In New Zealand, Westpac Bank has gone in the opposite direction in response to the Reserve Bank of New Zealand lowering its Official Cash Rate or OCR.
There have been a lot of excuses given by the bank and economists about why this move. That's because one would expect banks to lower mortgage interest rates when the Reserve Bank lowers the OCR. I think Westpac has raised interest rates to prop up Australia. New Zealanders are subsidising the Australians.
Here's my thinking: Australia has a major problem. China is slowing up and will not be buying the same volume of coal and iron ore, simply because it won't be making as much stuff and won't need the amount of steel it has previously. Australia needs this business as it lacks its own industry. Australia has always thought it a good idea to rip raw materials out of the ground, export, then take the money and buy flat screen TV's with the proceeds.
Australia is also faced with higher inflationary expectations. They've mismanaged their economy, and expect Kiwis to pay. It's as simple as that.
NZ should stay the course. Inflation does appear under control and confidence has returned. Kiwis should think carefully about whether moving to Australia is a good idea as there is a real risk of being stranded without a job.
As a side note, Australia is currently heavily promoting itself to Kiwis. They're using positive and negative campaigns. The positive ones mention better quality of life and higher pay. The negative campaign says NZ is falling apart (it isn't), and that everyone is leaving (they aren't). This kind of advertising can have real consequences. I recently saw a young doctor originally from Christchurch, on YouTube describing her life on the Sunshine Coast now she's moved to Australia. She described how she'd gone from receiving free meals at Christchurch Public Hospital, and all learning materials being paid for, to Australia where she has to pay for meals and pay for everything else. Then, she described trying to get onto her speciality course, and not being able to. Well, no shit Sherlock, the Australians will always prefer their own, the immigrant is there to work, not to get ahead. And based on the Sunshine Coast, a swamp two hours from Brisbane. She gave up living in the most positive city with a wonderful buzz, to go to the Sunshine Coast to be eaten by mosquitoes. And despite the negatives, she remained positive about her move; all I can to that is a fool and her money are soon parted.
