Analysis by BNZ Economist Tony Alexander.
This week we note that if booming retail spending and
employment growth are not causing the rate of inflation to rise then trying to encourage people to borrow more and spend more via lower interest rates probably won’t help the RB reach its goal of inflation back near 2%. Yet two more interest rate cuts remain likely in November and February.
We also list official Statistics NZ projections of population growth for each NZ region and local authority area. This is so all those people looking at investing in regional housing markets do so with full awareness of how local population pressures are likely to develop. For your guide, in some locations in the media recently with people buying very low priced properties the projections are for rapidly declining populations. Be careful when you leave the bright city lights.
Trying To Boost Inflation
The Reserve Bank are cutting interest rates in the hope that this will stimulate people to borrow more money and spend it or to save less and spend it, and that this will cause inflationary pressures which will get the annual inflation rate back above 1%. They are failing (along with almost all central banks these days) and we got good insight into this failure last Friday when the Retail Trade Survey numbers appeared.
They showed that during the June quarter inflation and seasonally adjusted spending rose by a massive 2.6%. Growth from a year before was 6.4% and for the entire year 5%.