And with that, the OCR hike season comes to an end

Probably. The Reserve Bank stuck with its forecast of the OCR peaking at 5.5% but still managed to deliver shock and orr with its commentary

Mōrena and welcome to The Bulletin for Thursday, May 25 by Anna Rawhiti-Connell. Presented in partnership with Z Energy.

In today’s edition: National wants to change housing density rules; short shower tips given the short shrift; Bromely residents report new stench; but first, after months of commentators and punters asking “are we there yet?” on peak OCR, the RBNZ has suggested that we have finally arrived

The Reserve Bank’s commentary yesterday was described as “dovish” for the first time in a while (Image: Getty, additional design by Archi Banal)

‘Dovish tone’ surprises

For maybe the first time since I started writing The Bulletin and covering official cash rate (OCR) announcements, I can finally use the word “dovish”. The hawks have left the building. If you’re still wondering what these economic bird analogies mean, here’s what I read when I started this gig and could no longer pretend I knew what the bird words meant. The Reserve Bank (RBNZ) announced a lift in the OCR by 25 basis points to 5.5% yesterday afternoon and said the OCR hike cycle that started in October 2021 has likely ended after 12 consecutive rate hikes. Though the bank was just sticking with its November forecast of 5.5% as the peak OCR, the markets and many commentators were surprised by the bank’s “dovish” tones after expecting government spending and net migration figures to be assessed as inflationary, and therefore requiring the OCR to go as high as 6%. If “dovish” isn’t the word for you, you can always run with “chill”, as Tom Pullar-Strecker has done in The Post (paywalled), when describing the RBNZ’s assessment of the economic outlook.

Source: Reserve Bank of New Zealand

Consumer spending slowing

Unusually, the Monetary Policy Committee took the decision to a vote with two of the seven voting members wanting no increase at all. In a statement the committee said “the level of interest rates are constraining spending and inflation pressure" and inflation pressures at home and abroad have been easing. It pointed to slowing consumer spending which was supported by the latest retail spending data from Stats NZ  that showed the total volume of retail sales falling by 4.1% in the March quarter. Unlike Treasury, the bank is still forecasting a recession but a very shallow one in the June and September quarters this year.

What does it mean for homeowners?

As Stuff’s Susan Edmunds reports, economists think home loan interest rates are probably about as high as they are going to get. Kiwibank chief economist Jarrod Kerr said wholesale markets had priced in an OCR peak of nearly 6% in the past week. While the RBNZ doesn’t see a lowering of the OCR until September 2024, most economists are expecting home loan rates to start to drop in early 2024. However, as BusinessDesk’s Rebecca Howard reports (paywalled), many economists are also saying that despite the forward guidance from the RBNZ, they think a further OCR hike could be possible. At this point, we throw up our hands and place our fate in the lap of the Gods.

RBNZ relaxed on government spending and migration

In The Post this morning (paywalled), Luke Malpass describes yesterday’s rate hike as one “that didn’t realise the worst fears of Labour Party strategists” with the RBNZ essentially giving the budget a “pass mark”. RBNZ governor Adrian Orr described fiscal policy as “more of a friend than foe to monetary policy”. Malpass writes that the RBNZ has basically assessed that the government will spend a bit more than the central bank expected in February but that the size of government spending as a portion of the economy will contract over the next few years. Cyclone recovery and repair spending, rather than other discretionary budget spending, seems to be the drive behind the short-run spending assessment. Crucially, for all of us who have lived with a small Orr in our ears every time we took out our wallets, Orr said we’d cooled the jets.

How Balu Brigada is finding their sound

Signing to an international record label gave the brothers behind New Zealand duo Balu Brigada the opportunity to spread their wings. Now, from New York City, they are staying digitally connected with home, their label and their fans all over the globe. Find out more about how Balu Brigada is making the most of their digital nous to keep up this connection, on The Spinoff now.

This piece was sponsored by One New Zealand.

National looking to change housing density rules

On October 19, 2021, Nicola Willis proclaimed it a “happy day” on Twitter after Labour and National joined forces to announce an overhaul of planning rules designed to address the housing crisis. The agreement resulted in the Medium Density Residential Standards (MDRS) which were included in legislation passed in December 2021 — all parties except Act voted for it. By then, Luxon was National leader and Willis was one of the bill’s principal sponsors. It was billed as a “rare show of bipartisan cooperation” but it sounds as if there is to be no more of that. As Stewart Sowman-Lund reports, yesterday Christopher Luxon said “We’ve got MDRS wrong” and added that he’d have more to say on that “in the coming weeks”. Sowman-Lund has all the details on the event Luxon spoke at in Auckland including the lack of appetite for questions on inflation and the great interest in wanting to discuss the overuse of te reo Māori.

The government’s ‘short shower’ tips given the short shrift 

The government launched a campaign yesterday in conjunction with a range of other agencies to encourage people to “find money in weird places”. The campaign includes tips like taking five minute showers and setting your heat pump to a maximum of 21 degrees. Am getting notes of the 2008 coalition government and showerheads. The attempts back then by the Labour-led government to regulate how much water came out of showers were labelled nanny state policies and Phil Goff admitted they were a mistake in 2009 after he took over as Labour leader. On the face of it, they’re not bad tips. They’re just very basic and people might be forgiven for not wanting to hear them from the government, during a cost of living crisis, on the same day as an OCR rate hike. The approach has been roundly criticised by National, the Greens, Act, a former advisor to the Labour party and anti-poverty advocates. Pop culture fans will enjoy Green MP Ricardo Menéndez March’s response. Newshub’s Jamie Ensor has all the reactions.

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New, worsening stench reported in Bromley

Spare a thought for the residents of Bromley in Christchurch. Again. Just a year after remedial work began to resolve the stench caused by rotting material at the Christchurch Wastewater Treatment Plant, residents of the suburb are reporting a worsening stench coming from a compost plant. The city council has agreed to move the council-owned Living Earth organics processing plant but that will take five years and residents say they are at breaking point. Bromley resident Vickie Walker said the overpowering "vomit-like silage stench" left her feeling sick to the stomach, caused headaches and coughing and stopped her from spending time outside.

Click and Collect

• Newsroom’s Jo Moir previews this weekend’s Labour party congress (what they call its conference)

• Early childhood sector says the government's plan to extend its 20 hours subsidy to two-year-olds is unworkable

• If you enjoyed Danyl Mclauchlan labelling the budget “kludgeocratic”, you’ll love the Herald’s Thomas Coughlan’s introduction of the term “Bleurghget” (paywalled) to the political discourse

• Auckland residents donating Doritos to help find missing parrot (Thai sweet chilli ones — the parrot’s favourite)

• Singer Tina Turner has died at the age of 83

Got some feedback about The Bulletin, or anything in the news? Get in touch with me at thebulletin@thespinoff.co.nz.

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