Face to Face with Bernard Hickey: Has the Reserve Bank got the right target?

Gareth MorganEconomics3 Comments

Face to Face with Bernard Hickey: Has the Reserve Bank got the right target? was last modified: October 28th, 2016 by Gareth Morgan
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Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.

3 Comments on “Face to Face with Bernard Hickey: Has the Reserve Bank got the right target?”

  1. The OCR if it drops wont be passed on by banks so what then?

    We also dont take into account the massive house price inflation in our cpi calculations which seems bizarre. This has led us to the lowest interest rates in modern NZ history and the highest private debt. We are borrowing more to purchase the same houses. This debt is going to be the biggest drag on our economy in the medium to long term. The levels of GDP to mortgage debt here are higher than the US preceding the GFC.

    Even if we dont see the house price collapse that the US and other countries experienced our economy will die with rising interest rates.

    I think the lowering of interest rates that has fueled the housing boom and youd think spending to some degree is a disaster. Perhaps were one cycle behind the rest of the world and next bust will be 30% wiped off our house prices. I wonder if the peeps at the RB have thought of this scenario and its crushing consequences!!!!

  2. When low interest rates first came into the news, I heard discussion hinting that the 1-3% inflation target is really the built in circulation incentive. Sounds crazy to me that we want any inflation at all. Zero should be the goal but because of the structure of the whole set up, interest rates are the only tool, both as a circulation incentive and as a tool for adjusting inflation. Can’t have two different goals, they don’t work together.

    As for negative interest rates, which must be round the corner surely, see the article by Nicole Foss for a review of what is happening round the world and the consequences. https://www.theautomaticearth.com/2016/09/negative-interest-rates-and-the-war-on-cash-1/

  3. I remember reading about Alan Greenspan of the American Reserve Bank, and how one of his criteria for setting interest rates was to look at the employment figures. At one time when employment had picked up, but there was no inflation in how it was measured, he considered raising interest rates to keep a larger pool of the unemployed.

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