More mortgage pain on the way, ACT official says
The Reserve Bank of New Zealand has slammed the government’s big spending and anti-immigration policies, promising more mortgage pain in its attempt to tame surging interest rates, ACT Leader David Seymour said.
Read more: Extra gov't spending won't have much effect on inflation – ASB
In a media release, RBNZ said “the committee agreed it remains appropriate to continue to tighten monetary conditions at pace” and that the central bank “is going to carry on 50-point increases for the foreseeable future.” It also noted that in New Zealand, “the level of domestic spending has remained resilient to date, in the face of slowing global growth and higher domestic interest rates.”
“In other words, Grant Robertson has carried on spending like a drunken sailor, so putting up mortgage rates with OCR increases like today’s has not helped tackle inflation yet,” Seymour said. “The bank goes on to point out what would-be employers up and down the country are telling ACT every day: ‘New Zealand’s productive capacity is still being constrained by labour shortages and wage pressures are heightened.’ This is why the government should follow ACT’s policy of streamlining overseas recruitment by skipping the Labour Market Test for accredited employers.”
Read next: Reserve Bank makes its next rate call
RBNZ also said “committee members agreed that monetary conditions needed to continue to tighten until they are confident there is sufficient restraint on spending to bring inflation back within its 1 to 3% per annum target range,” and that they remain “resolute in achieving the Monetary Policy Remit."
“It is taking heed of what US Federal Reserve Chair Jerome Powell said at Jackson Hole in August,” Seymour said. “They are going to keep on raising rates until people stop spending. After a decade of Modern Monetary Theory lunacy, orthodox monetary policy is back. For mortgagees, the message is clear. The Monetary Policy Committee is resolute in putting up your mortgage until inflation is back under 3%. Currently it’s 7.3% and the falling New Zealand dollar effectively imports inflation, making things even harder.
Seymour noted that New Zealand mortgage rates are now over 1.5 points higher than Australian rates. And with Australian inflation lower and the Reserve Bank of Australia recently taking its foot off the interest rate pedal, “the mortgage gap is another advantage Australia has to offer New Zealanders with itchy feet,” he said.
“If New Zealand is going to remain competitive, the government needs to stop spending so much, make Immigration New Zealand issue visas in a timely manner, and get out of the way of productive people generally,” Seymour said.
