KEY POINTS:
Here is an earlier selection of Your Views:
Rob Burd
The Reserve Bank is guessing (and has no control), the Labour Government is guessing (and only wants to control us), they're blaming the people that make up this country but telling us they know better. What's going on? Stop letting our country be sold to the rest of the world, stop being so ignorant as you sit in your individual luxury. You're going to give this country away and your children's children are going to miss out. Simple.
Mike
We are told that we now live in a sophisticated age, where information is detailed and freely available. Will someone please tell the Reserve Bank? There must be better ways to achieve the objective of controlling inflation than using the tired old "blunt instrument" of increasing interest rates.
Jonesy
A pity Mr Bollard wasn't still a young married man, trying to support a family and pay an ever increasing mortgage. I am in the fortunate position of being free hold, but I hate watching as my children struggle to be in the position we managed to achieve without too much difficulty. For the younger generation it is increasingly difficult. The interest increases only have the government and banks in mind ,more money for them and less for those younger people who we will be relying on in the not to distant future for the support of our once thriving country.No wonder they all head over the Tasman. Good on them.
Chris
Mr Bollard us hard working people dont have the cash to spend that you are talking about. We are doing it tough! But for you who earns as much as you do you probably dont have a mortgage anyway so what do you care if honest hard working people suffer. We will soon be a society of poor or rich and that will be thanks to you and the Labour government.So will thank you for destroying what hard working people are trying to accomplish a home that we can raise our families in.
Mortgagee, Auckland
Isn't it lovely that the government has turned their hand to helping so many people into their own homes. Pity though, that with their other hand they are punishing those who have already struggled - without government assistance - into a home already. Sadly I fall into the gray area. I earn too much for any kind of assistance, but don't earn enough to cover my ass when the government plays these kind of games. I think myself extremely lucky that I have a fixed rate until next year. Like many others I guess, I have spent the last 24 hours since the announcement calculating what my repayments will be if it does not drop before it is due for renewing. Simply put, I will no longer be able to afford the home that I struggled to buy. Back to renting I suppose. Thanks so much Labour. It is really nice to see you are rewarding those people who doesn't ask for handouts, go to work everyday, pay thousands and thousands each year in tax, and fill your coffers just a little more by (god forbid) driving. Roll on 2008 - Helen will be out of there so fast her sensible shoes will be smoking.
Ian (Auckland)
It's a bit "rich" for Roger Douglas to point the finger of blame at this government when referring to the current interest rate / exchange rate spiral, when it is his creation and baby, the Reserve Bank Act that is causing the current interest rate rises and consequently the high exchange rates spiral at the moment. Douglas's Act worked OK in the 80's and 90's when the economy wasn't booming, under stagnant center right governments. But since 2000 when overseas commodity prices and the demand for NZ products overseas have risen, helped along by events like the BSE crises in America and others. And more recently the huge pay out increase the dairy farmers will receive in their payouts this year. We should be celebrating our farmers income increases not cringing and worrying about its effects on interest rates, there's something very wrong here. I really do feel that at the very least the Reserve Bank Act should be amended to allow for the changing economic environment, because for anything to grow and improve it must change otherwise, in this instance, it will cause huge damage to the economic future of this wonderful country of ours. We must embrace change, change for the good and ride it. So pull your head in Douglas, your act is what is causing all this damage now, not government spending that is absolutely necessary to "catch up" on two decades of underspending on infrastructure in NZ by previous governments, because if we don't spend now when the economy is buoyant, we won't have an infrastructure to sustain any future economic development here!
Critter Dan
One affect of the Bollard misstep will be on the least wealthy Kiwis and it is going to be hard. Many mortgage-holding Landlords will have to raise rents. Hard-working Kiwis won't be able to afford the increases. What will they do? Some will have to move back into more consolidated family units. Some landlords (especially some Mom and Pops who got into the business recently) will have to sell up - and since money is currently easy, they will on-sell to people who think that they just have to own a house now or maybe they won't ever be able to afford to. These people will overpay and overextend themselves. When this shell game implodes, and with all our interest payments to the foreign investors gone, credit will tighten, and many Kiwis will face bankruptcies - their retirement and home-owning dreams ending up in a nightmare.
Dougal (AKL)
I feel I need to make a second posting. I can see numerous Your Viewss scolding the 'complainers' here for being the architects of their own doom. Well that maybe true in some cases but certainly not all. Speaking for my family, we live a very frugal lifestyle, only purchase things by saving up, paying cash and bargaining hard to get a good discount - and only to replace something that has gone to the great appliance shed in the sky. I drive an 8 year boring and economical Toyota. We don't have a LCD, nor plasma TV, we have a standard TV that was given to us by a friend that was fed up with NZ and left for greener pastures. When grocery shopping we always choose the item on special regardless of it being our favoured product or not. We have channelled all our spare cash into our mortgage that was comparatively modest to begin with. We listened and followed the advice to pay off debt. But still we are facing the increasing pull of Aus. When one does the calculations, NZ looses on every front. This is hurting the people you need the most, the hard working battlers with ambition to get ahead.
Martin
Bollard is making the situation worse. The reason for the over-borrowing and over-investment in housing is largely because of the "easy money" policies of the banks due to the huge foreign inflows chasing guess what our high interest rates!A lot of this is from the retirement accounts of Japanese senior citizens (in Japan the available interest rates are not much above zero). Much of this is set up on an institutional basis. The NZ financial institutions have to lend these deposits to someone - so they make it easy for us Kiwis to borrow way beyond what we should. This "investment" though is not really "investing" in NZ, it is just chasing the highest interest rates available in any stable Western democracy, i.e. they are lending us money at high rates that they are then going to suck the proceeds of out of NZ. One day the bottom is going to drop out of this kind of check-kiting scheme and the average Kiwi is going to be left holding the bag.Raising the interest rates is just going to have more of those overseas monies pour into NZ even more and faster. This extra inflow of money will just heat everything up even more. This is the exact opposite of what we need. Bollard, and this government (and maybe National would be no better, or possibly worse) really don't care, because for the moment, the huge foreign inflows and the easy money keep everything seemingly strong, but one day the burden of paying the foreign pipers will come back to weigh on our shoulders like the last straw that broke the camel's back. We can't even imagine what that will look like.This government, and Bollard, need to be called out on this travesty.
Shrenik (Auckland)
Mr. Bollard should look at ways of controlling the credit available rather than increasing interest rates to reduced debt driven spending. If consistent increase of rates has not given the right results over the last 2 or so years, time to try out something else like controlling the flow of credit into the economy.
Aaron (Auckland)
'One trick ponie' springs to mind when I think Of Dr Bollard. He seems intent on increasing home lending rates in an attempt to cool the economy but at the same time is driving it further by making overseas investment more attract and conversely imported goods cheaper and more attractive to people who at the same time are giving up their dream of owning an increasingly unattainable home and living a consumer life instead. In addition he is only fueling the contraction of wealth in the economy as people are forced to sell their homes due to unmanageable servicing costs, homes which will then be snapped up by the foreign and local investors to whom interests rates are just an excuse to write off more of their tax liabilities with negatively geared investments. And so the quarter acre dream becomes increasingly just that.
Meg Peek
It seems that at every turn, honest hard working New Zealanders are disadvantaged. Where is the incentive for people to get ahead and plan for future retirement? It seems to me that governments favour the disadvantaged, the criminals, the lazy.Why doesn't the government pull in its purse strings on its spending? The layers of bureaucracy become more layered and more worthless with each new crisis arising from the deeds of the irresponsible in our society. Bureaucracy supports and feeds into society's underbelly - undoubtedly for the huge vote it gets from this group of people.We are fast moving away from democracy into a socially engineered society which does not support enterprising New Zealanders.When is enough enough?
Les
What he is doing is really crazy he will slow things down so much there will be a large rise in unemployment and more people on benefits which always hits us who are called the middle class and are the one's who work our hard to just make ends meet
Bruce
Bollard is right when he says it's not the Reserve Banks fault that interest rates are being put up again. The tragedy for NZ is that as a country we're not allowed to grow. We are punished based on property activity within the economy. It's very disappointing especially when Australia continues to grow beyond there own expectations. Inflation across the ditch is not the be and end all. I blame successive governments who between have little vision and even less nous in grappling with economic management. People talk about imposing capital gains taxes to discourage property investment (and it is seen as politically damaging for anyone contemplating that line of action) yet no-one considers removing the tax on investment gains. Do that and perhaps investment diversity and savings will become a reality in this country.
Paul H
There is a price for blind optimism. If you didn't believe this would happen despite all the signs, and you chose to listen to real estate agents instead of economists for the last three years then you are either stupid or greedy. If it's the latter then it serves you right, and I look forward to purchasing your investment property when it falls to a price that I can afford.
kiwiwik
They say that stupidity is repeating the same thing you did before and expecting a different result, well it looks like Bollard fits right into this catagory. Surely it must be apparent that just raising the interest rates is now working, I mean, how can it work when Government spending makes up 40 per cent plus of the economy and the Government is just handing out spending money with its working for families package. All raising the OCR does is penalise the small business people who don't have the leverage to borrow their finance at internationally competitive rates, penalise the export sector, and penalise the home owners, but it sure makes buying overseas produced goods a whole lot more affordable. There must be other tools that will work, how about being really radical and dropping the OCR rate significantly so that money flows out of the country causing interest rates to go down, mortgage money being harder to find because there is not as much money freely available, the costs of imports to rise significantly making that new 52" Plasma TV not that affordable anymore, export returns to rise significantly so those that are exporting are able to run profitable businesses and employ more NZ'ers, stop the Government giving spending money to those at the upper levels of the working for families packages as they don't really need it but of course wont turn it down (would you?), and put in place capital gains for those who own more than one house. It might just work?
Disgusted
I reckon we have one of the worst governor for Reserve Bank. From 2004 he has increased the OCR and every time he made a statement saying that the Inflation will be curtailed and house prices will cool down. However, the reality is the opposite.... I reckon he either needs to resign or go back to school and learn economics. His policy has already ruined the country and by 2008 we will see one of the worst years for New Zealand Economy.And the joke is that this Govenrment has re-appointed him for another 5 year term. Labour needs to be kicked out early as possible.God save this Country.
Victor (Auckland)
I am really dissapointed with the Reserve Bank's Governor to increase the Interest Rate again by another 0.25 per cent. Workers like me will never be able to raise a mortgage now as it beyond our reach. It is getting very expensive every day to leave in NZ now. Rich are getting richer and poor workers are getting poor and struggling to survive.Reserve Bank should advise Labour government to cut down unnecessary spending of millions on road & Hilton Prison.To buy a decent 3 bedroom house (Brick & Tile) in Auckland will cost you nothing less than $500,000 now so how can ordinary NZ people afford it. It is the rich Asians who can afford to buy here. I understand there are several property owners who own more than 3-5 properties each and getting excellent rental income. The Government should introduce some new tax (Capital gain tax) to tax these people who are making millions in property sales every year.Reserve Bank should also advise Banks & Finance Coy to cut down lending on Unsecured basis on Credit cards and purchase Motor vehicles. Finance in NZ is very easily avaliable to any Tom, Dick & Harry which has seen a few finance companies crash in last 2 years. Inland Revenue Department should be making more regular audits of business and individuals who do not declare all their Income. eg. Vendors selling at Flea Markets on Saturdays & Sundays who earn in excess of $100k pa (based on minimum sales of $2000-00pw) in tax free income who own several motor vehicles & more than 1 house and we poor workers get tax deducted at source and pay high GST of 12.5 per cent on every purchase. Rental & Transport cost mainly the fuel prices is the biggest burden for a average worker and we find it difficult to survive in NZ at present time.I hope Labour Govt, IRD and Reserve bank all get together and find further ways of reducing inflation, collecting maximum revenue from GST and tax from Tax evaders/dodgers and control Credit card debts increasing with the Banks and introducing Capital Gains Tax and also limiting Foreigners to own maximum 1 property for their own living or Investment.The way NZ is heading I can easily see there will be lot of first home owners properties going on Mortgagee sale and lot of workers migrating to Australia and England soon. God bless NZ and its people.
Jonesie
Don't worry folks, the economy is in such a mess, within ten years it will collapse and there won't be anything for mortgage owners to concern themselves about. Apart from disease, starvation, war, pestulance, energy, drought, violence, corrupt politicians, no oil and more tax. Cheer up NZ, have fun while you can, it's never too late.
William
My grandfather canme to Australia from NZ in 1910; I guess he was ahead of his time. Reading the views of readers in respect of your recent budget and now the increase in your interest rates I find it increasingly depressing that many of you view your ability to just get up and move to Australia, as a "safety net". What sort of people are you? Things get a bit difficult and you pack up and move. Why don't you buckle down a try and change the system? Is rugby all you are passionate about? Don't migrate here. Stay in NZ and change the things you dislike through the ballot box. We've had enough of people who want the best Australia has to offer while waxing lyrical about how much they love New Zealand.
Graeme (Auckland)
Why do governments think the best way to curb spending is to blindly raise interest rates? Does Mr Cullen want us all to sell our houses and start renting? Does he only want the rich to be able to afford to buy a house? Perhaps he would rather we all moved to Europe or Australia. Maybe we should just keep on paying high taxes for no return and carry on crippling ourselves to pay our mortgages? It doesn't matter though because high house prices and high interest rates coupled with a high currency will equal disaster. Then we're all left with low house values and high mortgages with no extra money to save or invest. Ten years later it all starts again. Raise GST on Luxury items, remove it on essentials (Power, Water, basic food items etc), remove the lower brackets on income tax and raise the higher brackets. Give us our money back it's not as if you're doing anything sensible with it anyway.
Sami, New Migrant in Akl
I am a new migrant living in Auckland. I fully support Dr.Bollard when he raises interest rates. It helps the $ raise aganist my home currency. I send all my money home and the higher the exchange rate the better it is for my savings back home. I fully support Dr.Bollard and Dr.Cullen. I am looking forward to another raise!! Roll those raises all at once!!
Worried (Auckland)
Well the next two funerals that Helen Clark attends will be for the NZ economy and hopefully the voting out of power of the Labour government. We now need some words of wisdom from Michael Cullen on how the average NZer can put 4 per cent of their gross salary away in Kiwisaver, pay the additional 3 per cent that has been added on to mortgage interest rates and the 8 per cent plus increases in local body rates, water rates and petrol taxes? Maybe the answer is that we all apply for a benefit called working for families so that every family in NZ can be benefit dependant.
Tua
I wonder how long it's going to take Bollard to realise that raising the OCR is not working and is not the end-all-and-be-all in regards to curbing Kiwi' spending. This is only part of the answer to dettering people from excessive spending. The more critical issue is the availability and easy access of funds/credit/loans. It doesn't matter how high the interest rates are if funds/ credit/ loans are readily available then people will continue to borrow and worry about or in a lot of cases not worry about the consequences later. Lenders need to take some responsibility and raise the debt to asset ratios so people don't overextend themselves when they clearly cannot afford it.
LabourLetsBends
I am not sure why everyone is airing their frustrations about Labour on Your Views? Haven't they realised the vast majority of labour voters cannot read?
Pat Duignan
Surely it is not too hard to understand. Inflation damages enterprise and productivity. Prices rise because money supply is growing too fast (faster than real economic growth in simple terms). To slow monetary growth we need to slow borrowing growth which requires interest rates to increase. It is childish to get angry at the Reserve Bank for acting on this obvious point. Michael Barnett simply shows ignorance by attacking the Governor of the Reserve Bank.
Hansie
Homeowners complaining about increased payments on there mortgage so not have a foot to stand on and complain. Are you really surprised your mortgage payments are more expensive - you cant say DR Bollard didnt warn you. He has been saying for years Don't borrow heavily for housing. But you didn't listen, now whose fault is that.
William
Good things that come with interest rate hikes. Shopping and more shopping. I'm about to go for a holiday overseas and apple iphone is just around the corner. Sweet.
Eddie, Auckland
It's quite obvious that Bollard hasn't got a clue as to what drives the "average" NZ'er and therefore the economy. Interest rate rises are the most inflationary events in the economy, pushing up our dollar (that only favours speculators),causing pressure on wage demands to compensate, thus increasing manufacturing cost structures as well as impeding exports and fuellling the housing market to recoup the extra paid to service mortgages. Wake him up or give him the boot like they did with Brash either of them proved to be totally inept in every facet of their professional and political careers.
YJames
This time OCR rise seems a bit unexpected. But I don't think Mr Bollard did something wrong. It is always a hard decision when adjusting OCR to boost/cool down economy. Raising OCR could further simulate already overvalued NZD, widen trade deficit more, and benefit offshore speculators. But economic rules tell us tightening monitory policy such as raising OCR is an effective way to reduce domestic demand and consumption, rising mortgage rate to control booming real-estate market and so on inflation. Further, temporary strong dollars could implicate future currency depreciation due to increasing import and risk premium. I would like to say we cant simply justify and criticise OCR instrument is effective or not since this is a trade-off vehicle. Its overall effects need to be shown from a relatively longer horizon.
Paul Tudor
Good on you Mr Bollard! Maybe this will help reduce the number of newly purchased 4WDs on the roads.
Rick, Albany
Once again the Government continues to uphold the lie that spending is causing inflation and somehow the OCR fights it. With NZ M3 money supply increased by per cent12.8 over the last year inflation is very real and very frightening yet the perpetrate the lie that inflation is caused by spending while they are busy pumping millions of fiat/counterfiet dollars into the market.The OCR is all about using greed to prop up the dollar. Better to make people suffer than risk a collapse of the dollar due to greedy governments and banks.The ignorance of basic economic understanding is even more terrifying. God help us all because our Government won't. They are too bound now by the revenue stream created by monetary inflation.
Robert Leivers
Economically, the rate rise is only going to damage NZ exports still further and if you seriously believe that International Student incomes are suffering for this reason, then you've a very hard time ahead.From an inward migration viewpoint, Mr.Cullen's latest very uncertain welcome package for new investors (and skilled migrants) is likely to be negated by higher mortgage costs on arrival,higher cost homes and other products due to the lower buying power of the Kiwi$, and in all, a greater deterrent to those wanting to invest in NZ. Australia looks increasingly attractive. Would you invest $20m.in a currency so expensive with every prospect of an imminent crash to earth when carry traders eventually lose their nerve ? You do have to look very seriously at an alternative to the OCR such as a variable rate levy on mortgages - not pleasant I know, but clearly the OCR isn't working except for damaging the export economy.The mortgage levy charge could perhaps be offset by an equivalent credit(refund) for increased savings.The inevitable danger of a mortgage levy is sadly that Govts.enjoy the extra benefit and fail to remove it when it is no longer needed - but worth looking at./
Soon 2B ex Kiwi homeowner
What better time to sell up and get out. A sky-high dollar will buy more than after it crashes. And with stupidly high house prices... What a start in a developed nation. Avoid the tax, the crime, nanny Helen&.Go to countries with doctors, business futures, and secure living.I am arranging it all now. A bright future .
Jerry Flay
Alan Bollard is clearly clueless - his interest rate strategy is failing to impact on spending, sending our currency through the roof, thus killing exports, and potentially killing our housing market. At a time when I am trying to sell a house, and maintain a living from my exporting business this is most inconsiderate.
Preyesh (Akld)
Love it. Bollard delivered the most beautiful gift to NZ and NZders today by lifting rates to 8.00 per cent. Though he could have been a bit more hawkish in his tone. Maybe now NZ consumers and investors alike will take note and start to save a bit more and diversify their assets outside of property. We are a nation of sheep. and when it comes to investments.......we are no different. We follow the herd. property this, property that. We really do need to sharpen up. Maybe 8.00 per cent cash rate could help us learn to help ourselves and the long run sustainable growth rate for our country.
Ian Morine
The Reserve Bank Act is really the cause of this problem. There is far too much emphasis on inflation these days, which is killing exports and has killed growth in the economy for the past six or seven years. Neither of the main parties will abolish or change that Act, there lies the real problem. Until that happens nothing will change as New Zealanders continue to spend spend spend with the high Kiwi dollar meaning cheaper imported goods and rising house prices making owners "feel" wealthy.It is truly unbelievable that Bollard, who has all the Business Degrees, still continues to raise interest rates.
David(Manurewa)
The definition of inflation, the beast dr bollard is fighting, is 'too much money chasing too few goods' and its manifests itself by rising prices of goods and services and more recently assets as in houses.One must ask the reserve banks of the world, including New Zealand, why they are printing so much money. One gauge of this is M3, this has been growing in high single digits to double digits according to The Economist magazine. Its seems bizzare, that one hand- interest rates are increasing but on the other, they are printing money as if it was confetti.Central banker should have the equivalent of the AA, for the over indulgence in money printing.
Max (Queenstown)
Can't believe that Bollard has done this again - More tax for those who 'don't have'. What about taxing the half million $$ plus holiday homes sitting on the Coromandel etc? Whats really pushing the house prices higher is the fact that there is no tax on you gain. Surely this is a good time to bring in a robust Capital Gains Tax on all but the family home? Or will this cause too much of an NZ middle class uproar?
Bobster
Government spending has gone exponential, but they use our tax so well, no wastage at all
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