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The NZ Economy “Coming of Age”

Economy Update

We are hearing positive growth forecast in the first BNZ – REINZ Residential Market Survey for 2012: which has found a reasonably sharp turn for the better in New Zealand housing market activity. Each of our eight major measures of housing market strength has risen over the past month to show a residential real estate market attracting more interest from investors, even more first home buyers appearing, buyers becoming more motivated than sellers, and prices more strongly perceived to be rising. The results gel with media commentary last week regarding accommodation seekers having greater and greater difficulty finding what they want.

Also the ASB Economic Weekly Global : states that growth forecasts are no longer being revised lower, as growth in Asia has held up and growth in the US has been better than expected. It is now possible the next revisions to global growth could be upwards, which would support the NZD.

 
Westpac Weekly Comment: A slightly rosier hue has also appeared in New Zealand interest rate markets over the past few weeks. The Reserve Bank of Australia’s surprise decision to leave interest rates on hold in February has played an important role, and with the perceived risk of a catastrophic event in Europe receding and some positive signs in the New Zealand domestic economy (in particular retail trade and gathering momentum in the housing market) markets are now pricing a bit less than a 50% chance of a rate hike by the RBNZ by December. It will be interesting to see if the more positive tone also permeates New Zealand business confidence this week.

MONEY

more affordable housing?

We’ve been saying it for a while, but there is already evidence that the banks want to get their money into the market. There are offers and incentives along with dropping rates….and that even before Bollard left the OCR flat last week.

I was talking with my own personal banker last week and she commented that she had 27 pre-approved loans sitting going nowhere, as they had for up to six months, but noted that in the past week she had heard from 13 of them ‘just checking that the offer is still current…” indicating a plan for action soon.

I strongly suspect that NZ will be recipient of increasing offers and incentives from the banks as the OZ market tightens even further…they need the money to be used somewhere and really, ANZ is the only one with strong Asian presence as an alternative option.  My guess? Incentives galore and a bit of a war in NZ for the next few months, esp as Christchur

ch is going to be slow off the mark in view of ongoing rumbling there.

IF YOU WATCH ONE VIDEO THIS YEAR, THIS HAS GOT TO BE IT!

how the GFC occurred

It’s not often you get the chance to  learn while sitting in a silver tube in the sky but that’s what happened recently!  I grazed through the channels and found series of three documentaries that purported to explain  how the Global Financial Crisis  occurred.

Now, you have to set aside the occasional references to 1940-50s economic philosopher Ayn Rand…but hell, this doco shows up the idiocy of the world economic order. Just watch the first one….and make a good coffee, put your feet up and don’t let anyone interrupt you till it’s finished.

http://rutube.ru/tracks/4465754.html?&bmstart=1000

INTEREST RATE UPDATE

 Some good news this past week came from the NZCER’s CEO, Shamubeel Eaqub, in his quarterly review of the country’s performance along with predictions of downstream results of the Euro crisis.

choices for first home buyers

In short, he is of the view that NZ’s export focus on food products and the Asian market will hold us in good stead should the  global economy slow although quite obviously we will endure a drop in overseas income which will slow our internal economy, Eaqub is of the view that interest rates will not be raised in NZ until mid 2013 and that sometime in the first quarter of 2012 we may well see a lowering of the OCR in an attempt to stimulate activity …dependent upon retail and manufacturing volumes between now and then, along with the cost of overseas money.

SO, those first home owners who are secure in employment and wish to take advantage of presently well priced  property may well be able to budget low rates well further ahead than previously anticipated.  Watch the banks for any further shifts in rates…Fixed 3 – 5  years are getting more and more competitive.

BANKS LOWERING FIXED RATES

Banks lowering fixed rates

Good to see that as we commented a month or two back, the banks, loaded with funds as they are and just out of announcing huge and record profits, need to get that money out there!

So, check out the lowered fixed rate mortgages – three and five year fixed rates are looking very tempting compared with what the floating rates might just climb to over that period.

Speak with your local banking or financial advisor to find out what the best option is for you!

TREASURY OPENS BOOKS

Treasury opens the country’s books to all parties and the public

As is general practice now, before elections, Treasury opens the country’s books to all parties and the public so party policy can be based around reality. Here’s a quick summary from our friends at ANZ…

KEY POINTS

  • Treasury’s latest forecasts did not contain much by way of surprises.  The growth profile is broadly similar to the Budget forecasts, as is the expectation of a return to surplus by 2014/15.
  • The battleground to achieve a surplus by that date will be fought on two levels.  First, whether real GDP growth can average 2.9 percent over the next five years as Treasury forecasts.  Historically, this has been easy to achieve, but more questionable in a deleveraging and bumpy global environment.  The earthquake rebuild will add to growth, but if supply-side capacity is not what it was, then this impetus will displace growth in other sectors.  Second, whether sustained government spending restraint can be achieved in an ongoing manner.  Further restraint in some areas will get into diminishing returns.
  • These suggest a return to surplus could potentially be delayed by a year.  In the overall scheme of things, we do not think this matters much with the spirit of fiscal austerity more critical.
  • No matter who wins the election, all political parties are in a fiscal straitjacket for the next five years.
  • We see greater coordination between fiscal policy and monetary policy over the coming years, which will assist the RBNZ in keeping interest rates lower than would otherwise be the case.

GOOD NEWS FOR RURAL SECTOR

SLIGHTLY LOWER FARM GATE PRICES BUT INCREASED PRODUCTION

ANZ Bank’s daily summary predicts better returns across most rural sectors this year on the back of excellent Autumn and Winter growing conditions delivering production increases that will more than make up for any export price contraction.

 “The 2011–12 season is off to a solid start. The theme this year looks like softer farm–gate prices will be offset by better production, subject to the weather gods continuing to play their part. The lift in production will not help offset the entire decline from softer prices, but will provide a soft landing for total gross revenue.”