June 11, 2010 3:00pm by David Farrar

Editorials 11 June 2010

Money markets expect this tightening by way of small steps to prompt an official rate of 4 or 4.25 per cent by this time next year, and further increases to about 5 per cent by the end of 2011.

We should not, says Governor Alan Bollard, expect the rate to rise as far as the 8.25 per cent peak of the previous cycle.

Hopefully not, but several things could knock the ship off course. One is rising inflation, the central bank’s core concern.

I think the OCR will increase beyond 5%.

The Press also talks OCR:

Now, however, as recovery begins to look more robust here and among New Zealand’s main trading partners, the central bank must consider again the prospect that inflation will spike outside its target 1 to 3 per cent range. The move yesterday was modest – only a quarter of a percentage point – but it is an indication that the bank is determined to keep inflation expectations under control.

Some manufacturers and exporters have suggested that moving now on interest rates is premature. Manufacturers and exporters, like politicians and indeed all borrowers, never welcome interest rate rises, but the criticism in this case is unwarranted. The Reserve Bank under Alan Bollard has hardly been hawkish on inflation. A sign of this is the fact that, in an effort to balance competing forces during the boom years, the bank allowed inflation to nudge outside its prescribed limits three times in the space of six years. At the moment, inflation in the future is a possibility.

I still think the range should be 0% to 2%, so a midpoint of 1% is targeted.

The Press focuses on the Foreshore & Seabed negotiations:

Last year, the Government announced it wanted to restore the right of Maori to seek customary title in court, and acknowledge the foreshore and seabed not already in private title as public domain. It held nationwide hui, with Treaty Negotiations Minister Chris Finlayson at each one. Though that impressed Maori, they did not like the “public domain” concept. They want ownership in iwi hands, the foreshore and seabed being inalienable.

Again I remind people that the Court of Appeal merely said that an Iwi could try and claim title in court, not that they would get it. They also said one would have to show unbroken usage since 1840. That is a world of difference away from saying Iwi own the entire foreshore & seabed.

What the Maori Party thinks at this point is not clear – it definitely wants the Foreshore and Seabed Act repealed but might be having to weigh up pleasing the ILG against pleasing an increasingly implacable prime minister.

As Mr Key found over the Tuhoe/Urewera matter, it is hard to placate Maori without upsetting many Pakeha or to ameliorate Pakeha fears without upsetting many Maori. He might have to reluctantly accept that the Foreshore and Seabed Act has to stay on the books.

That is an option. Another is to simply repeal the FSA and let Iwi test their claims in court.

And the ODT chides North Korea:

The jury appears to be out on the exact state of mind of the North Korean dictator Kim Jong-il, variously regarded when healthy as either cunning like a fox, borderline mad or just pathologically nasty.

It is rumoured that he suffered a destabilising stroke some 18 months ago and, at 68, is ailing. Consequently, the world’s only hereditary communist dictatorship seems to be gearing up for succession to the “Dear Leader”.

Cuba is looking hereditary also. Ironic that communism was meant to be a fight against inherited privilege.

Had there been serious evidence anywhere else in the world that a submarine of one sovereign nation had arbitrarily sunk a warship of another, in what appears to be an entirely unprovoked incident, the clamour for retaliation or justice would have been deafening.

This is my concern. You reward North Korea for being well mad.