> > Your suggestion, that the economy might be different in 2 years, so it's
> > ok to ignore the future and choose a solution with no on-going benefits,
> > is rather short-sighted. The economy could be worse in 2 years!
> In which case after two years your CEMP will be 2% instead of 1%?
But is it not 2% after two years, because there is nothing to stop someone
refinancing their mortgage after the first year and re-borrowing the 1%
repaid in the previous year. That is the killer flaw.
> OCR does so much collateral damage to the rest of the economy, particularly
> with the amount of forex money chasing interest rates these days, that it
> seems a particularly poor instrument to use unless one already has a lowish
> OCR and you want to stabilise things. When you already have HIGH OCR it
> seems particularly like using a sledgehammer... kill both exporters and the
> balance of payments in the hope of maybe eventually slowing the housing
> market? (assuming of course that cheaper imports from the rapidly rising
> dollar don't completely negate your OCR increase).
There are other things the government could have done to reduce inflation rate
without the reserve bank having to increase the OCR.
a) cut the top personal tax rate to discourage negative gearing in property
b) reduce personal tax in general to encourage skilled workers to stay in NZ.
I don't see any great reason for staying in NZ after clocking up a 6 figure
student loan at a tertiary institution.
d) provide tax incentives to encourage people to save and invest in businesses
(kiwisaver sort of addresses this)
c) get the IRD to root out speculators who are in the "business" of buying and
selling property and tax their income accordingly. There would be no need for
a capital gains tax on property, if the current tax laws were properly
(Cullen has provided more funds to the IRD in the last budget to promote this)
d) stop inflating the public sector and creating jobs which add no value to