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Economic Weekly: Knockin’ on housing’s door

After a period of gazing at overseas events, the focus for this week is more firmly back onshore with Wednesday bringing another dairy auction, the RBNZ’s Financial Stability Report (FSR), and labour market data.

Dairy prices should prove resilient enough to support $7.50+ farmgate milk prices for this season and next.  Local production is faring well heading into autumn, and in time it will be interesting enough to see how this late flush counterbalances the continued strong buying interest from China.

The FSR is going to bring the attention back onto NZ’s housepocalypsearmageddon.  The November FSR was released when the housing market was evidently heating up over and above a post-lockdown rebound and the Finance Minister had just written to the RBNZ Governor suggesting that monetary policy decisions take into account house prices. 

Since then, the action has only heated up in the market and in the Government’s responses.  The Government has tweaked the RBNZ’s Monetary Policy Remit so the Monetary Policy Committee needs to assess the impacts of monetary policy decisions on the Government’s housing policies (namely discourage investors from buying pre-existing homes).  The RBNZ also needs to have regard to house price sustainability with its financial stability decisions.  Finance Minister Robertson has also announced that he will establish a new framework for deciding what type of lending the RBNZ is permitted to restrict.  Until now, there has been no formal oversight of what tools the RBNZ can use other than the RBNZ Governor and Finance Minister signing a Memorandum of Understanding over what lending restrictions the RBNZ would employ.  The devil will be in the details of how prescriptive this process will be and whether there are any tensions between what types of lending the Government would like to see restricted (and what not) relative to the RBNZ’s assessment of where it sees the financial stability risks as being greatest.

And of course, when it comes to assessing the risks, the housing outlook is up in the air in the wake of the Government’s tax changes to discourage residential property investors.  Accountant: put my tax deduction in the ground, I can’t use it anymore.  We’d expect the RBNZ to still be unsure about the impacts on house prices and financial stability.  The changes are likely to sound the death knell for continued unbridled capital gains and further stretch in house prices relative to incomes and rents.  But there is also the risk that the tax changes are a little too effective, so the RBNZ want to take the time to see what happens – and has no new tools to use yet anyway.

To round out a busy Wednesday morning, the labour data for the March quarter will be out.  The influences on employment and wages are a curious mix of flat activity, slow population growth, emerging skill shortages yet regional pockets suffering from the lack of international tourists.  We expect flat employment over the quarter yet a marginally lower unemployment rate, with annual wage growth likely to start building over the course of the year.

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Jane Turner

Senior Economist

Originally hailing from sunny Nelson, Jane moved to Auckland to join the ASB team in 2008.  As Senior Economist, Jane's main focus is co-ordinating the team’s macro-economic forecasts.  In this key role, Jane was thrilled by the team’s twice consecutive win of the Consensus Economics Forecast Accuracy award.   

During her decade-long career in economic forecasting, Jane has gained a thorough knowledge of the New Zealand economy.  Her current focus is on New Zealand GDP growth, including both manufacturing and the construction sectors.  She has spent time forecasting most sectors of the economy, including inflation, trade, housing, labour and financial markets.

Prior to joining ASB, Jane honed her macro-economic forecasting skills at the Reserve Bank of New Zealand.  Jane is a qualified scarfie, attending Otago University and graduating with a Bachelor of Commerce in Economics with 1st class honours.  In 2014, she took a career break from ASB to travel the world and learn to snowboard.

Mark Smith

Senior Economist

Mark joined ASB in 2017, with over 20 years of public and private sector experience working as an economist in New Zealand and the UK.

His resume includes lengthy stints at ANZ and the Reserve Bank of New Zealand, and he has also worked at the Bank of England, HM Treasury and the New Zealand Transport Agency. Mark's areas of specialisation include interest rate strategy, macro-economic analysis and urban economics.

Born and bred in the Waikato, Mark studied at Waikato University where he graduated with a Master of Social Sciences, majoring in Economics.

Mark's key strengths are the ability to use his extensive experience, inquisitive nature, analytical ability, creativity and pragmatism to dig a little deeper and to deliver common sense solutions to tackle complex problems.

When not at work Mark likes to travel, keep fit and spend time with his friends and family.

Mike Jones

Senior Economist

Mike joined ASB in 2019 armed with almost 15 years of experience in applied macroeconomic and financial markets analysis.

Mike's career has been all about distilling the risks and opportunities of economic and financial market trends for business. Basically asking the "what does it all mean" question. Mike's enthusiasm and skill for drawing out practical, commercial insights from the murky world of economics has been honed over a relatively broad base of experience.

After spending the early part of his career on the tools at the Reserve Banks of both NZ and Australia, Mike had a lengthy stint at BNZ where he was NZ’s top-ranked currency strategist. His regular and topical macro research also saw him pick up several FX forecast accuracy gongs from Bloomberg.

Drawn in by the prospect of putting strategy into practice, Mike moved from Wellington to Auckland in 2013 to join Fonterra as GM Treasury Risk Management. In this role, Mike lead Fonterra’s macroeconomic research output, and was responsible for the strategy and execution of Fonterra’s foreign exchange, debt, and interest rate hedging programmes.

mike.jones@asb.co.nz