Things just keep adding up

Last week the reserve bank increased the official cash rate (OCR) by .25 basis points to 2.75%. If you want to know what the OCR does follow this link to the Reserve Banks website about the OCR and other monetary policy statements.

http://www.rbnz.govt.nz/monpol/about/0072140.html

BUT. With an increase in the OCR comes another likely increase into costs that was not spoken about in the budget. The OCR influences bank mortgage rates. An increase or decrease in the OCR by the Reserve Bank tends to lead towards peeks and dips in the rates offered on mortgages at banks we use every day. Those who own their own home can likely expect rates at the banks to go up, adding to your weekly payments.

But in the current environment this move in the OCR is another weekly increase that seemed to have been missed by Bill English and his budget. This change was not unexpected. In fact from July 2009 the OCR has been unchanged at 2.5% and we were warned that an increase was likely around this time. I am no economist. I'm no economic strategist. I'm Joe public with bills to pay and I would not blame my landlord if I got an email or a letter soon saying your rent is going up to $XXX as of a certain date. Its bound to happen with other increases coming soon from the ETS and GST and who knows what else is coming. It just means more out of our pocket into someone else's.

Now the Government could get away with saying that its not responsible for landlords rents, or Reserve Bank policy and it may technically be true. But ultimately responsibility comes back to the government for creating the environment in which these changes are necessary by landlords and other proprietors. Government changes the tax situations on property owners, owners do one of two things. Sell out, or pass on costs. Thus ultimately the government is responsible for the cause...if not the effect.

We have already received letters from companies whose services we use that have advised us of increased costs, directly or indirectly associated with the ETS or prospected tax increases within the next month. In our own cost savings measures we are cutting some of these 'convenience' services but in the end, it will save us cents, rather than dollars overall.

I said in a previous blog that as much as I want to own my own home some time I do not believe it will be within the next decade without some kind of huge miraculous lotto win and since I don't buy tickets, it will make it impossible. My personal position on that has not changed at all. In fact, long before that decade is out we intend to leave the country for what are likely to be better pastures in the USA.

Now I'm no economist nor am I a chartered accountant. I'm a simple working family man who tries to do his best for his family and employer. But I know this overall from the budget and other aspects related to it...we're going to have a rough ride.