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Tuesday, April 17, 2007

So, the economy's fucked then? 

A primer for non-economists

There is a problem with inflation, apparently, much of it fuelled by demand in the housing sector (esp. amongst would-be landlords me thinks).

The Reserve Bank is charged with getting this under control, but only has one instrument at its disposal, and it appears to be rather blunt: increasing interest rates. But if this was going to work you'd think it would've already, since we already have the highest interest rates around, and have done for some time.

Other than a few more mortgagee auctions it seems to make bugger-all difference.

And the hikes in interest rates make the NZ dollar attractive for earning a quick buck or two, so it increases in value, to a staggering 74 US cents (yawn ... wake me when we achieve parity).

Which works to the disadvantage of our "super-efficient export sector" (TM), which apprently can't compete without the somewhat artificial advantage of one of the lowest currencies (if not the lowest) in the developed world. Quite why this is the case is not explained. I guess they face higher transport costs than most, but then these should fall as the NZD increases, esp. relative to the USD.

Anyway, unemployment is low, and even if every sheep farmer went to the wall it still would be. Alternatively, the farmers could get into more lucrative crops.

Meanwhile, National blames government spending. (Yawn). As if their favoured tax cuts wouldn't be inflationary. Hell, I favour tax cuts too ... but can guarantee I have no intention to save a brass penny of any extra money heading my way.

With the NZD heading up, I'd take an overseas holiday!

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