web analytics

National’s interest rates record

Written By: - Date published: 7:00 am, April 15th, 2008 - 22 comments
Categories: economy, john key, national, slippery - Tags: , , ,

National’s latest line is that interest rates have doubled under Labour, with the implication that National would magically lower inflation (while simultaneously pouring more money into the economy through lower surpluses) so rates would fall. But, as with so much National says, a quick look at the record reveals the lie.

mortgagerates.JPG

Average Mortgage Rate- Nat: 9.7%, Lab: 8.4%

Interest Minus Inflation- Nat: 7.7%, Lab: 5.8%

When Labour came to power the floating mortgage rate was 7.3%, today it is 10.5%. If that’s John Key’s idea of doubling, it’s surprising he survived two seconds as a money trader.

This interest rate line is just another example of Key’s slipperiness. National’s record on interest rates is worse, their policies are inflationary, and they have no plan on how to bring interest rates down. Key knows that but he’s hoping you won’t think about that.

22 comments on “National’s interest rates record ”

  1. “Interest Minus Inflation- Nat: 7.7%, Lab: 5.8%”

    Hi, there are two things I would like to add to put the numbers in perspective:

    1) Inflation is sticky so in the early ninety’s real interest rates needed to be higher in order to drive inflation expectations down.

    2) Between 2003 – mid-2007 global interest rates were very low, making it easier from banks to source cheap credit and loan it out to people at a competitive rate. This is a global factor, it had nothing to do with the government in charge.

  2. mike 2

    Steve, the point is Labour scaremongered in the 2005 election that Nationals Tax cuts would cause interest rates to rise. Well we didn’t get a tax cut but we got the higher interest rates anyway.
    BTW – are tax cuts not inflationary when labour do them?

  3. Tamaki resident 3

    Glad to see the y-axis starting at 0! Now, how about some horizontal grid-lines!

  4. AncientGeek 4

    mike – I realize that you don’t like understanding economics and the questions of cause and effect. The tax cuts that National was proposing in 2005 were massively inflationary. Inflation sits at the base of interest rates. For some reason banks want the real value of their assets to rise, so they charge a more than inflation. So what you should be looking at is how much higher interest rates would have been.

    BTW: try Brian Easton who now has a website. It is a vast archive of informed comment.

  5. Occasional Observer 5

    Yet again, Steve shows how he is both dishonest and ignorant on economics.

    The graph shows that when National came into office, interest rates were very high. When they left office, interest rates were very low. Contrary, when Labour came into office, interest rates were very low. Now they are very high again.

  6. Phil 6

    Actually Steve, some interest rates have doubled under Labour.

    I point you to another RBNZ website graph; this one showing the OCR and 90-day interest rates. From 4.5% to just under 9% is good enough for most of us to say that “doubling” is legitimate.
    http://www.rbnz.govt.nz/keygraphs/Fig7.html

  7. AncientGeek 7

    And mike. Tax cuts are always inflationary, whoever does them. That is why they have to be implemented carefully so there are no spikes in inflation.

    The best time is when there are external factors buffeting and reducing economic growth. That is the time for a classic Kenysian intervention. Oh and look at the economy in the US, UK, aussie, and all of our traditional markets right now. Look healthy do they?

    Why do you think that Cullen thinks now is a good time to start introducing tax cuts. There is always a delay before their effect kicks in.

  8. AncientGeek 8

    Oo: ok so Key and the Nats are not dishonest for claiming the interest rates have doubled?

    Look at the graph – 7.3% in 1999 and 10.5% now. It is like so much from the Nats – lousy spinning with virtually no facts, and a complete absence of any coherent policy.

  9. mike 9

    “Why do you think that Cullen thinks now is a good time to start introducing tax cuts.”

    Ummm lets see.. could it be that Labour are miles behind in the polls and its election year by chance?
    This is by far the biggest dead rat swollowed.

  10. infused 10

    Nice piece of spin there AncientGeek.

  11. Ari 11

    Not really Mike- Labour don’t mind Tax Cuts, but they want to be careful about them, not put the country in debt or slash social services to finance them.

    Now, if Labour were scrapping, say, their working breaks legislation for tax cuts, that would be a dead rat being swallowed. But we’re not there yet.

  12. djp 12

    Very good point there OO. We should take into account that National was handed a high interest rate as they came into power in the early ninetys and managed to lower significantly it by the time they left office.

  13. Steve Pierson 13

    Ok my responses:

    a) Yes inflation is obviously sticky and interest rates are partially subject to global forces. But that cuts both ways. You can’t just blame global forces for high rates under National and low rates under labour – just as equally the low points under National and high points under Labour can be attributed to those factors.

    b) Obviously government policy does influence inflation otherwise it wouldn’t be a political issue, it would be like the weather. The issue is whether National’s policies would somehow lower inflation, and thereby interest rates. Their track record suggests not.

    c) It’s not true to say that National inherited high rates that they brought down and Laobur inherited low ones that they brought up. – the bulk of National’s time in power, 1994-1998, rates were as high as they are now.

    d) It is undeniable that interest rates under Labour have been lower than those under National. The core of National’s argument is that they would have lower rates – history suggests otherwise.

  14. Scribe 14

    A simple reading of the graph above says this:

    Interest rates when National came into power were at 15%. When it left office, the rates were about 6.5%. They’re now up to 10.5 after 8 years of a Labour government in incredibly favourable economic conditions (except for the last 12 months or so).

    And as Phil pointed out, John Key’s comment that interest rates have doubled is true for some rates.

    I’m constantly amazed at how some people see a bad news story for Labour as a good news story. Were rose- (or red-) tinted glasses on sale at the Labour conference over the weekend?

  15. Steve Pierson 15

    scribe. That wouldn’t be merely a simple reading of the grpah, it would be a severely mentally sub-normal reading.

    as phil knows, the OCR isn’t the rate that ordinary kiwis borrow at, so its not relevant.

  16. higherstandard 16

    Steve

    Wish the OCR was the cash rate ordinary Kiwi’s borrowed at, it doea however tend to drive the rate at which ordinary kiwis borrow at.

  17. AncientGeek 17

    infused:

    Nice piece of spin there AncientGeek.

    (Falls over laughing…) First time anyone has suggested that I spin. Usually they’re complaining about the blunt prose.

    Anyway, all I said to Oo exactly what was in the post with the addition at the start of one of those stupid “have you murdered your wife” questions that some of the kiwiblog more idiotic commenters favour.

    Really what I was asking was – Had Oo actually read the post? Because his points were already covered in it.

    mike’s question was strange – he’d obviously never looked at kenysian economics.

  18. Scribe 18

    Steve,

    What a joke. You try to pass off “average” interest rates under the last two Governments as indicative and then call the simple facts that interest rates dropped drastically under National and then rose under Labour “a severely mentally sub-normal reading”.

    Here’s a hint: If a graph makes your conclusions look idiotic, don’t use it as support material for your argument.

    Have a nice day.

  19. Phil 19

    Steve,

    While the OCR and 90-Day rates are not those at which NZer’s borrow for their mortgages and other debt, they are, as you know, important bell-weathers which have significant impact on other interest rates ‘out the curve’ as well as the interest rates payable on other forms of lending.

  20. Phil 20

    AG, April 15th 8.52 am (waaaay back up the thread)
    “Tax cuts are always inflationary,”

    Not so.

    Tax cuts can quite validly have no impact on inflation (and sometimes even help to lower inflation) if they are implemented at a time when capacity utilization is lower than historical norms.

    If the economy slows in the manner currently being predicted, I personally see no reason why a rolling tax cut program should be inflationary

  21. AncientGeek 21

    Phil: You’re correct.

    But it does require what is effectively a recession with falling consumer demand (to get the reduction in capacity utilization). That looks like what we’re heading into in the external world. NZ is (largely) an open economy so the effects arrive here as well, sooner rather than later.

    Looks like a good time to implement a stimulus like a rolling taxcut program. We look to be in a good position to implementit as well.

    It is the usual problem with any of these economic tools. Do it at the right time and it assists the economy from spiralling out of control. Do it at the wrong time and it speeds up the spiral. A tax cut in the dimensions that were proposed in 2005 would have been the latter causing a even more overheated economy.

    I’ve always been suspicious of the effects of a kenysian stimulus. But that was from the misuse of the 70’s with that interesting stagflation environment that I grew up in.

  22. Occasional Observer 22

    Ancient Geek,

    In yet another example of mindless waffle, you’ve failed to make any conclusive points.

    Fact: The OCR now is twice what it was when National left office, and all the forecasts suggest they will continue at current levels for some time to come.

    Fact: Inflation is now twice what it was when National left office. What Steve doesn’t understand, because he’s an economic pygmy, is that interest rates take eighteen months to have an effect on inflation.

    Fact: When National left office, growth was strong, and had remained so consistently over a long period of time, despite several significant, external economic shocks. Labour’s economic has been moderate, without any external economic shocks, but is now caught up in an inflationary, high-interest rate spiral, which is seeing growth diminish. Multi-factor productivity has been static since Labour took office.

    Fact: AncientGeek pines that tax cuts are inflationary, and ignores the massive elephant in the room that is about to stomp on everybody: government spending has increased at twice the rate of private consumption over the last eight years, and has had a greater inflationary effect than any other player in the market. If you cut taxes, yes, some consumers will spend the proceeds. Some consumers will save. The history of this government is that if you run high surpluses, the Government will be tempted to spend the surpluses. Which is why we’ve seen a massive increase in government spending.

    Fact: private sector spending is generally more efficient, and likely to lead to greater productivity gains, than public sector spending. Which is why despite doubling state sector spending, New Zealand has seen no increase in productivity; we won’t get real growth in productivity until the private sector can play a larger part in the market.

    The only way to do that is to cut taxes.

Recent Comments

Recent Posts

  • Pae Ora (Healthy Futures) Bill passes first reading – Ka tutuki te pānuitanga tuatahi o te P...
    The Pae Ora (Healthy Futures) Bill passed its first reading in Parliament and a special Select Committee has been set up to consider the Bill and hear public submissions, Health Minister Andrew Little says. “We are fixing a public health system that has, for far too long, failed Māori and ...
    BeehiveBy beehive.govt.nz
    3 hours ago
  • Nuclear Non-Proliferation Treaty – what next for the nuclear “grand bargain?” – Speech t...
    (Check against delivery) Kia ora tatou It’s my great pleasure to be here today at the New Zealand Institute of International Affairs. I welcome this opportunity to share with you the Government’s thinking on the Treaty on the Non-Proliferation of Nuclear Weapons, or NPT. Forged in the depths of the ...
    BeehiveBy beehive.govt.nz
    4 hours ago
  • Government helps sharpen the competitive edge of New Zealand’s medicinal cannabis industry
    The Government is backing an innovative research and development programme to help accelerate the establishment of New Zealand’s medicinal cannabis industry and boost export potential, Agriculture Minister Damien O’Connor announced today. The Sustainable Food and Fibre Futures fund (SFF Futures) is contributing nearly $760,000 to the $1.9 million, three-year programme ...
    BeehiveBy beehive.govt.nz
    7 hours ago
  • Restrictions eased in parts of Waikato at Alert Level 3; Northland to remain at Alert Level 2
    Restrictions in the Waikato will be eased slightly from midnight tonight, COVID-19 Response Minister Chris Hipkins said today. “From 11.59pm tonight, people in the parts of Waikato at Alert Level 3 will be able to meet for outdoor gatherings between two households, with a maximum of 10 people,” Chis Hipkins ...
    BeehiveBy beehive.govt.nz
    7 hours ago
  • COVID-19 rent relief support measures refined
      The Government has landed on a balanced package of changes to improve rent relief measures for both landlords and tenants hit by COVID-19 restrictions, the Minister of Justice Kris Faafoi says. “Businesses in the Auckland region, and elsewhere under COVID Alert Level Three, have been doing it tough, and ...
    BeehiveBy beehive.govt.nz
    7 hours ago
  • Govt considers regulatory safeguards for three waters services
    Public feedback is being sought on the regulatory safeguards required to ensure consumers and communities receive three waters services that meet their needs, Commerce and Consumer Affairs Minister, Dr David Clark announced today. “The future three waters system needs to promote consumer interests and ensure infrastructure is delivered in a ...
    BeehiveBy beehive.govt.nz
    7 hours ago
  • Appointment of new Te Pou Tupua welcomed
    Environment Minister David Parker and Ngā Tāngata Tiaki o Whanganui chairperson Sheena Maru have welcomed the appointment of Keria Ponga and Turama Hawira as Te Pou Tupua. In a joint statement Sheena Maru and David Parker said: Today, Ngā Tāngata Tiaki o Whanganui chairperson Sheena Maru Minister and Environment David ...
    BeehiveBy beehive.govt.nz
    8 hours ago
  • Don't freak out, ShakeOut
    Minister for Emergency Management Kiri Allan is challenging more people to join the almost 650,000 who have already signed up to take part in the nation-wide ShakeOut drill, happening tomorrow. “ShakeOut, New Zealand’s annual national earthquake drill and tsunami hīkoi, is a great opportunity for all of us to put ...
    BeehiveBy beehive.govt.nz
    11 hours ago
  • Government to protect vital public water services for future generations
    Local Government Minister Nanaia Mahuta today confirmed the Government will create four publicly owned water entities to ensure every New Zealander has access to affordable, long-lasting drinking, waste and storm water infrastructure without ballooning costs to households and families. “The case for change is too compelling to ignore. It is ...
    BeehiveBy beehive.govt.nz
    11 hours ago
  • Annual MFAT- NGO Hui
    Tēnā koutou katoa, Talofa Lava and Warm Pacific Greetings to one and all— and in recognition of Tokelauan Language Week this week, Fakatalofa atu ki te koutou uma. Malo ni. Thank you for inviting me to join with you at the 2021 MFAT–NGO Hui. It’s a privilege for me to ...
    BeehiveBy beehive.govt.nz
    11 hours ago
  • Opening Address – Council for International Development and MFAT NGO Hui
    Tuia te rangi e tu iho nei, Tuia te papa e takoto nei, Tuia te here tangata ki te here wairua kia rongo te pō, kia rongo te āo – Tīhei Mauri Ora! Kei ngā iti, kei ngā rahi i whakapau kaha ki te whakahaere i ngā mahi atawhai mo ...
    BeehiveBy beehive.govt.nz
    14 hours ago
  • Govt backs business to vaccinate workforces
    Vaccination will be required for all workers at businesses where customers need to show COVID-19 Vaccination Certificates, such as hospitality and close-contact businesses. New law to introduce a clearer and simplified risk assessment process for employers to follow when deciding whether they can require vaccination for different types of work. ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Winners of the 2021 Prime Minister’s Education Excellence Awards
    Frimley Primary School in Hawke’s Bay is the Supreme Award winner of the 2021 Prime Minister’s Education Excellence Awards, Prime Minister Jacinda Ardern and Education Minister Chris Hipkins said today. “The past year has been a real test for teachers, schools and local communities. But out of the challenge of ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Government provides greater assurance to homeowners
    The Government has provided greater assurance for homeowners with the introduction of a new code of ethics for Licensed Building Practitioners (LBPs), Building and Construction Minister Poto Williams announced today.   The Code of Ethics, which comes into force in October 2022, sets behavioural standards for LBPs to give both ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Primary sector returns strengthen export-led recovery
    Farmers’ hard work in leading New Zealand’s export-led recovery from COVID-19 is being rewarded with high prices forecast for milk and very strong returns for meat, says Trade and Export Growth and Agriculture Minister Damien O’Connor. Fonterra announced today a record predicted milk price of $7.90 to $8.90 for the ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Supporting economic resilience in the Indo-Pacific – Speech to the Asia Forum
    (Check against delivery) Ladies and gentlemen, distinguished guests, kia ora koutou katoa Thank you Farib. It is a great pleasure to be invited to speak at this event. I want to acknowledge the on-going work of the Asia Forum. Over many years – decades, in fact – you have been ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • RSI ‘state of the nation’ report published
    New Zealand’s FCR cited research ratio is twice the world average Investment in R&D is increasing Case studies underscore how a science based COVID-19 response helped save lives In 2019, Māori and Pacific people represented 5 per cent of PhD graduates. The latest research, science and innovation system report card ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Funding to translate science into real life solutions
    The Government is investing in ‘Te Tītoki Mataora’ the MedTech Research Translator, to deliver new medical tools - and meet both the demands of a global pandemic and of a growing and aging population. “COVID-19 has shown that we need to build a more resilient, productive, innovative and economically-sustainable health ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Tokelau champions language and culture
    COVID-19 continues to be a powerful reminder of the importance of language and culture to the wellbeing of our Pacific communities, said the Minister for Pacific Peoples, Aupito William Sio. “Our Tokelau community in Aotearoa has responded strongly to the challenges of the global pandemic by getting vaccinated and supporting ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Festival drug-checking services get a boost
    The Government is financially supporting drug-checking services to help keep young people safe at this summer’s large festivals and events, Health Minister Andrew Little says. “This is not about condoning drug use, but about keeping people safe,” Andrew Little said. “There is clear evidence that having drug-checking services at festivals ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Expanded vaccination order for health and disability, education and prison workers
    A newly-signed Order means most people working in three key sectors will very soon need to be vaccinated against COVID-19 for the sake of themselves, their workmates and their communities, COVID-19 Response Minister Chris Hipkins has confirmed. The extended COVID-19 Public Health Response (Vaccinations) Amendment Order 2021 comes into effect ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • APEC finance ministers focus on inclusive, sustainable COVID recovery
    APEC finance ministers will continue to work together to respond to the effects of COVID-19 and ensure a sustainable and inclusive recovery while capitalising on the opportunity to build a more resilient future. The New Zealand Minister of Finance and Deputy Prime Minister Grant Robertson chaired the virtual APEC Finance ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Improvements to child and maternity facilities at Timaru Hospital on track
    Improvements to child and maternity facilities at Timaru Hospital are well underway, and the next stage of the project will begin next month. Health Minister Andrew Little visited Timaru Hospital today to view progress onsite. “The improvements are part of South Canterbury DHB’s four-year refurbishment project and will create a ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Govt responds to independent review into WorkSafe
    The Government has clear expectations that WorkSafe must action the recommendations of the independent review into the regulator to improve its management of adventure activities following the tragedy at Whakaari White Island, Workplace Relations and Safety Minister Michael Wood says. The Ministry of Business Innovation and Employment (MBIE) today released the ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Prevention funding to reduce tamariki in care
    A new iwi-led prevention programme will receive funding from Oranga Tamariki to help reduce the number of tamariki and rangatahi coming into state care, Children’s Minister Kelvin Davis has announced. Te Rūnanga o Ngāi Tahu (Te Rūnanga) will receive $25.9m of Oranga Tamariki funding over three years to improve outcomes ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Transforming New Zealand’s mental health legislation
    Public consultation is now open for Aotearoa New Zealand to have a say on the repeal and replacement of the Mental Health (Compulsory Assessment and Treatment) Act 1992. “’He Ara Oranga, the report of the Government Inquiry into Mental Health and Addiction’ made it clear that we needed to replace ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • COVID-19 Protection Framework
    Kia ora koutou katoa Today I’m speaking directly to all New Zealanders to share a plan that will help us stay safe from COVID-19 into the future. A future where we want to continue to protect people’s lives, but also to live our lives – as safely as possible. Our ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Business boost to transition to new COVID framework
    We know that over the last twenty months the approach New Zealand has taken to COVID and Delta has saved lives and livelihoods. Along with one of the lowest mortality rates in the world, we have also had strong economic growth, low unemployment and one of the lower levels of ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • COVID-19 funding boost to protect maōri communities
    Tēnā koutou katoa As you have heard from the Prime Minister, the new protection framework will support us to keep people safe especially our vulnerable communities and minimize the impact COVID-19 has on business and our day to day lives. If you want to protect yourself, your whanau and your ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • New COVID-19 Protection Framework delivers greater freedoms for vaccinated New Zealanders
    New COVID-19 Protection Framework provides pathway out of lockdown and ability for businesses and events to re-open to vaccinated New Zealanders Simpler framework to minimise cases and hospitalisations without use of widespread lockdowns Auckland to move into the new framework when 90 percent of eligible population in each of the ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • New fund to accelerate Māori vaccinations
    The Government has established a $120 million fund to accelerate Māori vaccination rates and support communities to prepare for the implementation of the new COVID-19 Protection Framework. The new Māori Communities COVID-19 Fund will directly fund Māori, Iwi, community organisations and providers to deliver local vaccination initiatives for whānau, and ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Government extends hardship assistance for low income workers
    Income limits for Hardship Support through the Ministry of Social Development have been temporarily lifted so more people can recieve assistance. “Cabinet has agreed to make it easier for low income workers to recieve assistance for items such as food and other emergency costs,” Carmel Sepuloni said. “We know the ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • More support for learners with highest needs
    Students most in need of extra help in the classroom are the focus of a new review that gets under way today, Associate Education Minister Jan Tinetti says. About 50,000-80,000 children and young people are expected to benefit from a Ministry of Education review into Highest Need Learners that will ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Parts of Waikato to stay at Alert Level 3 for next six days
    The parts of Waikato that have been in Alert Level 3 will remain at that alert level till Wednesday, COVID-19 Response Minister Chris Hipkins said today. “Based on the latest public health information, maintaining level 3 in those parts of the Waikato continues to be the most prudent course of ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Hon Peeni Henare September 2021 Proactive Diary Release
    ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • NZ passes world-first climate reporting legislation
    New Zealand has become the first country in the world to pass a law that will ensure financial organisations disclose and ultimately act on climate-related risks and opportunities, Commerce and Consumer Affairs Minister Dr David Clark and Climate Change Minister James Shaw today announced today. The Financial Sector (Climate-related Disclosures ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Prime Minister NZ UK FTA opening remarks
    Tēnā koutou katoa. Ngā mihi nui ki a koutou katoa. I am delighted to announce today that following a conversation with Prime Minister Johnson last night, New Zealand and the United Kingdom have Agreed in Principle a historic high-quality, comprehensive and inclusive free trade agreement. I’m joined today by the Minister ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • New Zealand secures historic free trade deal with the United Kingdom
    A boost of almost $1 billion to New Zealand GDP, unprecedented access for New Zealand exporters to the UK market UK to eliminate all tariffs on New Zealand exports, with over 97% being removed the day the FTA comes into force NZ exporters to save approx. $37.8 million per year ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Quarterly benefit numbers show more people in work
    Benefit figures released today show a year on year fall of 9,807 people receiving a Main Benefit in the September Quarter.  “The Government is working hard to tackle COVID-19 and it is clear our strong response to the initial outbreak has created a resilient labour market which is providing opportunities ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Health reforms bill introduced to Parliament
    Legislation central to fixing the health system has been introduced into Parliament by Health Minister Andrew Little. “Rebuilding the public health system is critical to laying the foundations for a better future for all New Zealanders,” Andrew Little said. “We need a system that works for everybody, no matter who ...
    BeehiveBy beehive.govt.nz
    1 week ago