YO U R I NVE STI N G
Going Up, Going Down Economist Cameron Bagrie takes a good, hard look at New Zealand and how we’re going as a nation.
Pop goes the balloon Success has now created a challenge: how to contain inflation. Throw together Covid, supply chain bottlenecks, money-printing, low interest rates and huge government stimulus, and something will pop.
Housing backs up House prices are down 4 per cent from their November 2021 peak and are likely to remain under continued pressure, given rises in interest rates and rising housing supply. Falling interest rates and looser monetary policy worked their magic lifting house prices. The effect cuts both ways. There are still pockets of resilience. Taranaki, Northland and Canterbury remain the better performers assessed by average across median sale price, days to sell, volumes, house price index, and sale to list price. Queenstown-Lakes district is another bucking the national trend.
Inflation is back, after being dormant for 30 years.
Close to a peak? Inflation has hit 6.9 per cent. Some are blaming offshore factors, but actually inflation is a combination of both offshore factors and an economy that is exceeding its available capacity to supply, which puts pressure on prices to rise. This is inflation that the Reserve Bank can and will influence, by lifting interest rates.
F-grade Headline inflation is high and two-year ahead inflation expectations sit at 3.3 per cent. That is a FAIL for the Reserve Bank, which has a 1 to 3 per cent policy band target. Having inflation outside the bank’s goal the odd year is OK, but not for this year and expectations of another two!
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