hi jamie - basically because of the lag time to effect markets.
So, consider this. 80% of property in this country (nz) is financed by fixed rate products which the reserve has no control over - this is unlike any of the countries you mentioned. So in order to influence the property market they could either go fiscal and try the direct taxation method or use rates as the tool knowing they would only effect the cost of housing finance in 20% of the market.
Bollard was widely criticised for the last two rises in the current round as most economist were saying that the job had been done but that is the nature of these things. It's not just about numbers but also about trying to change spending habits through having a tough position.
However, money flooding into the country chasing high rate products(particularly from japan) put ridiculouse pressure on the NZD and it was trading at around 95 ozzie cents. This is crazy as the 20 year average is about 80 cents. Currency now is heading back to trent levels which is making most people happy but there we are again with the BOP situation again.
This week bollard is saying there will definitely be no rate decreases this year which probably means rates falls by around august/september. By definition two quarters of negative growth is (I knew that degree would come in useful some day) a recession so will be interesting to see what the numbers come back at - won't be hard to reverse a 0.01% number given this quarters numbers will be of the back of a lower dollar
But that does not fix the spending problem as was the case in oz many households are rich in equity and using home equity products and the like to finance consumer spending - such is human nature. We spend when we feel rich not when we are rich. Same happens i my household. Currently we can't get enough x boxes and consumer products.
Unlike the US gov't who has managed to keep oil prices down for ther own consumers (even though at war) the rest of the world are price takers rather than price makers.
So in nz at the moment fuel is 155 and 159 for premium. That is almost $2 aussie or close to it.
So in laymans terms we need to get more goods out of the country - which should be easier as the NZD is returning to trend - and globally money markets are chasing the USD off the back of expected rate rises in that country. Both AUD and NZD are usually traded on blocks of currency as a "position" in this region so trends show that AUD and NZD should float lower against the green back for the next couple of months.
The only thing that really stops spending is consumer confidence levels which are realy a "vibe" and the other big one is having no money. In the region I live in employment is growing at 8 times the national average mainly in manufacturing and services which i notice got a mention in the article.
How does it effect the property market - same as in oZ. As soon as disposable household incomes fall and people stop feeling rich they stop investing in property as a trend. People trade property a bit more here than in oz as there are virtually no entry and exit cost so you can take a small gain or wear a loss and move on to the next investment vehicle whether is be property of another asset class. I hear anecdotally off a guy who trades property regularly that there is alot if "pain" in the owner occupier market for families with mortgages over 800k. Nice homes I bet but that is alot of debt to service on a wage. Prices are still trending up in cities. It is a bit like Perth V sydney if you know what you are doing. I am doing quite a bit of buying for myself right know dealing with private sellers. I never thought I would say this but bring back the agents. It is some much harder work to negotiate a deal with individuals who my not understand some aspects of it or who are emotionally involved. I suppose that's my fault partly for not having the right patience level but you can only spend so much time and then you have got to move on to the next.
What is that they say about the deal of a lifetime comming along every week! It is pretty much true I reckon. Some aussie are still paying asking price and buying properties over the phone and net. That's fine but I could not sleep at night if I had paid asking price for anything - its just my nature - there has got to be some fat in ever deal.
Got a bit of track there but I hope tht helps you understand a little bit more or how it all works.
Sorry about the typos - after rambling on like that I could not get motivated to go back and fix them up
regards
Don
