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Alan Bollard
Thursday's decision to leave the OCR on hold again at 2.5% comes with a little sting in the tail for some borrowers.
Having badgered markets and borrowers all year about how there was no need to raise the official cash rate from its record low until the latter or second half of next year, Bollard's gone and changed the script again.
Now Bollard is saying he doesn't see any need to raise rates until 'around' mid next year.
This is a deliberately vague, but significant change in language and could mean that rates are hiked by the Bollard as early as May or as late as August. This is quite a bit sooner than the latter part of next year as promised just 12 weeks ago.
The change in language is also an acknowledgment that Bollard's is more than willing to move the timeframe in as the economy improves, so from that we must be ready for more changes in language if the economy charges ahead - as some think it might.
For borrowers on short term rates, the key here is to watch these announcements closely and work out what your pain threshold is for interest rates hikes. How high could it go before you started to get really uncomfortable and perhaps need to think about fixing?
On current forecasts floating rates could be around 8.6% in March 2012.
Why the change in language now?
Firstly, Bollard believes he has successfully realigned market expectations with where the OCR is likely to be going next year.
Secondly, and encouragingly, it is a reflection of the fact that the economy is improving and it is much harder for Bollard to keep interest rates at record low levels given the risk of inflation.
Unemployment, for example, is now forecast by to peak at 6.6% in the March Quarter next year. This is well down on some doomsday forecasts earlier in the year.
In fact, many economists will still argue he should be hiking rates at the start of next year given the improving outlook.
Bollard was prepared for that criticism, pointing out in his statement that other factors such as a high currency and high long term fixed interest rates were already doing some of the work of the OCR.
He also knows that given the fact more people are on floating rates than in the past, when he does hike rates to cool off the economy, it will have more of an impact.
What about housing? Is Bollard still worried about a consumer bubble emerging in the housing sector?
Somewhat surprisingly the answer is no.
While he is predicting house prices to keep rising in the short term, he doesn't seem to believe it will amount to much over the medium term given it is being driven by the low numbers of properties for sale.
And, he isn't worried about stronger house prices flowing through to increased consumer spending and greater borrowing.
So far he says credit growth as been muted.
More importantly, Bollard seems to believe that Kiwis have got the message about their over consumption and heavy borrowing.
He says many are now intent on repairing their balance sheets and paying down debt.
At the start of the year Bollard had to deal with an economy teetering on the brink.
Eleven months on, the worst has clearly passed. And, while more shocks (like Dubai) will come along from time to time, New Zealand is out of recession. Finally it seems on the mend...
