The Hoon The hoon for the week that was to Feb 26
TLDR: This week, the clean up after cyclone Gabrielle forced the Government into a last-minute rewrite of its pre-election Budget 2023 set for May 18, but the Reserve Bank warned it against spending with extra tax or less spending to ensure the rebuild doesn’t generate more inflation in an economy straining at full capacity.
Finance Minister Grant Robertson wouldn’t rule out a cyclone tax of some sort to pay for potentially billions of dollars of repairing and rebuilding in Te Tairāwhiti, Hawkes Bay and Northland. The Opposition pushed back hard against a ‘flood tax’ and said the Government should instead borrow and spend more carefully.
Elsewhere, the United States warned China against supplying arms to Russia for its war in Ukraine, threatening financial and other sanctions against our largest trading partner. Also, President Vladimir Putin suspended Russia’s involvement in the last nuclear weapons testing and proliferation treaty with the United States.
In the global and local economy, stronger-than-expected factory, jobs and consumer spending data in the United States and Europe forced traders and investors to increase their expectations for peak interest rates being set by the US Federal Reserve and the European Central Bank.
Our Reserve Bank (Te Pūtea Matua) stuck to its inflation-fighting guns by putting up the Official Cash Rate by 50 basis points, as expected, to 4.75%, and by keeping its forecast for a peak of 5.5% within a few months. It saw Gabrielle putting up prices by around 0.6% this year, and lifting GDP by around 1% over a few years.
Fixed mortgage rates were mostly unmoved this week because they’re already priced in expected rises in rates, but more than half of mortgages are expected to roll off fixed rates of 2-3% to refix at 5-6% over the rest of 2023, which the Reserve Bank said would increase average mortgage costs for those with mortgages from 9% of disposable income to 22% of disposable. About 30% of renters pay more than 40% of their disposable income in rent.
In this week’s podcast above of the weekly ‘hoon’ webinar for paying subscribers at 5pm on Friday night, I talked with co-host Peter Bale about the economic and Gabrielle action, while he talked with Robert Patman about the first anniversary of Russia’s invasion of Ukraine.
Other places I appeared this week
Thanks to the support of paying subscribers here, I’m able to spread the work from my public interest journalism here about housing affordability, climate change and poverty reduction around in other public venues.
I spoke with David Hall, the climate policy director at Toha about the political economy problems of climate change policy for When the Facts Change, my weekly podcast via The Spinoff.
I also appeared this weekend on The Nation on TV3 to talk about the fiscal and monetary policy implications of Gabrielle and the Reserve Bank’s latest moves.
Longer reads and listens for the weekend
Here’s a few useful longer reads, scoops and podcasts for paying subscribers for the weekend.