Like lambs to the slaughter. The UK is stuffed, and the next tranche of collapses, macro and micro, is set to hit the US, Germany's on the way; what makes this country immune. I just don't understand the thinking in this country.

It sure is all go out there, net migration gain looks like exceeding 25,000 have to book into top restaurants well in advance, people queue up to buy the latest release of ipods and Playstaion sells out, cars sales up, house prices reaching for the sky, tickets for concerts, boxing etc hard to get, interest rates at record lows and the strong Kiwi dollar means imports go well down in price so soon the 50" flat screen telly will be less than $1,500. Also with airfares down great time to travel with say Euro at 0.50 and USD at 0.75 soon. Business class at half what it cost 18 months ago. YeeeeHaaaah!

Looks like we are in for a great recovery phase in all sectors!

It seems to me that New Zealand should be the "Lucky Country" instead of Australia :)

If it wasn't for Australia, and the fact Australia owns most NZ banks, we would have likely suffered the same fate as Iceland, where each person in Iceland owes nearly $400,000 each. Unfortionately NZers haven't learnt anything, and are still borrowing to buy, and spending more that they earn. They are borrowing like they don't expect interest rates to go up. I can see the bubble bursting again, and the government won't have the cash to stop it occurring this time.

But Rob people need to borrow, buy and spend in order to keep the economy going - otherwise we would see a big rise in unemployment and people leaving the country. If they were spending more than they earn the banks would not lend them money.

Iceland cannot be compared with NZ or Germany, USA or UK - we are different here.

Our government has not had to bail out anything so all good here. If you live overseas and are reading this why not move your family here and enjoy living in a lucky country?

ANZ CEO see's a dead cat bounce
http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=1059...

Hi Lara and expat,

Great to see that you both quoted the reports from Westpac Chief Economist and ANZ CEO. It is so challenging for the audience to read and digest for themselves and judge for themselves.

Is really net migration so influential and become a subject of reference every now and then? Then, these migrants are here to just buy houses without having to take up home loans from the banks, is that the case? Otherwise, they have to have a stable job/income to be able to take up home loans. Do we have that many jobs for migrants at this stage or in the near future? Look at the whole picture! Maybe, by releasing unemployment rate monthly would be helpful to the greater audience.

Some would suggest that it is the out-migration that is slowing (less leaving instead). For that, how many would jump on the bandwagon and buy up houses if they are already staying here and not leaving the country? If that's true, then isn't that speculative?

Quite confusing right? Cheers.

Shame that confidence doesn't go into something productive: setting up businesses that produce things to sell (not services sold domestically), or savings, or paying down debt. Rather the survey says that 45% think it's a good time to buy a double-door fridge, 50" flat-screen or something else made of stainless steel; no doubt on hire-purchase (read more debt). Or an overpriced house. We have learned nothing as a nation.

Hi Wally, ruru,

In this blog, we have same understanding, but majority of the people out there may think otherwise. There are also many out there who view that the higher the NZD the better they are now. They claimed that they could buy more things and could travel cheaper with a high NZD. What to do, should there be any collapse in the economy, then we all know who is at fault.

Who can prevent the situation ie. over borrowing to consume? can the govt help? or should the consumers help themselves? Maybe, a credit crunch might happen soon, who knows? cheers.

Grandy, Wally: Of course we could be wrong and happy days ARE here again. this is a fine juxtapostion with Neville Bennet's piece on the banks. Looks like nothing has really changed. Until it's hard to get credit, the party will continue.

Which translates, expat, into:
Those who can afford to go, do; those who can't dont.
Seems like were keeping the poor and exporting the rich, to me!

...of course not - I have forgotten to mention the banks, which loan them money. It is a bloody vicious cycle isn't - stimulating the property market/ banks ... and then after that ?
...ah okay they all work for the 2011 Rugby World Cup and new roads etc. - called increased productivity.

Matt: Ganesh Nana is good. Bank economists by definition are not balanced: they are paid by the banks. though some are better (more cunning) than others.

Matt in Auck - the housing companies will still do plenty of one off new builds fully funded by end purchasers - firms like David Reid, Jalcon, Signature, Harmony, Fletchers, Jennian - they would build more than the fly by night developers and they will have no fundinh issues.

Rob - which finance companies has the NZ government bailed out?

I have a question - if the global crisis the world has just been through saw NZ only mildly impacted then what exactly will cause us to have a hard recession. Surely this latest global mess showed just how reslient we really are.

Look at the US sharemarket. Stocks have gained in eight of the past 10 weeks. The Dow this past week had its best performance since July 24, gaining 2.2 percent to 9820, 50 percent above its March low. The S&P 500 rose 2.5 percent to 1068, and the Nasdaq was up 2.5 percent at 2132.

Interesting to hear the crowd boo John Key on the stage after the rugby toniight.

No funding issues, Lara? Didn't both David Reid, Chch and Signature Homes, Welly franchises go belly up?

Lara, I believe Mascot Finance is one finance company that the NZ tax payer will have to bail out, for the tune of $70 million .

http://www.interest.co.nz/ratesblog/index.php/2009/03/02/government-guar...

There were also 3 others that have failed since, but I am not sure if there were GG

http://www.interest.co.nz/deepfreeze.asp

Matt in Auck

Maybe Brendon O'Donovan is a moron, but that's because what he was saying a couple of months ago. I think he's come round to a more sensible point of view, rather than abandoning his senses as you imply.

Personally I wouldn't put my faith in ANZ's chief economist Cameron Bagrie (I guess that's who you're referring to).

I've had dealings with his mum Bev and brother Logan, who were Real Estate agents in Dunedin. I remember them telling me back in 06 how the price of a flat (which they were trying to sell) that had already quadrupled since 02 was going to double in the next couple years. I don't want to be too disparaging but I didn't exactly hold their opinion in the highest regard! (NB From memory I suggested offering about a third less than asking for the property - which got the "your dreaming" response from Logan!)

I note the Cameron's mum and brother seem to have left the industry (I have a feeling that they were quite involved in buying property back then themselves), maybe because the Bagries got out of real estate Cameron's a bit anti-real estate right now? It's amazing how personal involvement changes viewpoints.

Every commentator seems to hold such diverse opinions, most of which are just random nonsense.

Take Meredith Whitney last week talking about US residential property potentially falling another 25%, how such a respected analyst comes up that I don't know. Even Roubini is "only" talking about a 10% further fall. The fact is prices seem to be stabilizing in the US and the big falls were only seen in some states (California, Florida, Nevada, Michigan etc), take a look at CNBC's 15 most recession proof cities (most with house price falls much less than NZ or even price rises):

http://www.cnbc.com/id/31490968/?slide=1

Back to NZ, Matt take a look at the synopsis of Charles Drace's 1998 book - 10 years Mr Drace was getting lead articles written about his opinions in all the major newspapers (much like Mr Hickey) - not surprisingly we haven't heard anything from him since about 2001. I found the following lurking in cyberspace:

""How to Survive the New Zealand Residential Property Crash" - a book by Charles Drace, CFP

An interesting, wide ranging discussion of the reasons why residential property has escalated in value over the last 50 years, why these reasons no longer exist, and an examination of why the current decline in values will continue well into the 21st Century.

If you own a residential property, invest in residential real estate, or are contemplating a house purchase in the future, you must prepare yourself by reading this book.

Includes a chapter detailing how bank managers can protect their banks from the risks of a falling market and a special section for real estate agents called "Survival Guide for Real Estate Agents" (also available on tape, see above).

Note : in the first nine months since publications residential property values in New Zealand fell 5.8%. The total average fall over the next five years is expected to be nearly 40%.

Many of the experiences of the New Zealand market are valid for overseas markets, especially the currently overheated American market."

Good Advice. I think not. Unless you read the book 8 years after it was written!

Chris J - well despite your misgivings I still think ANZ are pretty good.
But I agree with your more important point as to all these commentators who have made stabs in the dark over the years often on the back of books or websites, and been horribly wrong.
Personally I think economic forcasting is essentially guess work and I take any forecasting with a grain of salt

@Lara :
""¦.what exactly will cause us to have a hard recession. Surely this latest global mess showed just how reslient we really are."

I tend to agree with you that NZ is much more reslient and for the reasons why you have to go back to the late 80's.
The mid 80's in NZ was a bubble very much like what we saw in USA in the last 10 yrs.
Imports twice exports, Large Govt Deficits, Stock Market bubbles, Inflation, properties going up 50% in a month, "investments" in Goats, Kiwifruit financed with 'cheap interest' Swiss Francs. Going to the DFC for a loan for $100k coming out with $200k.
The difference was that NZD wasn't the world reserve currency and the party came to a very abrupt end.
I believe that the policies that were put in place during the 1990's because of what happened to the NZ economy and the institutional memory of the crash are what have made the NZ economy sail thru the Asian, Dotcom and now Banking crisies.

The policies I can think of are:
Floating exchange
Public Finance Act - esp accrual accounting in Govt. No more 'missing' liabilities because they haven't been paid for yet.
RB act
Elimination of tariffs & subsidies.
Banking supervision.
RB holding FX reserves
An attitude that business survives because they are competitive, not because the Govt picks them.
Govt debt is Bad.
Govt investments should be evaluated on cost/benefit (rail purchases excluded!)

I know there will be people who will pick details with me but for those who remember the 1970's and early 80's, can you really say if NZ had stayed like the 1970's we wouldn't have been dog tucker by now?

Lara said:

"Interesting to hear the crowd boo John Key on the stage after the rugby toniight."

That is normal at rugby games, and is due to some of the morons who go to the games. Key doesn't deserve it, and neither did the PMs before him. Many of those people end up moving to Oz anyway, which improves the IQ of both countries :)

Chris J
Your figures 89-97 are real ie after inflation.
The difference with the last decade is that there was a rapid increase in world liquidility which would normally cause general inflation but beacuse of the productivity gains in China at making things decreasing prices, it looked like there wasn't much general inflation esp for goods.
The liquidity had to go somewhere and it seems to have ended up in asset inflation.

What I am saying is that we think there was very little inflation in the last 10 yrs but the flood of ever cheaper and better goods hid what was really going on.
Inflation stats arn't very good at picking up quality increases, eg a 1998 car compared with 2009 car maybe the same price but 2009 has many more extras than the 1998 model. In 1998 you were lucky to get an AM radio, now airbags, A/c, stereo, power steering etc come standard. Same with TV's, PC's, Ipods, Cell phones etc.

If inflation was really 7% per yr for the last 10 years, a 90% increase wouldn't seem much different from 89-97.

Chris J

I agree

I have little doubt that consumer confidence is up in New Zealand. Robert Prechter, creator of the "Elliot Wave" theory of socionomics makes a good case for this being the leading indicator in all boom and bust cycles. Those with the time can listen to his interview @ http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2009/8/27_R... .

But this is the thing: Attitudes can change very quickly and be devastating in its depth and speed. I have an aquaintance here in the Far North who owned a used car lot. He had great contacts in Japan whom shipped him low-mileage, quality cars. He had a vast portfolio of credit he could offer to clients that were mostly Maori, on benefit, or fixed income. Business boomed, and he bought and rented out four homes, all staircased one upon the other, the liability shielded in a LAQC. Then last year, people stopped buying his vehicles. He shifted his stock from SUV's to economy cars but demand was still non-existent. I thought this was because of the credit crunch, but his said, "No, people just stopped buying." Unfortunately, he shut the doors on his dealership two months ago and took a job as a primary school teacher. He can no longer offset the loss in rental income against the profit his dealership provided and has raised the rents and listed two of his houses. Currently, his head is just above water. His mortgages are all on floating rates.

Any increase in mortgage rates and his housing portfolio will fold like a house of cards. Confidence may be high; but all it takes is Fonterra or Silver Ferns defaulting on their bonds, or a downgrade from S&P to send rates up. When the herd begins to reverse course then look out.

@Chrisj: "...new houses on average become a lot smaller...". My last cuckoo has just flapped away, and we don't need the 5 bedroomer anymore. 3 will be enough, and no desire to prune the roses, again! We're the last of our friends in the process. They are mostly looking for the right time to downsize their houses, but upgrade the quality. So I think you have somthing there.

Interesting to see in the Sunday Star Times today that rents in many parts of the country have fallen significantly over the last year
It's a great time to be renting!!!!

Matt in Auck - it is indeed a great time to be renting. Just out of interest, I'm popping around the corner shortly to check out a couple of open homes - places of similar quality and size to what I'm currently renting (my rent has remained static since I moved here 18 months ago.....long may it continue!). Meanwhile my "deposit" has grown by about $30k.

@ Matt in Auck:
I agree with your sentiments re the crowd etc, but re "It might be understandable if Key was a really bad PM" time will tell; and I hope that turns out to be the case.
My fear is that, like Mae West, he will look back and regret not the things he did, but those he didn't.

Harriet, if you are reading today, would you please expain this in simple easy terms? Thanks.

"I like the way that Banks are sending their customers down the yeild curve ! [...] By lengthening the maturity pattern of their liabilities ( as the RBNZ has "˜asked' them to do) they have mitigated their risk."

Thank you, Harriet.

"And you have to ask yourself - Why are they doing that?"

I dunno - because Mr Banky is not my friend?

veedub - how did those open homes go. I went to a couple and it was like opening day of Kirkcaldies sale - could hardly move!

The two Open Homes I went to today weren't as overrun with potential buyers as some of the ones I've attended of late. The first Open Home wasn't what I'm looking for (but the price was right) and the second one was pretty much what I'm looking for but the RE Agent insisted that the vendor wants above RV so that won't be a happening thing. The house has been on the market for a month and the vendors have found a new place they want to buy, but are holding out for what they perceive it's worth/what the RE agent has told them they'll get. Que sera que sera.

So Veedub are you seriously looking or not? You seem to still be in the mindset to potentially buy??? Otherwise you wouldn't be visiting open homes.
Me I'm happy to rent for the short to mid term (2-3 years) knowing that rents are flat / dropping, and confident that there will be another dip in house prices some time in the next 2-3 years once interest rates push up again
In the meantime I'll save hard to build up a really good deposit

i just wish Lara would either stop taking that speed or come clean and tell us which real estate co. or bank she works for?

James - obviously you are speculating and are going to pay your capital gains tax.