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Interest.co.nz's submission to the Opposition's banking inquiry
By Bernard Hickey Executive Summary Interest .co.nz's data shows banks are not boosting profits by charging high mortgage rates, but they are cutting business lending and helping to unbalance the economy. Interest.co.nz is a free news and information website for savers and borrowers to compare interest rates and find the latest financial news. It has monitored all retail interest rate changes daily for all New Zealand's financial institutions since 1999 and sells data on these changes to banks, finance companies and the Reserve Bank. It also sells advertising to banks and others on the website, which is free to all and used by over 100,000 people a month. Data gathered by interest.co.nz shows banks' net interest margins and profitability (as opposed to total profits) have fallen in the last year and have been falling since 2004. This is despite an apparent widening of margins between retail interest rates and wholesale rates. Hot competition for term deposits and higher foreign funding costs have squeezed margins.
Also contrary to public perception, some banks have booked losses on mortgage break fees and are reducing their fees for dishonored payments. Surprisingly, Kiwibank has been the only major bank to have not reduced its profit margins in the last year. Its break fees are the highest. However, the Big Four banks are far from perfect. Interest.co.nz argues they have effectively been subsidizing relatively low mortgage rates over recent years by charging relatively high business and credit card interest rates. This trend worsened in the last year. Banks have reverted to conservatism by encouraging lending against land and property in farming and housing, while reducing lending to businesses that rely on cash flows and chattels for security. This is further damaging the tradeable sector and many small to medium business employers. This slump in business lending in 2009 is further skewing an unbalanced economy towards property investment and consumption, and away from business investment and exporting. Interest.co.nz argues that the banking industry is much more competitive than almost all major sectors in the economy and is not profiteering. Banks are however responding to fiscal, monetary and prudential policy settings that are driving New Zealand Inc deeper into foreign debt and undermining the productive capacity it needs to service that debt and grow incomes. We argue this is a long term death spiral that can only be arrested by structural reform to remove the bias to property investing and to encourage banks to lend to businesses, while savers can invest equity in businesses. The Reserve Bank could also use its capital adequacy setting powers more aggressively to help reverse this pro-property bias in banking. New Zealand needs a broader, simpler tax system that encourages business investment in the tradeable sectors and discourages unproductive property investment. We favour a land tax. The risks of continued inaction are a sovereign credit rating downgrade and a loss of foreign investor confidence. This could force Australia to step in to formalize its existing informal underwriting of New Zealand's economy and to demand control of our banking regulation. This would lead to an eventual capitulation to an Australian-led Trans-Tasman monetary and banking system with the associated loss of sovereignty. Here is the PowerPoint presentation made to the Banking Inquiry. Here is a companion submission by Interest.co.nz Publisher David Chaston.
Who is interest.co.nz? Interest.co.nz was launched by Publisher David Chaston in its current form in 1999 as a free interest rate comparison service online. Since then it has built up a database of thousands of interest rate changes, financial reports and detail on debentures, call accounts, term deposits, cash PIEs, floating mortgages, fixed mortgages, car loans, credit cards, personal loans and bonds. Before the demise of dozens of finance companies, interest.co.nz covered interest rate announcements from over 100 deposit taking and lending institutions. Interest.co.nz's data analysts gather information from websites, faxes, emails and press releases. An automated software "˜robot' checks financial institutions' websites regularly for rate changes. In early 2008 Managing Editor Bernard Hickey joined interest.co.nz and added news and commentary to expand the service. Interest.co.nz now has 7 staff, including two data analysts, a video producer and two journalists. Over 100,000 people visit interest.co.nz every month and generate between 0.5 million and 1 million page impressions a month. Readers check rates comparisons tables, news and commentary. They also generate more than 100 comments a day on issues such as monetary policy, tax issues, the property market and banking regulation. Our report on the announcement of this inquiry generated 56 comments Interest.co.nz sells interest rate data and competitor analysis to banks, other institutions and the Reserve Bank. It also sells rates tables and news feeds to media companies, while selling display and classified advertising to banks, finance companies and others. Our advertising rates are the highest on the Internet in New Zealand and our front page is sold out until October. Interest.co.nz won the 2009 Qantas Media Award for best business news site in May. Bank funding costs have risen around 50-150 bps since September apart from OCR Anyone watching how the Official Cash Rate and floating mortgage rates moved in the last year would quickly conclude the banks are raking in extra profits. Why else would the margins between retail and wholesale rates have blown out so much? There are two good reasons, but more on that later. Firstly, let's look at the gap between the 90 day bill rate and the average bank floating mortgage rate. These two rates tracked each other closely until mid 2008 and the financial crisis forced many banks to start charging each other a margin above the wholesale rate to lend to each other. Secondly, the relationship between the two year swaps rate and the average two year fixed mortgage rate was both close and closely watched up until mid 2008, given the two year fixed rate mortgage was the rate of choice during the housing boom of 2003 to 2008. At its peak over 87% of home loans were fixed rate loans with an average maturity of close to 18 months. At the face it seems like the banks are just pocketing an extra 150 basis points in profit, but they're not as we show below in figures on net interest margins. Two major factors are increasing bank funding costs. Firstly, the extended financial crisis from August onwards pushed up the premiums that foreign banks demand from New Zealand banks whenever our banks borrow in international wholesale markets, or more correctly, roll over that debt every 90 days. Getting data to find out what these "˜extra' margins are is difficult. There are a couple of proxies that can be used, including the Credit Default Swaps prices for Australasian corporates. It is best for working out what premiums are charged for longer term bond offerings. This chart to the left showed margins had dropped from over 200 basis points during the depths of the crisis to around 100 basis points now, but were still significantly above pre-crisis levels of under 50 basis points. The Reserve Bank also showed some figures in its July 6 analysis of bank margins estimating the gap between Libor and overnight rates to give a proxy. That showed this margin rising to over 300 basis points at the peak in September before dropping back to around 75 basis points. Most banks say this current "˜extra' margin on wholesale funding is still between 50-100 basis points above pre-crisis levels. Secondly, banks are now having to pay a higher margin to the Official Cash Rate to raise term deposits. There are two reasons for this. Firstly, the Big Four banks have found it harder to raise funds on international wholesale markets and have been forced to raise funds from local "˜Mum and Dad' savers. However, "˜Mums and Dads' have balked at term deposit rates anywhere near the OCR at its current record low of 2.5%. They will not accept less than 4% for no other reason than it's "˜too low'. This has forced banks to pay up to 250 basis points above the OCR. This is unprecedented. The second reason is the Reserve Bank's long-foreshadowed push to get the Big Four banks to rely less on "˜hot' wholesale money. On June 30 it announced it wanted banks to find 75% of their "˜core funding' from longer term wholesale bond issues and local depositors. The Reserve Bank itself said this was likely to push up retail interest rates by around 10-20 basis points because the banking system then had a "˜core funding ratio' of 70%. Net interest margins for the Big 4 are falling, not rising
| Bank | Net Interest margin 2009 | Net interest margin 2008 | Net profit 2009 NZ$mln | Net profit 2008 NZ$mln | Profit vs assets 2009 | Profit vs assets 2008 |
| ANZ National | 2.19% | 2.45% | 561 | 960 | 0.6% | 1.1% |
| BNZ | 2.20% | 2.25% | -183 | 597 | 0.01% | 1.35% |
| ASB | 1.78% | 1.82% | 336 | 432 | 0.7% | 1.0% |
| Westpac | 1.97% | 2.13% | 186 | 462 | 0.5% | 1.2% |
| Kiwibank | 1.90% | 1.90% | 52.5 | 36.8 | 0.6% | 0.6% |
These higher foreign funding and domestic funding costs have actually reduced the Big 4's net interest margins in the last year and they are signaling further falls. Not all the Big 4 plus Kiwibank have reported for the June quarter yet, but here is a table compiled from the latest bank reports. The data is culled from bank General Disclosure Statements. It includes net interest margins as a percentage of total assets, which measures profit from borrowing and lending, rather than from other factors such as higher fees or lower costs. It also includes net profit in total as a percentage of total assets and absolute net profit. This table makes clear that all the Big 4 have sacrificed both net interest margins and profit because of both higher funding costs and higher bad loan costs. The only major bank not to see its net interest margin fall in the last year was Kiwibank, largely because it has been immune to the rise in foreign funding costs and was able, at least initially, to reduce its term deposit rates in line with the OCR. This chart shows a longer term picture. It is compiled from RBNZ data. 
The tax system's free ride for housing and land speculation, along with the poor performance of equity and other investment markets, have seen the banks respond by offering "˜loss-leading' prices to grow lending in areas with the lowest hanging fruit. The changes to the regulatory arrangements for capital adequacy have also deepened the bias to property lending. The long foreshadowed shift to Basel II meant banks were effectively allowed to set their own capital requirements based on past loan loss records. This meant they had to hold much less precious capital for home loans than business loans. The Reserve Bank has imposed a 15% regulatory surcharge to boost the capital set aside for home loans. They should use this tool even more to rectify the imbalance. Meanwhile policymakers should change the structural settings that encourage demand for home loans. Interest.co.nz believes a flatter, broader tax system that encourages business and productive investment and discourages consumption and property investment should be introduced. We believe a land tax is the simplest way to "˜put a price' on such property speculation. The alternative is a loss of sovereignty (and a sovereign rating downgrade) The risks of continued inaction are a sovereign credit rating downgrade and a loss of foreign investor confidence as our foreign debt continues to grow while our productive capacity withers. This could force Australia to step in to formalize its existing informal underwriting of New Zealand's economy and to demand control of our banking regulation. ANZ alone pumped NZ$10 billion of fresh capital across the Tasman during the financial crisis of the last year. New Zealand was the biggest drain on the Australian banks during the last 12 months and was a factor prompting them to raise A$20 billion in fresh equity from Australian savers through its pension system. Any suggestion that the New Zealand banking tail could wag the Australian banking dog would quickly result in political and regulatory intervention. This would lead to an eventual capitulation to an Australian-led Trans-Tasman monetary and banking system with the associated loss of sovereignty. Many thanks for the opportunity to make this submission.
1 Comments
The bank is happy to
The bank is happy to lend me another 300K for another rental property but not 100K to expand my business!
@28yo.. yup that is pretty
@28yo.. yup that is pretty much about it... we (I work in a bank) sadly have to turn away many businesses as the lending is perceived as "high risk" in most cases.
In the case where a business has a tangeable inventory or stock or other 'actual' assets, a loan can be secured against those assets, but if the business is a 'service', well that's where it gets extremely difficult since there is no 'asset' to which to secure the loan against.
Either way, if a loan can be negotiated it will be at a premium (interest rate) in comparison to a residential mortgage.
@ Matt S....exactly right.....I'm in
@ Matt S....exactly right.....I'm in a service industry myself
Something needs to change, banks are currently set up to finance residential property rather than productive businesses
Bernard Isn't the inquiry about
Bernard
Isn't the inquiry about banking margins not about "Bernard's recipe book of ways to deflate house prices so he can prove that he was always right"!
I see that you've realised that the "15% drop" in net interest income that you "analysed" from disclosure statements and published in articles earlier this year has been significantly modified - because as I pointed out at the time the analysis was wrong.
The reality is that net interest margins are down only marginally in 2009 over 2008 despite housing floating rates dropping from near 11% to 6.5%. This would have significantly reduced the return from the bank's capital which would consequentially reduce net interest rate margins. Without doing a thorough calculation I can't say how much this would have affected the margins but as a back of the envelope number - 5% capital earning 400bps less would have cut 20bps off their margins. Take that number into account and all the banks must have been charging a higher margin on the money they on-lent in 2009 than in 2008!
Of course their profits were down but this was largely due to provisions for losses which may be repatriated to the balance sheet in subsequent years as income if the losses turn out to not be as deep as anticipated.
Even though its not the topic the banking inquiry is considering, the guts of your argument is that low interest rates TODAY are the cause of the perceived housing unaffordability.
This is baloney.
Low interest rates in 2002-2004 were the real problem.
What was the cause of this? Not businesses subsidising home lending (business lending is much riskier you know!) But a fundamental change in the way the CPI is calculated.
Excluding existing asset prices in 1999, decoupling house prices from CPI is the root cause of the problem which has still not been addressed.
The other major contributing factor which caused the 02-07 boom was the rapid changes in lending criteria - something careful regulation could have prevented.
The reality is that today criteria has tightened back similar to how it was in 98-01 so putting in restrictions to further tighten conditions would be downright stupid.
An example of how ridiculous lending was, one of the main banks wouldn't lend money on houses worth less than $30,000 from 98-01, a smaller bank had a limit at $50,000. When the market started to rise in 2002 they were perfectly happy to lend 80% on a $60,000 house that the year before was worth under $30,000 and unmortgagable - you can see the problem!
The other problem was the literally hoards of cash rich Australian and UK non-resident speculators who were buying dozens of residential properties each in 2002-2003. They quickly bought nearly all of the affordable property in the cheaper centres driving prices higher literally each week.
In Dunedin in 2003 one real estate agent I know who specialised in cheaper properties reckoned that 2/3 of his sales were to Australian non-residents many of whom had never even been to Dunedin. I heard of one Australian buyer who bought about 40 houses under $60,000 in just 3 months. Many of these properties were resold after just a couple of years for tax free (shouldn't have been!) 100% gains.
This was a ludicrous situation were cash from future NZ homeowners was flowing overseas completely tax free, because their are no restrictions on Australians buying residential properties.
I'm not opposed to foreign investment, but when the market gets swamped by Australians who have recently been to "richmastery" type seminars promoting property in NZ then there really needs to be some restrictions on this type of buyer if their intention is not a long term investment.
Current IRD rules may apply, but it doesn't help if the cash is already out of the country!
The solutions for preventing the 02-07 boom were simple but unfortunately the horse has bolted and there's not much that can be done to lower house prices without damaging the economy.
But if you want to fix anything:
1. FIX THE CPI
2. KEEP LENDING CRITERIA FROM SWINGING VIOLENTLY TO AND FROM EXTREMES
3. CLARIFY TAXATION ON PROPERTY - HOMES THAT ARE NOT A PRIMARY RESIDENCE COULD BE TAXED IF OWNED FOR LESS THAN TWO YEARS SAY
4. APPLY A STAMP DUTY TO NON RESIDENT/NON CITIZEN PROPERTY BUYERS AT THE LOW END OF THE MARKET (SO THAT AUS/UK BUYERS DON'T HAVE AN ADDITIONAL INCENTIVE TO SPECULATE IN NZ RESIDENTIAL PROPERTY)
Now Bernard, there's some sensible solutions that won't cost NZ home owners more for their mortgages!
Chris_j, Thats the first time
Chris_j,
Thats the first time I agree with you re fixes. I would tax ALL homes regardless to remove any ambiguity. Stamp duty would apply to ALL purchases from non residents.
Classification of Aussies and Kiwis
Classification of Aussies and Kiwis as non residents of our respective countries, though, jimmy is a bit like school zoning. There's always a way around it. Easier to make it stamp duty without exception.
Also, I see the BNZ
Also, I see the BNZ parent, NAB, has it's own problems with tax as well as the ones here in NZ.
"National Australia Bank Ltd has written down to nil the carrying value of $309 million in receivables due from the Australian Taxation Office (ATO)"
Lending is all about the
Lending is all about the measurement of risk.
For a bank, measurement of the value of a residential property is simple (size, location, age and then tie that in with a housing price index "“ easy).
However for a private business it is not that simple, unaudited financial statements although they may be correct don't give sufficient confidence to a bank. A banker may not know about electronic widgets, if they don't understand it they are simply not going to lend on it. Solve this trust issue, and we will have better lending to private businesses.
Now lets say there were private firms (that over time build up a good reputation) that specialise in auditing small private businesses and preparing budgets. Now take these financial statements to a bank, I'm sure there the bank is likely to have more confidence in lending to small businesses (it would certainly help in weeding the pretenders from the real deal).
Not that I like Government spending money, but perhaps if they fronted up to get some quality auditing/budget preparation firms off the ground (and to keep costs down) we could see more trust from the banks and more money flowing into small productive businesses"¦ There are worse ways the Government could spend taxpayers money.
I agree with Chris. Selective
I agree with Chris. Selective quoting of data such as profits and ignoring the detail to make the data fit a point is a poor method of debate. The Banks have all made high levels of provisions that lower Bernards "Profit" details, making a mockery of the analysis.
The CPI issue will not go away and needs to be reviewed.
The only point of Chris' I do not agree with is Taxation on property that is not a personal residence. That tax already exists, it is caught under the "trading" rules and catches all who buy with the intention of selling.
Running a rental provider business is just as legitimate a business as many others including providing financial columns on the web. Productivity of NZ inc is not going to increase due to interest.co.nz any more than provision of places of residence for new immigrants and others not wishing to buy.
Bernard you have quite a
Bernard you have quite a vested interest in changing the debate from the rorting banks to your obsession with yesteryears problems of rapidly rising house prices. There is absolutly NO evidence of the housing market heating up aside from a couple of economic forecasts, the market has just returned to a sort of normality.
Your sponsorship by one of the banks that forms a big part of the "opposition grandstanding" enquiry is a fact. What would the ASB say to you if you called them a bunch of Aussie's robbing poor kiwis along with their oligopolistic mates ?
Exclude the write offs from tax avoidance and they are hardly hurting, bit of clever accounting in the way they allocate costs between jurisdictions and you cant deny it has been a good recession for the banks.
David, Its not about getting
David,
Its not about getting house prices to not heat up again, it about removing the existing bubble whihc is NOT normality - as long as houses stay high new entrants to the market will require massive loans most of which are sourced from overseas. A crash is the only way to begin to address our debt debacle.
Jimmy how does devaluing an
Jimmy how does devaluing an asset address the debt that it is encumbered with ?
If prices are dropping it is impossible to borrow to purchase them with borrowed money which doesnt help new entrants. As we have seen people dont sell into a falling market and supply dries up. Most would welcome stability in the housing market which I think we have now and the first home buyer is back with a vengance.
How about addressing the issue of the lack of depth in our capital markets reducing investing opportunities. From memory I think Burger Fuel is the last dog to list on our sharemarket.
@28yo Sell a rental property
@28yo
Sell a rental property but keep the mortgage secured over your remaining property and drop the funds into your business. The bank will be happy you kept the mortgage running even at the housing interest rate. The introduced capital will decrease your income tax on your current account with your business. Then after growing your productive business sell it and reap a tax free capital gain.
Quick someone call for a CGT on small business !
"Most would welcome stability in
"Most would welcome stability in the housing market which I think we have now and the first home buyer is back with a vengance" This is just rubbish. "Stability" balancing on useless govt economic policy and grossly unaffordable but to suggest the FHB is "back with a vengance" is utter idiocy.
Wally, the market is clearing
Wally, the market is clearing without movements in price and in an average time frame which most normal thinking people would consider stability.
Your devotion to Bernard while touching is mis-guided and you should actually look at the REAL statistics as opposed to Trass who wants a 30% decline and Infometrics who want a 24% increase.
I think you and half a dozen other people here are the only people in NZ who cant see the FHB back in the market, its a welcome sign for NZ.
@ Wally Nearly every house
@ Wally
Nearly every house in Central Auckland with a real estate hoarding out front has a SOLD sticker on it and prices are stable (not off 30%).
Just as expected Bernard, not
Just as expected Bernard, not even a peek behind the diplomatic curtain, straight down the line of maintaining public confidence in a banking system that is nothing but a confidence trick and a wealth transfering pyramid scam.
Good works everyone. Keen to
Good works everyone.
Keen to invest in NZ now, it seams NZ is lagging Australia for 12 months so it might be a good time to buy in NZ.
I don't have the data for the percentage of houses in NZ owned by Aussies, I guess the number might be between 3% and 6%. Do any one know where I can find the numbers?
"Clearing" Really!. Well you had
"Clearing" Really!. Well you had better get in quick David and buy all you can. Don't miss out on the bargains. Move quickly. Pay the asking price David.
Aussi (sic) cash buyer -
Aussi (sic) cash buyer - same person as Chinese cash buyer?
Whoever you are you need to work on your spelling and grammar
The media in NZ is
The media in NZ is controlled, in a metroploitan city we have just one major newpaper, we have a few economic journalist and they have their own affiliations. Is it Surprising that Benard can only find the stats that support the Banks.
On the unrelated topic to this debate, but primary focus of this site ie: HOUSING, I am waiting for the house price to crash by 30% or even more and there are many more like me who want the same, however I distinguish between my wishes ,needs and the reality out there. The part of Auckland i live (Mellons Bay, Howick etc) most of the houses sold very quickly and at prices that are not much below their peak value, between %5-9 lower. I shall continue to dream and keep renting.
Interesting to see Infometric's views
Interesting to see Infometric's views today which suggests that although they think prices will rise over the next 2-3 years, as widely publicised, they seem to imply that some further correction will be necessary given the departure from fundamentals.
I think most people without a vested interest in the property industry would agree.
Chris_J............... Some well rehearsed research
Chris_J............... Some well rehearsed research will certainly give you credibility points..... but bringing in your posse of used car salesman just does not look good. Honestly bud, you get back to talking the property market up and what will be will be yes..? regards to T.A. he must be still smarting a bit or I guess he'd ignore Bernards colums all together............ya think.....?
I think T.A. is ignoring
I think T.A. is ignoring far more than Bernads columns. Soon enough itll be the other way around.
For something with some teeth
For something with some teeth without the "we must maintain public confidence in the confidence trick" bolony, have a look at my submission to the unofficial banking inquiry. I will also be emailing this to every MP in parliament and everyone of them that does not acknowledge that they have taken the time to read it in person is not fit to claim they represent the interest of New Zealand society as opposed to that of international capital.
http://socialcreditorbust.blog.co.nz/iain%20parkers%20submission%20to%20...
ChrisJ Welcome back. I'm sympathetic
ChrisJ
Welcome back. I'm sympathetic to your third and fourth points.
Nomad
Please read this piece again. You'll find I am quite critical of the banks' reliance on property lending. Also, net interest margins do not include items such as bad loan charges or tax provisions.
David
I'm not going to call any bank a "bunch of Aussie's robbing poor kiwis along with their oligopolistic mates" unless I believe it and I don't. I've shown how they're not profiteering and how their margins have fallen in the last year. I prefer the data to insults.
cheers
Bernard
It is too simplistic to
It is too simplistic to accuse property as the problem with the NZ economy. There are many other factors including tax, GST, CGT etc. But, there are others. We are not a manufacturing country, this mainly due to our high input costs, particularly wages. Over recent years successive governments have seen fit to set unrealistic 'minimum' wages. This was mainly a vote-catching exercise. Now the chickens have come home to roost and manufacturers and others are doing what they have to do and moving off-shore. We can wring our hands and squeal that China is not fair with its wage laws. Fact is we are nothing in the world and China is.
Bernard's assertion that property is the problem is flawed and depicts a very narrow observation. He was wrong about the 30% price falls and is wrong about this. Our 'obsession' is no different to Australia, or anywhere else. If we did not buy our houses we would have to rent them. And who would we rent them from? Property Investors. If we have a growing population we have to have houses so to argue that we are obsessed with property is disingenuous. In economics they talk about supply vs demand. If there are more people than houses prices will go up, if there are more people than available rental properties rents will go up. And if there is a growing population new houses have to be built which means the building industry benefits. What is wrong with that?
Slapping CGT and GST on all property sales and rents will not make one iota of difference to the property spikes. Australia introduced CGT about 20 years ago and they still have exactly the same problems as we do. The taxes are simply passed on to the buyer or tenant.
It is correct that property speculators who trade in the short term (less than 5 years) should be taxed on quick profits. But, not long-term property investors as that is a totally different business and the same as all other businesses. If a property is sold within 5 years and the proceeds not re-invested they should be taxed. That will prevent the overseas opportunists or anyone else from coming in and making a quick buck without paying tax on their heists.
There is a far bigger and wider issue than simply property.
@ Bernard Please advise me,
@ Bernard
Please advise me, is it time to dust off my old opinions of you? I thought you had changed for the better but your spots are re-appearing,
Introducing a capital gains tax would be a "huge signal to New Zealand's property bubble" and there would be an immediate drop in house prices of 10-15 per cent, he said. (quoting BH)
Is this the next step from 30% declines, to upward of 15% declines to, introduce CGT and we will see the 10 to 15% declines we desperately need for me (yep that's you Bernard) to appear remotely credible.
Bernard Bernard Bernard please tell me this is not true, these comments being from you i mean, i already know the comments to be clutching at straws, so i'm guessing it could be from you, but before i unleash, you know i had previously given you full public credit for your turn around, but you should know you do not get double the credit for a double turn around - you end up with your old name again (remember agreeing Richard Cranium was a good name for you when you were being a wally)
when it comes to your earlier predictions - we will forgive you as they were only earlier predictions, but as a host to the many, you have a responsiblity above that of website revenue.
Presidente' : Are you and
Presidente' : Are you and Steven brothers ? Ooh , you are awful . But we like you . Ta ta !
Kiwis should sell all your
Kiwis should sell all your assets to oversea investors to free from debt, Ausies investors are quit happy to take a large portion of them.
The cheaper your house price is comparing to ours, the more houses we will buy. Both of us will be happier after you passing debts to us.
John McCall, if the problem
John McCall, if the problem is not simply "property" then what is it? Give us solutions that will bring down the cost of property so that low income families ( most families) can afford a home without becoming financial serfs to a bank. Help us out John, give us all some answers.
( according to the banks
( according to the banks interpretation of margin)
If I buy something for $1 and sell it for $2.... my margin is $1...but my profit is 100%
If I buy something for $9 and sell it for $10... my margin is $1... but my profit is 12.5%
That is a big difference...
Unless you know what the banks wholesale cost of funding is ...then how can you know how much profit they are making...???
This is the only way you can know if their "Margins" are being squeezed .... or if they are getting bigger "Margins".. ( That is what the business world means when they talk about margins)
What Banks talk of as a drop in margins , could actually be an increase in profits if their wholesale costs, for funds are lower than before
They way banks talk about margins... is meaningless... and tells me nothing..
in my view
I am of the opinion
I am of the opinion that the banks and the Labour govt inner bunch of fools, knew dam well the flood of cheap credit would cause a massive property bubble. For Labour it promised plenty of votes thanks to the happy state of greed and all the temp jobs. For the banks it promised healthy profits on the back of bloated loans. There was absolutley no consideration for long term damage. What mattered were the bonuses and the votes, the fat bank salaries and the power of office. I also believe there will be NO effort by National to correct the property distortion because it would cost them votes and power. It is power that matters here and Key will not hesitate to 'go with the flow'. The only outcome now MUST be intervention by the world markets with the useless ratings agencies telling the truth about the NZ economy and why it is so stuffed.
"Slapping CGT and GST on
"Slapping CGT and GST on all property sales and rents will not make one iota of difference to the property spikes."
So if it's not going to make a difference, then let's slap it on ! and raise some revenue for the coffers.....
The target must be the
The target must be the cost of residential credit and it will require Alan Bollard with the RBNZ to step into the vacuum of Govt policy, with measures that strangle the residential flow while leaving the commercial/rural option open. It needs to be done with a progression of steps which push up the residential credit cost in the same way that the ocr adjustments were expected to work but which have been proven to be useless. We have entered a period in history when govt cannot be relied upon to do what must be done.
Good points by Chrisj regarding
Good points by Chrisj regarding house prices being removed from CPI, the previous government have a lot to answer for regarding our housing debt problems.
I think the RBNZ needs to increase even further the levels banks must borrow locally rather than from overseas banks.
Also a capital gains tax on overseas residential property investors would be great to see, why do we want them?
Get rid of as many of them as possible.
Banking loby is working very
Banking loby is working very hard those days. American banks spent 100M+ last year alone for lobying, that's excluding advertising. Anyone knows how much they spend here?
Wally............. the catch 22 is
Wally............. the catch 22 is that only the Minister of Finance can make such a directive.
Under the clauses I ripped and posted here a while back, he (Bill) has had more than enough reason to make such a directive and has .........CHOSEN... not to do so. I believe at the behest of interested parties who weild far more polictical grunt than the affected voters,soon to be dispossessed farmers etc...etc...
Anyone with eyes, ears and a grasp of the fundamentals can see the status Quo is unsustainable,...but......... will be as protracted as much as every deeply involved player can make it.
The major banking institutions( let's stop saying foreign,it's upsetting for some) have clearly far tooooooo much investested on the ground to loosen the stranglehold they NEED to have on the economy of N.Z.
For the C_J's and the A.J's this is not a conspiricy theory it's just a simple logical fact, and if your'e in a position to benifit from " The Banks" protect thier investment at all costs policy....then good for you ...nothing wrong with that !
All we, so called whinging Richard Cranium's are trying to convey to you is that , the imbalance of investment by the banks in N.Z. is unsustainable.
Here's a little tip.... what your house may or may not be worth don't matter a hill o beans if you can't service the debt.............. but it does to the underwriter........ as long as market rate rents are tied to the pricing index...the underwriter may be looking farther than you think .
Jolly good stouching though chaps whizz..............................BANG!
Dear Mr Hickey. Is this
Dear Mr Hickey.
Is this really you?: "'Property obsession' is the problem, not OCR" (paper headlines)
I think you are dead wrong. People are not obsessed with property. They are obsessed with the terrible performance of the stock market and the investment industry.
There is almost no property in NZ (with the upcoming obvious exception of coastal property) that performes so finacially badly as public companies or investment companies. Why would anyone who cares about their money buy shares in telecom or air new zealand or southern cross farms or many of the companies on the NZX. And if you go back a few years it would have been AHI or Fletchers or St Lukes or Vending or GDC or Ing or a group of companies that no longer exist.
The standard of corporate management is sooo bad that unless you have a wide range of stock coverage, then you are almost certain to loose money. But if you do have a wide range, you will have some bad ones that pull down the average. My attitude is that if my money is going to be invested in crap companies, then I would rather have the experience of doing it myself and invest in property.
And the other problem with stocks, its that a lot of money in the stock markets is from the baby boomers - either directly or via funds. theyve put it in there so that hopefully it will increase in value and they can take it out for world trips and old peoples home costs as they get older. BUT theres a hellve a lot of them and theyll all start needing that money over the next 10 years. Whose going to buy their stocks?
Trying to divert money into badly managed companies by using a CGT or widening the scope of GST wont have any effect. My mother in law will still see the drop of Telecom from $8.50 down to $3.00 as far more costly than paying a CGT on the sale (well - actually she wont - she will never sell - its her kids who face that problem.)
Concentrate on the REAL problem.
Bernard Many thanks. You make
Bernard
Many thanks. You make a good point about the poor alternatives, independent of the tax bias. The simple answer is for New Zealanders to simply borrow less. Most people investing in property are doing it on top of more debt they have on other property.
The best investment advice for anyone is to simply repay debt before putting any money anywhere else.
New Zealand needs to pay back debt first, and then invest.
However, we will never develop proper investment markets while the current property bias is so strong.
cheers
Bernard
@ Bernard Is that all
@ Bernard
Is that all you have to say for yourself for misleading the public...(again)
28_year_old said... <i>Something needs to
28_year_old said...
Something needs to change, banks are currently set up to finance residential property rather than productive businesses
Sure, that has to come from the voluntary decisions of the property owners themselves (banks) and not something to be forced via legislation. It is property rights and what the banks are doing whether to approve a loan for you or decline your application is entirely their rights. Remember you don't have rights to what I own and also I don't have rights to what is yours. Banks are primarily set up to seek profits, same as your business. They will conduct their businesses according to how they see fit in order to achieve that goal of profit making, whether targeting residential or businesses .
You're not gonna start lobbying MPs to draft a legislation to force banks to do exactly what you wish for, as you highlighted above, are you?
Power to Falafulu's arm. Look
Power to Falafulu's arm. Look forward to an answer to that question.
And speaking of NZ's mainstream economists again, BERL's Ganesh Nana is wanting legislation to do just this - tell the banks what they can invest in or lend to! Every answer that b*$&&#* bloke comes up with seems to involve the Big State running over private property rights and individual freedoms.
We are so badly served in this country by 'our' economists.
"They will conduct their businesses
"They will conduct their businesses according to how they see fit in order to achieve that goal of profit making..."
and if they do it in a way that conflicts with the national interest???
We can develop investment markets
We can develop investment markets quite easily. Remove Diplock from the Commerce Commission and put someone decent in charge, the woman inspires NO confidence.
Take away the NZX,s role as regulator which is hugely conflicted. Encourage/ fund a more litigeous culture and legislate for harsher penalties for crooks with not only a bit of jail time but the ability to unwind their family trusts.
Float Meridian, Genesis, Mighty River Power, Solid Energy, Kordia etc. Get cracking with the PPPs and get them listed, force local councils in christchurch and auckland to float their ports again.
Get on with a debt market for local bodies and how about making it easier to invest in government stock with accesable retail issues.
If we have a dearth of savings/capital why on earth is our super fund investing overseas ?
These arguements deserve the debate, whining about house prices that are flat is intellectually bankrupt.
Yes christov I agree with
Yes christov I agree with you. Can't do much else but bitch can we! I do detect a change in public opinion re Key and the govt though. With every passing week the peasants are learning about how the banks have gained complete control of politics in Noddyland. The riots are not far away.
neil c, I don't believe
neil c, I don't believe in 'the national interest', it's tribalistic BS. But if I give you the point regardless, then the national interest is served by free markets, not fettered markets.
This 'problem' in our economy is caused by all the other distortions in the free market caused State intrusion - in this case, tax policy - thus, further distorting the markets, by telling banks what they can and can't do, is crazy. Especially remembering that the tax cases being taken by the IRD against the banks have served to prove that due to our harsh tax regime, NZ already has a completely uncompetitive market for banks to be operating in, that is why they prefer their profits taxed in Australia. That is, yet another fault of our governments meddling and siphoning off profits that should be left in our productive sector, rather than transferred to our 'way too huge' public/welfare sector.
Ie, separate the State and the economy, and leave the banks alone. My only real wonder is growing to be why the Aussie banks keep operating here: perhaps this is the issue that would make them decide it wasn't worth the while.
Mark – I’d be interested
Mark "“ I'd be interested in hearing your solution?
The only alternative I've heard thus far is to tax property investors in some shape or form while essentially ignoring the banks role in this.
It's fiscally irresponsible to allow offshore funding to go into anything that is unproductive and fails to generate an offshore return.
Surely someone needs to be accountable?
I think you are all
I think you are all missing something with the business vs residential lending argument.
If someone can access funds through increasing their debt over property - they then have a choice to invest this in more property or business. The bank doesn't care as long as you have the necessary equity and can service your debt. And this means lower interest rates than business loans if I decide to use them that way.
So I decide I can remortgage my home and use the funds to invest in a business or more property - what do I choose?
The one I think will give me bigger gains of course.
So for individuals and couples who are limited to the size of their investments, I don't believe the difference in lending rates for residential and business are much of a deciding factor.
Sure seems as though nothing
Sure seems as though nothing will be done that is economically constructive by this govt and they will sit back feet up running with the spin doctors and BS. In which case, young skilled Kiwis ought to be searching for places to go. To stay invites low incomes and high taxes for a lifetime while the political elite syphon off the wealth and make policy that protects their interests. Meanwhile chunks of the country will be sold off to foreign investors who will extract the profits and direct them into other shockingly managed economies where they are able to gain a currency advantage and the advantage of having the capital.
Stupid Kiwi is set for a generation of misery and serfdom.
Dean makes an extremely good
Dean makes an extremely good point. For many small businesses, the owner's house is the only equity on which to borrow for their business, and many of these 'home' mortgages, for sole traders and partnerships at least, may well be business borrowing. Is this taken into account in all the official analysis Bernard? Actually, how could it be.
Chairman: I've given my solution. Laissez faire.
It's fiscally irresponsible to allow offshore funding to go into anything that is unproductive and fails to generate an offshore return.
Is that direct from the Politburo?
I'm an artist, running successfully
I'm an artist, running successfully a Studio/ ArtGallery for 18 years. It is hard work cutting/ sanding sculptures - apply the gesso and sanding again - apply the gold- leaf - do the framing for all paintings - arrange new exhibitions - open the gallery for customers - talk to them - accounting - cleaning and maintenance etc. - etc. day in day out.
Reading articles on this blog I ask my self- why I'm doing all this work ?
Why not just be another investor and buy houses - be part of the Real Estate Industry ? Rent them out for a while- squeeze the tenants a wee bit - spend a few dollars for maintenance- and sell them for a profit of 20K- 40K ?
Have a good, easy life and I even don't have to feel guilty, because it is a huge part of our culture.
W.Kunz, why not just be
W.Kunz, why not just be another SPI (smart property investor)...
Simple really because When it ALL goes DOWN and IT WILL,
YOU can proudly say with your head held high
I HAD NO PART IN WRECKING THE NEW ZEALAND ECONOMY.
@simon7 ..thanks Simon ! It
@simon7
..thanks Simon ! It is my 61 Birthday today !
..and I'm proud creating/ working hard and not to be involved in wrecking the New Zealand economy !
W.Kunz, wishing you a happy
W.Kunz, wishing you a happy Birthday have a GREAT DAY!
Happy Birthday Walter cheers Bernard
Happy Birthday Walter
cheers
Bernard
I don't necessarily think property
I don't necessarily think property is as unproductive as some are trying to make out, after all it employs a lot of people in the construction and maintenance of it.
The damaging part of it comes in when the money used to pay for it is borrowed by people, from banks that get their money from overseas.
This exacerbated when prices are artificially inflated by a combination of things, including overseas residential property investors.
No Mark, it is economics
No Mark, it is economics 101.
Borrowed offshore funds can only be sustained if the nation generates a relative offshore return. Failing to do so leaves the nation with no means (no new capital generated) to repay the interest incurred, leaving the nation worse off than when it initially obtained the loan.
So you would sit back and let the market sort itself out so we can go round the block and make the same mistakes again.
A market collapse will be hard, will fail to address the fundamental problems, and with the right intervention, is totally avoidable.
Have you read Naomi Klein's book The Shock Doctrine? It will widen your perspective on what you so vigorously support.
Book overview can be found here: http://tinyurl.com/m7fggf
This is also rather interesting:
Study Says World's Stocks Controlled by Select Few.
Companies from US, UK and Australia have the most concentrated financial power.
Stefano Battiston and James Glattfelder extracted the information from the tangled yarn that links 24,877 stocks and 106,141 shareholding entities in 48 countries, revealing what they called the "backbone" of each country's financial market.
These backbones represented the owners of 80 percent of a country's market capital, yet consisted of remarkably few shareholders.
The most pared-down backbones exist in Anglo-Saxon countries, including the U.S., Australia, and the U.K.
Based on their analysis, Glattfelder and Battiston identified the ten investment entities who are "big fish" in the most countries.
The biggest fish was the Capital Group Companies, with major stakes in 36 of the 48 countries studied.
In identifying these major players, the physicists accounted for secondary ownership -- owning stock in companies who then owned stock in another company -- in an attempt to quantify the potential control a given agent might have in a market.
The results raise questions of where and when a company could choose to exert this influence, but Glattfelder and Battiston are reluctant to speculate.
More here: http://tinyurl.com/nv9ufv
Wally said............ do detect a
Wally said............ do detect a change in public opinion re Key and the govt though.
I got me a little suspicion Wally that we, myself included have been well n truly sucked in . Honestly I think we probably would have voted for A.J. or Mark Hubbard just to be rid of Helengrad and Dr (I'm not Telling) Cullen.
This Boy ...this boy is gonna carve himself a nice big piece of financial history and share the hangi with us as he does it.
No mistake bucko the C.E.O. is in the house... !!! I'll bet you a year and a half from now there's gonna be a lot of.... Oh holy baby Jesus what the f..# have we gone and done now.(me included)
Mark Hubbard said......Dean makes an extremely good point. For many small businesses, the owner's house is the only equity on which to borrow for their business, and many of these "˜home' mortgages, for sole traders and partnerships at least, may well be business borrowing. Is this taken into account in all the official analysis Bernard? Actually, how could it be.
Bollocks Mark the same rule you apply applies in reverse so go get.. your.. facts!!
Let me be the first to assure you that the banks are not lending for buisness interests at all , I've done the rounds first hand. as to remortgaging the home and redirecting the funds into the buisness, you will find the largest percentage of small to medium enterprise are already overcommitted mortgage wise.
Stick to your art ,
Stick to your art , Walter . You're more value to us as you are . We don't need any more wide-boys flashing the cash and speculating on property ; they're a dime a dozen in NZ . Enjoy your birthday !
@Christov, your absolutley right, should
@Christov, your absolutley right, should have thought to mention it yesterday.. but we have *many* cases (sadly I don't know the percentages, but I suspect its quite high) where business owners are using their homes as security to get loan. Would be interesting if some research was done into this, as some degree of "business" finance is showing up in the stats as "residential".
Chairman: <i>So you would sit
Chairman:
So you would sit back and let the market sort itself out so we can go round the block and make the same mistakes again.
What are you talking about! It is because the market is so distorted by the meddling of governments that it is not allocating resources in the economy efficiently.
As you say, Economics 101. Now you tell me why you believe the free market is not the best allocator of resources? What evidence do you have against the weight of the entire 20th century that governments allocate resources better than the market system? And do you understand the implications of this as it pertains to you being able to live a life free of State interference?
Christov:
Bollocks Mark the same rule you apply applies in reverse so go get.. your.. facts!!
I was going to say, 'Jesus there are some morons posting here.' But that would be a breach of the site's founding principle that we must be 'nice' to one another. ;)
How on earth could it be the reverse? I have clients who bring mortgages down over their houses, and use this to fund businesses, precisely because the house mortgage rates will always be cheaper than commercial lending, due to risk premium. There is nothing illegal about this, the banks do it knowingly, as they are covered because it is secured by a house, no different to putting the holiday on the house mortage - the business owner is simply using possibly the only equity they have. For tax purposes, it doesn't matter how a loan is secured, only what use it is put to, ie, as a house mortgage, private, or to fund the earning of assessable income. [Qualification to this: this does not necessarily apply to businesses structured as companies. Although a system of back to back loans, with interest being paid, claimed, declared, etc, can still be used.]
Let me be the first to assure you that the banks are not lending for buisness interests at all , I've done the rounds first hand. as to remortgaging the home and redirecting the funds into the buisness, you will find the largest percentage of small to medium enterprise are already overcommitted mortgage wise.
An intuitively divined blanket statement with no facts to back it up whatsoever, meaning, therefore, nothing.
Chairman: my point is, the
Chairman: my point is, the market cannot 'sort itself out', because the government won't let it alone to do so, it being, as you know, the State's only revenue generator.
Go to here: http://www.legislation.govt.nz/
And brief through the regulation and legislation that distorts our economy, and controls how we live. Set aside about ten years to read it.
Mark H..........Let me be the
Mark H..........Let me be the first to assure you that the banks are not lending for buisness interests at all , I've done the rounds first hand. as to remortgaging the home and redirecting the funds into the buisness, you will find the largest percentage of small to medium enterprise are already overcommitted mortgage wise.
An intuitively divined blanket statement with no facts to back it up whatsoever, meaning, therefore, nothing.
You are correct...!! and I believe just demonstrated my point in regard to your seleltion of (researched..?) facts.
As to the cheap shot........ calm down sonny , you'll have a much wiser ass looking back.
Christov: it's the strangest thing.
Christov: it's the strangest thing. I understand each individual word you have used, in your last two sentences above, but the way you have strung those words together, has left them somehow devoid of all meaning.
I have no idea what you are trying to say in your last post, other than, perhaps, my 'ass' (which is arse) is at the 'back' of me, to which I agree, yet can't fit that into any sort of economic argument, per my previous posts?
Mark H : I am
Mark H : I am one of the morons blogging on this site . And I can see alot to validate your points . And can see glimmers of truth in Chairman and Christovs views , too . Does anyone have a monoply on the truth ? As my old woodwork teacher used to say : " lads , opinions are like assh**es , everyone has got one , but you aren't obligated to stand around and listen to it being trumpeted "......Bless you , Mr Beardsley .
<i>Does anyone have a monopoly
Does anyone have a monopoly on the truth ?
Hell yes. The truth. There is a right and wrong, and an increasing cowardly failure to recognise that fact, which is a failure of philosophy, has led to the West wasting its former freedom loving, individualistic, humanist ethic, down the black hole of the Left's airhead Big State Liberalism (as opposed to Classical Liberalism, which, as a Libertarian, I am one).
Mark "I was going to
Mark
"I was going to say, "˜Jesus there are some morons posting here.' "
Sure are. The idea that increasing and/or creating new tax(es) will "correct the market" is just absurd. No system suggested (CGT, Land tax etc) has made any difference overseas.
If anything the playing field for investment has to be leveled. Removing the ability to treat rental housing as a business and its associated deductions would be a start.
mark h – you know
mark h "“ you know very well that the banks NEED the state to legitimise the money they create as sovereign currency with the status of legal tender. As such it is the state's right (and indeed duty) to poke its nose into the affairs of banks to ensure that they do not act against the national interest. If banks created their own currency (in whatever form) you might have a point. They don't, so you haven't.
Crab: I agree with your
Crab:
I agree with your first sentence 100%. I've constantly said in here how I am against the CGT. You don't correct distortions in the market through over taxation in one area, by creating new taxes somewhere else. You reduce the size of State expenditure so you can lower all existing taxes.
As to your second sentence, I couldn't be more against that. You can't argue for not distorting the market more in your first sentence, and then in the very next sentence argue for distorting the market in another way.
We just need to separate the State and the Economy.
neil, that national interest bs
neil, that national interest bs again.
But you've spotted the fact that it is Central/State bank, fractional banking that is the major cause of our problems.
The solution is a return to laissez faire, either back to the gold standard, which I know is scoffed at, but I've read some edifying articles lately that point otherwise, or:
If banks created their own currency (in whatever form) you might have a point.
Yeah, lets try that: it's called free banking, which worked in the 19th century - again, has had a bad rap, but recent articles I have read point to it having been quite successful.
... now I'm back to work. I've no more time for this.
Mark, I agree we need
Mark,
I agree we need to separate state and economy.
Look.
A person/couple on 100k odd can borrow 300k for a 300k investment property using existing equity and with the use of IR 23b"s can end up cash flow positive to the tune of around $75 a week even though the return might be 5% on the full price and they pay 6% on the full price to a bank.
Its only the deductions (depn etc) which make it into a worthwhile return and cash flow positive
Remove the deductions (the State created) and we are back to asking yourself,'Is 5% an adequate return for my money?"
I bet if people had to "top up" the cash flow shortfall most would not bother to invest in property as they will need too much "real" equity. (around 35% deposit is a rule of thumb)
When I say level the playing field I mean between property and other investments by reducing/removing the Tax distortion which makes property work.
See what I'm alluding too now?
You’re quite right Phil, the
You're quite right Phil, the housing sector is an economic stimulus. However, as you also pointed out, the use of borrowed offshore funding has totally distorted economic fundamentals.
Housing investment is becoming the new sin when it's the offshore funding that creates the fiscal imbalance.
Who is the government going to target? Property investors or the banks?
All indications suggest the investor will cop it (punitive tax deterrents for investing in property) while the banks will relatively get away scot-free. The fact that even Kiwibank is planning to borrow offshore says it all.
"Unproductive investment" generally relates to its (housing) limited potential to generate an offshore return.
Walter "“ happy birthday, may you live long and prosper.
Crabs got a nice delivery...!!
Crabs got a nice delivery...!!
It seems your a little upset right now Mark H ... so I'll give you a little rope.
This damned Internet thing, so
This damned Internet thing, so hard to get away from - my time sheet is a mess ...
Captain Crab.
I have some sympathy with your argument. Yes, the reason you give is just such a distortion of the market by government legislation that I rail against. This is precisely the problem.
However, I wonder how many property investors understand how that depreciation deduction often works. I have seen a 'lot' of cases where the depreciation has created a tax shield over the years of the lower personal tax rates (across esp. sole traders and partnerships), but then when depreciation is fully recovered on sale (and it always is), then that is taxed in a lump for the one year on their highest tax rates. Thus, use of money aside, often the depreciation claim works against them, even use of money factors aside. An LAQC will mitigate this only to the extent the depreciation recovered will be taxed at (previous to the 2009 year) 33% rather than 39%, but the effect is still there). I've advised many of my clients to file an election with IRD not to depreciate.
But yes, we agree, separate State and Economy.
Christov:
There is that theory of if you have an infinite amount of monkeys banging away at typewriters, for an infinite amount of time, then eventually they'll type the works of Shakespeare. I actually don't agree with this theory, for a very specific reason, however, your posts to me on this thread remind of it. Keep banging away, you might type something I understand soon. So far we have:
arse (spelled wrong) / back / rope.
..and because we are all
..and because we are all greedy humans -
..and because we work for our own interests -
..and "laissez-faire" and what that really means isn't that easy to understand -
..and to practice that today for tomorrow -
opps!
http://en.wikipedia.org/wiki/Laissez-faire
Birthday boy, this is nothing
Birthday boy, this is nothing to do with greed, or otherwise. Laissez faire is, as I've said before, not a zero sum game: in a true laissez faire market, both buyer and seller take from a transaction something of value, both gain. It's only when you have governments, thus rent seeking by crony capitalists on the Conservative side, and entitlements (to other peoples money) on the public sector and beneficiary side of the Big Lefty State, that your implied notion of greed, being this bad thing, begins to have any traction.
Laissez faire is about freedom, not greed.
(I think that answers your question. Although I have to say, your post is a little Christovesq).
Hey Hey Marky boy !!
Hey Hey Marky boy !! ...I'm as greedy as the next man when opportunity knocks , I just don't try to disguise it as me doin (deliberate typo) you a favour my son. (kind of Cockney) gees I'll be exausted trying to explain every pun to you.... so some clarity.
Your lefty inferences......toward me..? ......Wrong.
As I pointed out to your little friend... don't confuse social conscience with communism or any other lefty organisation you care to attach it to.
State interference in the market place....? only as a last resort and only when the average hard working middle class shmuck can't seem to achieve what we once took for granted in the course of his/her pathetic life.
The point of difference here my friend is it seems , that I am... not... living under the illusion that "The Banks" are representitive of the "Free Market"
What are you so afraid of here (this site) ,..that you so strongly feel the need to, shovel your shall we say, less than unbiased opinion, down our throats .
Ill remind you once again , it's near impossible to offer unbiased commentary while having a vested interest in the outcome.
oh by the way ...you missed selected in the spelling bee thingy .. you'll find they are just typo's as I said I only have TWO fingers !!
@ Mark In principle I
@ Mark
In principle I agree with you, but we aren't living in an idyllic world.
If a nation values anything more than freedom, it will lose its freedom; and the irony of it is that if it is comfort or money that it values more, it will lose that too.
S. Maugham
..and the consequences are regulations by the government.
..and some are good -
..and some aren't so good -
..and of course we call for more freedom.
@ W Kunz........... nice piece.
@ W Kunz........... nice piece.
Marky Boy...!!....Christovesq....I..............................
Marky Boy...!!....Christovesq....I...................................like it!
Can I use that,.. can I.. can I huh..?
Hey Chairman... great article back
Hey Chairman... great article back a few in regards to the big fish... damn good read!!
I recently came across your
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Susan
http://pay-dayadvance.net
Hi Susan : Welcome to
Hi Susan : Welcome to our blogging community . We share ideas . And generally annoy and stimulate one another . What is your contribution ? So far , you have just introduced yourself and advertised your business . That's shite around here . Either give a comment , or piss off ! Regards , the resident wanker .
Mark H : OECD report
Mark H : OECD report says that NZ has 16 % poverty ( however they define that ) . A sad indictement upon our financial system . But here's the kicker , Germany , which has entrenched socialism and high taxes ( i.e. Gumnut knows best ) , has an even higher proportion in the " poverty " bracket than us . Their welfare programmes heftily exceed ours...........Go figure . Michael and Helen were totally wrong .......As I've said before , socialism , ironically , hurts the very people it purports to help . And so , you are right , they are wrong , eat that !
NZMEA submission calls for systemic
NZMEA submission calls for systemic changes
The New Zealand Manufacturers and Exporters Association (NZMEA) presented their submission to the Parliamentary Banking Inquiry today, presenting the argument that New Zealand's monetary policy and tax framework has encouraged banks to circumvent the intent of Reserve Bank policy.
NZMEA Chief Executive John Walley says, "There is a case for banks to answer as issues such as their lending profile, the lack of pass through of OCR cuts on floating rates and excessive break fees have hurt customers during the recession. Our own survey on this matter found 86 percent of respondents supported an inquiry."
The submission outlined the major factors:
In the good times the ready supply of offshore credit allows the banks to continue lending at cheap rates in the face of a high OCR, feeding the property bubble and holding up inflation.
In the bad times banks hang on to all the margin and fees they can, keeping monetary conditions too tight for the tradeable sector.
The demand for credit is stoked by the tax haven status of land and buildings, which reduces the credit available to the productive economy.
"We are willing to pay more for debt so generally interest rates here are higher than elsewhere in the world. Overseas money flows into the housing sector, the exchange rate rises and our tradeable sector struggles to make a dollar today, let alone make enough to invest in improving future activity. This is a worrying sign for the future."
"The tax haven around capital gains is distorting what we do; it is concentrating wealth and killing growth "“ this has to change if we are to anticipate a general improvement in aggregate wealth."
"These long-term systemic issues are receiving some attention from politicians but we need to see some quick and decisive action. The reported recovery will not last long if our economic imbalances are not addressed."
The NZMEA submission and presentation are available at http://www.mea.org.nz/media/submissions.aspx
Have not shot any rabbits, yet. Treatment going well, although have been a little dizzy at times. Many happy returns Walter.
Cheers, Les.
Les : Miss you .
Les : Miss you . These guys get really mean when I poke the borax at them . Wishing you good health , and speedy return to God-Zone .
Iain Parker - Read your
Iain Parker - Read your Submission... Fantastic research. thanks.
Ian Parker - please urge
Ian Parker - please urge more participants on this and other relevant sites to read this...........submission linked earlier in the blog........... absolutley deserves more daylight. great research,great work. A big thanks!!
Les Rudd....... Read the NZMEA pres/submission....love it, thank you !
So one bank has already
So one bank has already slashed the floating rate. Does anyone think that there will be less emphasis on/demand for residential property investment/finance in the near future as Bernard's article would love to have in NZ ?
Christov - yep, it's why
Christov - yep, it's why I support NZMEA with some of my time and money. I can't be bothered to support industry, employers' associations, chambers of commerce that have little in common with my interests and who DO NOT support the productive economy. Did you see their submissions?
Anyway, an extract from the submission of our mates and NZMEA Affiliate Member, PEC:
"All banks see the market pull (housing) and know inflation creates a highly desirable lending environment as follows:
1) If inflation is under way then the value of physical security will increase (greater
security) relative to the requested loan and will soon allow increased lending
2) With inflation and thanks to New Zealand's monetary policy the OCR (Official Cash Rate) will increase and justify higher interest charges to borrowers
3) If the OCR goes up it further increases the margin spread attracting more foreign
capital and artificially increases the value of the NZD (relative to the underlying
economy)
4) While this longer term trend (increasing NZD) is going on Banks are trading the short
and long term positions and controlling inflows to ensure their positions are in the money
5) The problem/opportunity for the banks is inflow of capital has to find a home. It is this step that saw banks in 07/08 lowering their housing deposit percentages to zero
percent in an attempt to find new borrowers for the available capital
6) New 0% home owners entering the market, further fuelling the inflationary cycle and increases the wealth effect of all current home owners
7) Foreign Banks repeat steps 1 to 6 for as long as possible. When it's no longer possible they move to step 8)
8) When the OCR ramps to the point that lenders are under real pressure and the
market is clearly about to turn, then banks encourage borrowers to lock in current
interest rates for three years
9) Defend onerous break fees, reducing business lending while dramatically increasing
credit fees and margins as the export market turns down under the pressure of a high
dollar and high interest rates
10) Take large provisions to mask excessive profits
11) Fuel new lending to remaining credit worthy customers to mop up excess property
12) Reverse provisions and go back to step 1)"
Cynical so and so's huh.... (Good on em'). Check their website (www.pec.org.nz) for the full submission or the inquiry website given in one of the articles below. Apologies for linkiness, but enjoy.
1) Monetary policy reform needed, banking inquiry told
http://www.radionz.co.nz/news/stories/2009/09/03/1245c723bf53
2) Oral submissions conclude at Banking Inquiry
http://www.scoop.co.nz/stories/PA0909/S00044.htm
3) Banking inquiry submitters say money supply needs more controls
" A common thread through several submissions to the Opposition's banking inquiry was the need for new regulatory controls of the money supply." (Really, ya don't say....)
http://www.sharechat.co.nz/article/ebb05b35/banking-inquiry-submitters-s...
4) Manufacturers call for sea change
http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=1059...
And by no means least...
5) Bank defends rates to MP's
http://www.stuff.co.nz/national/politics/2833041/Bank-defends-rates-to-MPs
Roger - make sure it's only borax and not Borat, and all will be fine.
Cheers, Les.
@Les, great, but what change
@Les, great, but what change can we really expect? Zip IMO, and we all know why - the 10/50+ rule. Meaning, 10% of us invest (speculate, let's get real) in property, land, passive assets, but this interest is represented by more than 50%plus of parliamentarians. Do you really think positive change can happen? Look at the history, let's get real.
Dream on.
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