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New Zealand plunges into recessionary spiral

macrobusiness.com.au

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Re: New Zealand plunges into recessionary spiral

#71

Post by idiotsecant »

coliveira wrote: post #48
matteotom wrote: post #38

Earlier quoted context omitted.

The Fed is designed to be independent from the whims of any individual politician, but it still exists due to an act of congress, and could be changed at any time by congress passing a law and the president signing it. And if that can't/doesn't happen, it's because _congress_ doesn't represent the people of the United States.

> if that can't/doesn't happen, it's because _congress_ doesn't represent the people of the United States. You're just saying the same thing with different words. If the Fed or the congress doesn't represent the people it doesn't make any difference to the elite class, who indeed own these two entities.

The distinction is significant though, there mechanisms to limit the fed's power if it's necessary, even if those levers and dials are not being currently used.

Re: New Zealand plunges into recessionary spiral

#72

Post by Negitivefrags »

mdasen wrote: post #65
robocat wrote: post #43

Earlier quoted context omitted.

In New Zealand, all mortgages are approximately at a floating interest rate. You can lock in a rate for up to 5 years (with the majority choosing 1 or 2 years), but after that “fixed” period completes, you now renew your interest rate at whatever the current market is. Most mortgages are signed up for a term of decades (mine is 30 years, and I signed up at age 50), so although you might use “fixed” rates for a few ye…

Silly question, but how do you budget given floating interest rates? Let's say that you buy an $800,000 place at 3% interest with a 20% down-payment ($640,000 borrowed). Your payments are $2,698/mo. Fast-forward a couple years and you're now at 7.3% and your payments are up to $4,388/mo. That's a 63% increase in your housing budget. That's an extra $20,280/year in housing costs. Yes, rent can increase crazy amounts w…

Yes. This is how you get wrecked in the housing market. This is because buying a house is taking a risk. The question is just who is taking it.

In 2008 my mother had her equity completely wiped out due to the exact situation you describe. Underwater mortgage, unable to afford the interest, forced to sell at a loss, zero net worth at the end after paying off all her debt.

On the other hand, we didn't suffer the 2008 banking crisis and overall the economy was basically fine with only a minor recession, mostly due to worldwide conditions.

Re: New Zealand plunges into recessionary spiral

#73

Post by tmnvix »

potatochup wrote: post #14
lostlogin wrote: post #9

Earlier quoted context omitted.

If you skim headlines it's much as you say. Interest rates rising (but still around historic averages), falling house prices and high inflation. https://www.rnz.co.nz/topics/business-economy

> falling house prices Good?

Overall, yes, very.

For some not so much. Talking with my landlord the other week, they said that they regretted not selling the house last year when they moved. It's lost 15k every week this year on average (according to homes.co.nz estimates). That's almost 30%.

For people like me, it's a good thing. Interest rates are higher, sure, but a smaller deposit is needed and for most people I know that have been looking to buy it's the raising of the deposit that has been the biggest hurdle.

Re: New Zealand plunges into recessionary spiral

#74

Post by shakna »

lostlogin wrote: post #12
hn_throwaway_99 wrote: post #7

One clarification if you're not familiar with New Zealand banking. The article states: > Last week, Bank of New Zealand warned that “things could well and truly turn to custard” as the global economy is plunged into recession. I read that and thought "Holy hell, central bankers in the US are usually extremely measured in their comments, they would never say something like 'things could well and truly turn to custard'…

> Bank of New Zealand And here is the funny bit, it's Australian owned. If it's anything like the rest of the market which is dominated by Australian banks, it'll pay some old kiwiana type music when you are on hold and say 'Kia Ora' or similar at regular intervals. Kiwi as.

Similarly, the Commonwealth Bank of Australia sounds like a government bank, and in fact even began as one, but is actually privitised. They also happen to be the sole owners for New Zealand's ASB - So that one is also Australian!

Re: New Zealand plunges into recessionary spiral

#75

Post by SturgeonsLaw »

jamesvnz wrote: post #3

That's a rather sensationalist headline. Written by an Australian looking at graphs, rather than having a feel for what's going on. I'm sure he's a capable economist, but based on what I see, New Zealand is not "plunging". There's definitely a slow down - but I think most businesses are expecting a relatively soft landing. I guess time will tell.

Macrobusiness is the Zero Hedge of Australia. They are permabears, often with a reasonable financial case for the claims they're making, but they definitely start from the premise that the sky is falling, then look for data that corroborates that perspective.

Re: New Zealand plunges into recessionary spiral

#76

Post by nobody9999 »

matteotom wrote: post #38
yonaguska wrote: post #22

Earlier quoted context omitted.

Let's be clear, the federal reserve does not belong to the USA, and is not beholden to any direct representation to the people of the United States. I'm not familiar with how the Reserve Bank of New Zealand operates, but if it's anything like our federal reserve, the country belongs to the bank, and not the other way around.

The Fed is designed to be independent from the whims of any individual politician, but it still exists due to an act of congress, and could be changed at any time by congress passing a law and the president signing it. And if that can't/doesn't happen, it's because _congress_ doesn't represent the people of the United States.

Edit: As was pointed out, I didn't read the comment I replied to in the best light.

As such, I'm deleting the original text, since I can't delete this comment any more.

My apologies.

Re: New Zealand plunges into recessionary spiral

#77

Post by thecoppinger »

lostlogin wrote: post #12
hn_throwaway_99 wrote: post #7

One clarification if you're not familiar with New Zealand banking. The article states: > Last week, Bank of New Zealand warned that “things could well and truly turn to custard” as the global economy is plunged into recession. I read that and thought "Holy hell, central bankers in the US are usually extremely measured in their comments, they would never say something like 'things could well and truly turn to custard'…

> Bank of New Zealand And here is the funny bit, it's Australian owned. If it's anything like the rest of the market which is dominated by Australian banks, it'll pay some old kiwiana type music when you are on hold and say 'Kia Ora' or similar at regular intervals. Kiwi as.

If I had a dollar for every time I’ve had to listen to Six60 while on hold, I’d be rich enough to start a bank.

Re: New Zealand plunges into recessionary spiral

#78

Post by damiankennedy »

It doesn't feel like a recession but something is wrong. Our "go hard, go early" approach to covid meant we avoided a lot of tragedy but the govt printed that money. Now we're having an inflation shock leading to an interest rate shock. The shrinkflation is insidious when the packaging hasn't changed. The thing is, unemployment is so low, it's like the whole country is running to stand still.

Re: New Zealand plunges into recessionary spiral

#79

Post by subarctic »

mig39 wrote: post #52
exhilaration wrote: post #35

Earlier quoted context omitted.

I've read comments on Hacker News that adjustable rate mortgages are the rule rather than the exception in many countries (outside of the U.S.). Here's a comment saying that Canada ONLY does ARMs https://news.ycombinator.com/item?id=15185052 and another comment saying that they're very common in some European countries: https://news.ycombinator.com/item?id=30339845 . I'm guessing this is how it is in New Zealand.

Canada does both adjustable-rate and fixed-rate mortgages. Just that we tend to do it for shorter periods. Typically 5 or 10 years. I have two fixed-rate mortgages with really low rates. They won't come up for renewal until 4 years from now. Then I'll have to choose whether to do another 5 years with the current rate, or convert over to an adjustable rate.

Canada doesn't have the concept of fixed-rate mortgages like in the US though, which is where the rate is fixed for the entire life of the mortgage. What you are describing is an adjustable-rate mortgage with an initial 5 year fixed-rate term, which in the US would be called a 5/1 ARM.

Re: New Zealand plunges into recessionary spiral

#80

Post by rufus_foreman »

mig39 wrote: post #52
exhilaration wrote: post #35

Earlier quoted context omitted.

I've read comments on Hacker News that adjustable rate mortgages are the rule rather than the exception in many countries (outside of the U.S.). Here's a comment saying that Canada ONLY does ARMs https://news.ycombinator.com/item?id=15185052 and another comment saying that they're very common in some European countries: https://news.ycombinator.com/item?id=30339845 . I'm guessing this is how it is in New Zealand.

Canada does both adjustable-rate and fixed-rate mortgages. Just that we tend to do it for shorter periods. Typically 5 or 10 years. I have two fixed-rate mortgages with really low rates. They won't come up for renewal until 4 years from now. Then I'll have to choose whether to do another 5 years with the current rate, or convert over to an adjustable rate.

In the US a mortgage with a rate that resets after 5 years would be considered an adjustable rate mortgage, although the rate would typically reset yearly after the initial 5 years (a 5/1 ARM).

A mortgage that ends after 5 years and needs to be renewed would be considered a balloon mortgage, and they are rare in the US. They are "non-qualified" mortgages which means the government sponsored entities won't buy them, so there is a limited secondary market and they have much higher rates.

I don't think I would sleep great at night knowing that every 5 years I would need to either get a new mortgage loan or lose my house.

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