up the countryside haphazardly.
Ipipiri (Bay of Islands)
Remember Don Brash use to have that job, he went on to prove he wasn't that smart also.
Wez and Manukau city
There's only one answer to control the housing market without the use of interest rates which is Capital gains tax,
Rene Auckland
I am under the impression that Mr Bollard is keen to see the National party as our next government.Let us take a moment and think. If the interest rates force people to sell their homes, they will surely vote out this leadership. If exporters, selling in US dollars, such as myself, cannot cover their cost of production due to over inflated exchage rates,we'll give the chance to National to show us some professionalism.
Tony
Keep it up Mr Bollard.At this rate, I might be able to buy two or three houses after the market crashes and we have an influx of bankrupt mortgagees. I feel sorry for those who actually have to borrow just to put bread and milk on the table. How about living in lower class South Auckland Mr Bollard? See what your OCRs are doing first hand.
J. Oborn
How can we stop spending? Grocery prices keep rising! Petrol prices keep rising! Just keeping afloat involves spending. There is no money left for savings. It takes every cent we make just to put food on the table and petrol in the car. Thanks Mr Bollard for nothing!
Matt Pilott
I'm amazed at the number of New Zealanders who have given such sound financial advice to Bollard in 'Your Views'. I'm sure all such well-grounded and educated views will come as a shock to Bollard. Or perhaps he actually knows what is going on and is doing what he can with the tools available. But then who am I to say - I don't have a lifetime's experience in finance and treasury, as everyone writing in here clearly does :P
Christine
What sort of a Government do we have that lets one man decide such an important economic factor as the interest rate? Who is in charge here - the Government, or Bollard?
Ian Morine
I wonder if Dr Bollard will stand as a National Party MP after leaving the Reserve Bank, or better still, the next National Party leader, like the Don? He certainly has all the credentials for the job - he is boring, repetitive and consistently tries things that have been tried before and failed miserably!The only answer to this problem is either amend the "Reserve Bank Act" or abolish it completely and our obsession with inflation that has held the NZ economy and our workers back for long enough. The RB Act worked OK when the economy was stagnant and not going anywhere in the 80's and 90's. Now the economy is buoyant and booming - it is failing us completely. Get rid of it along with the other failed right wing policies, before it's too late.
Jeremy
Putting up interest rates doesn't curb house sales, or should I say doesn't curb international house sales.Overseas investors borrow at low interest rates offshore and push up the value of properties for locals here in NZ. Overseas investors put money into the economy by investing with our high interest rates.The way to curb high house prices is for the government to introduce some form of stamp duty or tax on overseas buyers (or even refuse non residence to buy property). We keep on putting up interest rates and push up the value of the dollar here in NZ. When the value of the dollar falls inflation is going to skyrocket as petrol prices will increase dramatically and local New Zealanders are the ones to suffer. I could go on but this is "food for thought".
Shabbir (Manukau city)
I am just gobsmacked to see this interest rate rise with all the other raises, the city council rates, water rates, general grocery bills, power everything has gone up but the wage has been the same, last thing we want is being penalised for something that I have no control over. I have severely cut down my other spending to coup with these rises but this is as far as I can stretch, we really need to rewrite the target of the bank governor's role. He really needs to be in my shoes to understand how stretched I am just keep my head above the water.
Ken
One would have to wonder who runs this country, the Government, or the Reserve Bank? The Reserve seem to be so paranoid about inflation they have no other answers but to keep raising the OCR! No wonder we have to keep borrowing to buy things. There are countries in this world who enjoy prosperity without inflation. Will we ever be in this situation, or will we be forever poor paying interest to the Banks?
Pete W
Sacrifices? I sacrificed the idea of buying my own home three years ago when economy was due for a recession but was continually being held up by the housing market and foreign exchange rates. We will pay the price, and the longer it takes before it happens then the bigger the price will be. And that's the price a country pays for voting in two people who have never had a job in the real world outside academia and politics. Unfortunately, one of those two runs the show, and the other is in charge of fiscal policy. Assume the brace position folks, and thank you for flying Labour-Air.
Si
Your story about a lady on Waiheke Island faced with crippling mortgage payments is very one-sided. It ignores the fact that the bank needs to borrow this money to lend it on to mortgagors and profit needs to be made somewhere. She is only looking at the negative cashflow that is going into the property. She seems to have ignored the fact that she has been making double digits in capital growth over the last three years. Even if she did sell, she would have made a good profit.
Paul (Chch)
What I find offensive about this and being a homeowner, is that as a homeowner we have less to spend on luxuries anyway. Why should we be penalised for the Govt's mis-management of the economy. Surely the Government should be looking at the Generation Y aspect of the younger generation with expendable incomes, who are not interested in Kiwi saver or anything for the future as they will inherit everything they need or have supplied by parents. In many cases it's this expendable income that is fueling social problems and driving up inflation, not to mention binge drinking, drugs and hoon racing. Make these items more expensive or inaccessible. and bang, problem sorted.But I guess the Govt make too much money off drink and fags to make a brave decision on that one.Anyway that my five cents... no wait ten (we still have the rounding up and down issue to sort).
David (Auckland)
People appear to be confused about inflation and its causes. Inflation is at its root, a monetary phenomenon- where is there relatively growing money supply relative to goods/services. Rising house prices are a symptom and not the cause. To find the cause one must look at the reserve banks own statistics.
It has consistently printing more money each year- look at the M3 money supply.An extreme example of this is Zimbabwe, the root cause of inflation is nearly always due to those who have their hands on the printing press aka reserve banks.
Enough is enough
1. What is the real cause of the interest rate rises ? Answer; Out of control government spending? 2. Really ? Answer; Yes, this government has increased spending on its watch by $20 billion. 3. Isn't that a good thing ? Answer; Seen any benefits in our health and education systems ? 4. So where does the money go ? Answer; New office blocks in Wellington, '000s of beauracrates, consultants, ...5. Isn't that our money ? Answer; It was but the government knows better than you how to spend your money (yeah right).6. Why doesn't Bollard say something about government spending ? Answer; Who do you think appoints and pays him ? 7. But it will get better, right ? Answer; What do you think will happen in election year ? This government will try and use your money to buy your vote. 8. Won't that mean more government spending and more interest rate rises ? Answer; Now your starting to get it and don't forget more NZers turned in to welfare beneficiaries and more government control over your lives. 9. What can I do ? Answer; What do you think ?10. Really, what can I do ? Answer; Vote for your kids future, for a NZ of opportunity and individual freedom,
Almost broke
My $20 a week for Kiwi saver is already going to my $28 a week mortgage rate increase from the last hike. Great thinking guys. $14 Million is paid to our beneficiaries each day, Kiss my vote goodbye.
Paul
How are we going to save the money with this crazy growing mortage rate and inflation?
Murray
Ho ho ho. Its hard not to laugh. All those greedy people who fell for this Government's non productivity expenditure in order to buy your votes are now watching your chickens come home to roost. Problem is, its not only you, its the genuine hardworking ones just starting out that suffer as well. Those of us who were too smart to fall for it all are relatively ok, as the increases benefit us by giving a better return on our savings and investments as they are used to fulfil your greed. Never mind there is light at the end of the tunnel for all of us. In just over a year we should all have the absolute pleasure of seeing Heather, Sue and Jeanette along with their spokespersons Helen and Michael consigned to political oblivion. God knows what mess National will be left with though.
Albert
RB and the govt must decide what they want - a booming economy or a blooming economy. Don't bet house prices are about to crash. Most of the Kiwis leaving the shore are in the working class, and they are being replaced by migrants from countries where properties are more expensive than Auckland's. Pls don't blame migrants, the govt encouraged immigration but haven't got the hindsight to cater to the extra need for housing and infrastructure, and now they need even more migrants to replace the thousands of lost Kiwis each year. The raising OCR will not necessarily send house prices crashing down, it simply put house ownership beyond the reach of hardworking Kiwis. Think about that. Say, if just tweeking the OCR is all Alan does, don't you think he's overpaid? Not much brains needed.
Neil(Auckland)
That 65" plasma screen is suddenly very attractive now. Thanks to the high interest rates, buying a house is out of question, so might as well spend on luxuries I can at least enjoy life with.
P in Nelson
I am amused that every government, Labour and National, always promise the same things...."more money in the pockets of everyday New Zealanders". The standard excuse for upping interest rates is overspending, so it seems that normal people are punished for the government achieving its goals.I dont agree with taxing one group heavier than the next, but i do think it is time that the people who implement these policies and hikes in interest rates, petrol prices etc, should take a wee cut themselves. Does Mr Bollard have a mortgage? Is he working out how much to pay each week so he still has enough for power? I doubt it. There is a gulf between rich and poor, but that is the world we live in and those that complain incessantly about it annoy me. I am not rich at all, I have a mortgage that is now going to cost me thousands more and i dont have answers...just questions. When will the government actually begin to answer some questions instead of just using the stop-gap measures that have been evident since I can remember.
Fixiechick
I think those Your Viewers who are supportive of the rate hike, and who state that property buyers are getting their just deserts for boring to buy should maybe take time out to read up on the subject of macroeconomics. Some here have good grasp and understand how our hefty interest rates are encouraging foreign investment due to their country's rates being half or lower than ours. And why wouldn't they? If I could borrow at 1-2 per cent and then move that cash to a country that is so dumb as to keep increasing rates every other month to well into the 8 per cent mark, how much would our foreign investor reap? Heaps So rock on interest rate hikes, increased cost of living, easily available credit, mortgagee sales due to kiwis lack of servicability due to low wages, high and many taxes, lack of power, water, food etc. Are we all so dumb as to not see the blackhole that Helen is taking our country to?
richb
So there's no inflationary impact from $67/barrel oil? This is also squeezing the Bank even though Bollard may not have mentioned it in his statement.
Huang (Waitakere)
Nothing wrong with farmers having plenty of cash to spend, as they deserved it because of their hard work and long hours. Face it---our manufacturing is struggling and going overseas, and we have to depend on agriculture to bring in export revenue. The culprit is labour govt handouts to help finance the unhealthy lifestyle and overspending of big extended families.
Ian
There seems to be a problem here. Rising property prices are driving inflation higher and making owning a house harder and harder for the average Kiwi. I know, I think I'll raise the OCR. Hmmm, that didn't seem to work - property prices are still rising above inflation and certainly above wage increases, I need to get control of this - I think I'll raise the OCR. Oh dear, property prices are still rising, let me see, I could try raisng the OCR. Np that didn't seem to work, property prices are still rising and borrowing is getting more and more out of control. I think I'll raise the OCR. It's funny but I thought that last raise would do it, but it just didn't seem to, so I think I'll raise the OCR. No, not working, but I've got another trick up my sleeve, I might try raising the OCR. Continue ad nauseum or until no-one can afford to live here.
Tony (Thames)
We have this problem because this government and politicians in general totally refuse to make the necessary tax changes to stop these imbalances in our economy. They could do any number of things including a capital gains tax and/or the mortgage tax that Cullen was talking about fairly recently. Because the media and the economists lead the public into thinking that because a change seems politically damaging that it just can't hap