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RBNZ holds Official Cash Rate at 2.5% as expected; Bollard hints at easing unless NZ dollar falls (Update 7)
July 30th, 2009The Reserve Bank of New Zealand has announced it has held the Official Cash Rate (OCR) at a record low of 2.5%, in line with most economists’ forecasts. (Update 7 with Westpac economist Brendan O’Donovan saying the OCR is unlikely to be cut further and that hikes are likely from the third quarter of 2010)
However, Reserve Bank Governor Alan Bollard has kept the bias towards a further easing of the OCR below 2.5%, given any recovery is uncertain and patch. He also warned that the high New Zealand dollar needed to fall or he would have to reassess settings, hinting at further rate cuts.
“The forecast recovery is based on a further easing in financial conditions. If this easing does not occur, the forecast recovery could be put at risk. In these circumstances we would reassess policy settings,” Bollard said in a statement.
Bollard reiterated that he expected to keep the OCR at or below 2.5% until late 2010.
“We consider it appropriate to continue to provide substantial monetary policy stimulus to the economy. The OCR could still move modestly lower over the coming quarters. We continue to expect to keep the OCR at or below the current level through until the latter part of 2010,” he said.
Mortgage rates have been steady in the last two months after the Reserve Bank signaled it was likely to keep the OCR at or below 2.5% until late next year. However, term deposit rates for up to one year and for more than one year have been edging up since March as banks compete hard for term deposits in an environment where funding on wholesale foreign markets is harder to get and more expensive.
ASB economist Nick Tuffley said he thought the NZ dollar would remain strong over the next year, and that ASB still forecast a 25 bps cut in the OCR in both September and October, to bring it down to 2%.
The RBNZ has again reiterated that it is likely to keep the OCR on hold for an extended period, and beefed up its easing bias compared to the June Monetary Policy Statement. While rays of sunshine are appearing around the globe, for NZ there are still dark clouds hanging over its export sector. NZ did not feel the abruptness of the industrial slump that afflicted many countries, but instead the impact of a weaker global demand will linger for some time, particularly in the dairy and tourism industries.
The RBNZ noted its forecast recovery is based on a further easing of monetary conditions, notably the NZD. We continue to expect the NZ dollar to be strong over the next year, which does reinforce the prospect of the RBNZ having to cut the OCR further. We retain our view that the RBNZ will cut the OCR by 25bp in both September and October to try and engineer some easing in monetary conditions – a view obviously contingent on the NZD and wholesale rates remaining elevated.
Tuffley also noted that swap rates were down at 9:30 this morning from last night’s close, although the 90 day bank bill rate was unchanged.
In the interest rate market we observed a drop in rates, with rates down 5-10 basis points on yesterday’s close. The RBNZ has the door for further cuts remaining open – the market isn’t pricing this in yet, but the cautious statement has taken some of the enthusiasm for near-term hikes out of the market.
JP Morgan economist Helen Kevans noted that the RBNZ’s statement did not mention many positives, unlike the previous one, and despite a general lift in positive data lately.
There was no mention, for example, of signs of stabilization offshore or “upside opportunities for activity” as there was in the statement accompanying the last OCR announcement six weeks ago. Back then, the RBNZ acknowledged “a potential rebound in household spending and residential investment as a result of the rise in net immigration and the pick-up in the housing market”. We were surprised by the absence of such comments today as, in recent weeks, the data flow generally has printed on the upside of expectations – house prices have risen, confidence (particularly business confidence) has improved, and net migration ventured to a two year high in June.
So, as it appears, the RBNZ is reluctant to get excited about these recent, positive developments. Clearly, the central bank is becoming more concerned that consumers, amid signs that the prolonged downturn in the economy has bottomed, may revert to their old ‘borrow to spend’ habits. Recent RBNZ comments have highlighted the need for a shift away from debt-driven consumption as a key driver of growth. This, though, is a key argument for interest rates not to go any lower.
Westpac Chief Economist Brendan O’Donovan said the Reserve Bank was likely to focus on the domestic economy rather than the economy when push came to shove. The currency was not too over-valued, he argued.
If the market is overestimating the strength of the recovery, then the NZD is likely to fall of its own accord; and if the market is correctly anticipating the recovery then a stronger NZD won’t be enough to cancel it out.
Nor is it obvious that the NZD is particularly stretched at current levels. The currency is around its long-run average on the trade-weighted index; it’s slightly above average against the structurally weak US dollar and below average against the Australian dollar. While prices for New Zealand’s ’soft’ commodity exports haven’t matched the recent rebound in ‘hard’ commodities, they are still around their long-term trend in NZD terms – an impressive performance, considering that they have generally fallen below trend during previous, milder global slowdowns (Figure 1).
So while the threat of further rate cuts can’t be dismissed completely, we think the RBNZ will ultimately be guided by the outlook for domestic demand, the area over which it has the most influence. And if domestic conditions continue to improve at their recent pace, the RBNZ should be able to resist the temptation to deliver another short-term hit of monetary stimulus. As Dr Bollard’s speech noted: “Sustainable recovery, with rebalancing in demand and the economy’s productive base, is mostly a microeconomic matter.” A greater contribution to growth from the export sector would be nice to have, but it’s not essential for monetary policy.
The market responded to the more downbeat than expected tone to the statement, with two-year swap rates down by 14 basis points and NZD/USD dropping by 60pts to 0.6510 on the release. We expect these impacts to be temporary.
We remain of the view that the RBNZ won’t cut rates further in this cycle, and that rate hikes will commence in the third quarter of 2010. However, the recent mixed signals from the RBNZ make it harder to predict how long they will persist with their easing bias.
Here is the full statement from the Reserve Bank below.
The Official Cash Rate (OCR) will remain unchanged at 2.50 percent.
Reserve Bank Governor Alan Bollard said: “Despite signs of a leveling off in economic activity, the economy remains weak. We continue to expect to see a patchy recovery get underway toward the end of the year, but it will be some time before growth returns to healthy levels.
“The outlook remains highly uncertain. New Zealand’s merchandise exports are heavily weighted to soft commodities. As a result, New Zealand has not benefited to any significant extent from the rebound that has occurred recently in global hard commodity prices.
“Overall economic growth is evolving broadly in line with our forecasts in the June Monetary Policy Statement as the low OCR and stimulatory fiscal policy take effect. However, looking forward the level of the New Zealand dollar and wholesale interest rates are higher than assumed in our forecasts. The level of the dollar in particular, is not helping the sustainability of future growth, and brings with it additional economic risks.
“The forecast recovery is based on a further easing in financial conditions. If this easing does not occur, the forecast recovery could be put at risk. In these circumstances we would reassess policy settings.
“Annual CPI inflation is currently well within the target band and it is expected to track comfortably within it over the medium-term.
“We consider it appropriate to continue to provide substantial monetary policy stimulus to the economy. The OCR could still move modestly lower over the coming quarters. We continue to expect to keep the OCR at or below the current level through until the latter part of 2010.”
We welcome your comments below.
Tags: Alan Bollard, OCR, Official Cash Rate, RBNZ
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July 30th, 2009 at 9:14 am
Market reaction…NZ$ down.
Was it this bit: “The OCR could still move modestly lower over the coming quarters.” ?
July 30th, 2009 at 9:22 am
“expect to see a patchy recovery get underway toward the end of the year, but it will be some time before growth returns to healthy levels” “patchy” “some time” and what the hell is “healthy” Haaahhahahaha oh dear what a laugh. Quick John, rush those immigration changes through and let’s have us an advert blitz to drag in the Britz.
Anything to be able to trot out some growth stats, especially with the 2011 election approaching fast. “Must not let the peasants think they are in a depression.” “Got to employ more consultant spin doctors to drive the strategy message home, oops forgot about the peasants not having affordable homes.”
July 30th, 2009 at 9:29 am
as long as it is low in 14 months is all that matters – well for that particular mortgage anyway…
good to see he stood by his word, that should increase confidence on floating and short term rates for quite a while
i feel a sell one buy two moment approaching before years end…
July 30th, 2009 at 9:46 am
Bolly you have been benign to the point of redundant. Return to your office and await further instruction.
July 30th, 2009 at 9:54 am
Ha Ha Ha ….still wagging his finger…and only just !!
That’s all he can do?? The NZ$ will drop a little from profit taking but will soon go on the way to the moon again. If he cut cash rate later (to teach the currency speculator a lesson ??) it will only cause us to borrow more (from overseas) to buy a few more rental props and the currency goes up again …. it’s like a dog chasing his own tail…fun to watch for a while but after that it’s just tiresome.
NZ needs higher interest rate (not lower) and a lower currency (not higher)..the two don’t mix…just what should RBNZ do ??? Don’t know ?? Then sack the whole lot !!
July 30th, 2009 at 9:57 am
Christov.
Superbly concise:
July 30th, 2009 at 10:04 am
Wally,words out in Pomland that NZs not the land of milk n honey.There having a pop at Canada!!
July 30th, 2009 at 10:09 am
I give up!President of Property must be right.
Talking to an Auckland friend last night; she’s just lent her son another deposit on his second investment property. “It’s going off in Auckland, Don’t miss it !’
Her son is 21.
July 30th, 2009 at 10:10 am
Just got this from Dan Denning in his website :
Is this the reason why our property prices don’t seem to be rational ??
“The destruction of bank collateral is what’s behind the shrinking of bank profits and balance sheets. The largest part of Aussie bank collateral is in property, especially residential property. If banks don’t keep lending to the property market to support demand and prices, prices will fall, damaging bank collateral and forcing the banks to tighten credit (housing finance) which leads to even further house price declines. Vicious circle. Feedback loop. Take your pick.”
Read: http://www.dailyreckoning.com.au/glenn-stevens-says-australias-economy-has-been-travelling-better-than-others/2009/07/29/
July 30th, 2009 at 10:11 am
I think this entire year has shown that the RBNZ has almost no control over the NZD. The market is in full control over the NZD. Bollard is full of sound a furry signifying nothing. He would have to fully decouple to have any control at this point.
July 30th, 2009 at 10:45 am
Re Mine 10.09am:
It’s not just NZ ! This from a blog across the ditch ( or is that dutch)
“Comment by Nirvan on 29 July 2009:
True Ned S and I think universities should stop teaching most courses like the sciences . What use will that come to when you can buy land and sit on it. 18 year olds get into debt early these , not HECS debt but property debt (negatively geared) while they stay with parents.”
July 30th, 2009 at 11:14 am
JP Morgan Economist says:
“There was no mention, for example, of signs of stabilization offshore or “upside opportunities for activity” as there was in the statement accompanying the last OCR announcement six weeks ago. Back then, the RBNZ acknowledged “a potential rebound in household spending and residential investment as a result of the rise in net immigration and the pick-up in the housing market”. We were surprised by the absence of such comments today as, in recent weeks, the data flow generally has printed on the upside of expectations – house prices have risen, confidence (particularly business confidence) has improved, and net migration ventured to a two year high in June.”
Perhaps the reasons Bollard didn’t mention these is that these factors have been totally hyped out of proportion by Bank Economists ????
Or perhaps, more likely, he doesn’t want to talk up the NZ economy because he wants the dollar to fall?
not rocket science JP Morgan!!!!
I give up with economists
July 30th, 2009 at 11:27 am
Would agree with the general comments here that is seems that the main motivation was to talk down the kiwi dollar, although any drop is likely to be short lived since deposit rates are still attractively high to international investors.
July 30th, 2009 at 11:35 am
Slightly cynical there Wally ( @ 9.22am) !! although I do agree. Labour did the same thing last time after getting elected in ‘99, suffering through a recession, and trying to quickly make things “appear” to be improving by the ‘02 election. And around we go again…….. !
July 30th, 2009 at 11:35 am
sorry, sticky click button posted twice….
July 30th, 2009 at 11:59 am
George: hahaha
mad….
July 30th, 2009 at 12:02 pm
Matt S: deposit rates or the debt the investors can buy? My limited understanding is investors can buy packaged debt eg credit card debt and get far higher interest/return?, since we still seem to be spending on the never never I would assume this is far more attractive. Deposits are a joke when you take into consideration true inflation….
regards
July 30th, 2009 at 12:07 pm
George – brilliant 21st birthday present!!!!
“Here you go son, have a property that is returning 4%, deal with scummy tenants, pay rates, and enjoy minimal if any capital gain over coming years”
“Thanks mum, you are so kind. I’m looking forward to becoming a property tycoon by age 26″
July 30th, 2009 at 12:10 pm
He is right not to mention housing as it is incredibly quiet out there at the moment, looks like that pent up demand has been partially satisfied. Westpac would not be offering the mortgages they are if the market was humming along.
He seems to be doing the right thing though in tightening up bank lending by changing prudential settings and trying to help exporters by keeping rates low and may head lower. A better mix of settings than he has shown over the last 5 years.
July 30th, 2009 at 12:14 pm
Me, slightly cynical! Gosh. Kin you can see why Key and English have washed their hands regards any effort to save the fools who have splurged on property chasing stupid pirces. They are looking to save the banks and nothing else matters. The long term outlook is for higher rates and therefore greater pressure on the overleveraged peasants. The plan is to spin the ’strategy’ blather for all it’s worth while trying to drag in the foreign loot through a “citizenship rights for money” deal. Can’t see it as being too successful because anyone with a few million and half a brain in the northern hem will be checking out the local bargains while enjoying the sun in the Med on the private yacht. Who would toss that away for the dubious delights of Noddyland when you can afford to flit down here whenever in a burner.?
July 30th, 2009 at 12:14 pm
Summary: he doesen’t see any upside risk for at least another year, but potential downside if the dollar doesen’t fall, but who knows what will happen there, none of the experts do. Also he is pretty much bound by what Australia does.
Matt – well put pretty much what I was thinking when I read that post.
July 30th, 2009 at 12:21 pm
Even if he dropped the OCR to zero, it is not going to affect the dollar much. Doesn’t he know that the NZD is a commodity currency, and the OCR shouldn’t be used to try to reduce the NZ dollar. All he is doing by keeping the OCR low, is discouraging saving and encouraging borrowing, even though Bill English has said that we have no hope unless NZers saved anf stop borrowing.
July 30th, 2009 at 12:25 pm
The Kiwi peso down a cent to US 65 c. And that’s why Wooly Bully Bolly gets the $ 500 000 p.a. Money well spent !
July 30th, 2009 at 12:29 pm
Matt in auck,
“Here you go son, have a property that is returning 4%, deal with scummy tenants, pay rates, and enjoy minimal if any capital gain over coming years”
“Thanks mum, you are so kind. I’m looking forward to becoming a property tycoon by age 26″
Could not agree more. My index funds on the ASX and global shares are up 21% from early this year when I started investing. Its a no brainer really, 7-8% yield and the only cost is 0.5% fees. Housing might gives 4-5% yields before costs (rates, maintenance, insurance, not to mention time (or cost of a property agent). And remember, the yields get worse as the property becomes more akin to something you would actually want to live in. The false dawn for property (and there is one happening in Aus as well), is nothing more than a sad consequence of lemmings able to borrow more via artificially low rates. I am expecting volatiltiy in shares, but if dividends are 7% at the very least it means most companies expect to be returning a certain income relative to the price. Nothing is certain but I would be very surprised if over the next 5 years shares did not at least recover half of their loss – that would add up to a 35% gain in dividends and another 30% capital gains. Housing – best case scenario is flat to inflation adjusted gains.
July 30th, 2009 at 12:29 pm
‘Roger Thompson Says:
July 30th, 2009 at 12:25 pm
The Kiwi peso down a cent to US 65 c. And that’s why Big Bully Bolly gets the $ 500 000 p.a. Money well spent !’
Well it must have risen a.25 cents since you posted. It will be back to over 66 cents in a few days, as you always get that ‘panic’ drop after an announcement, but it always recovers.
July 30th, 2009 at 12:55 pm
re interest rates, an interesting dynamic was introduced recently. Bollard introduced new rules which require banks to borrow more of their finance long-term. This is to reduce the volatility from Lehman-type meltdowns in the future. Jolly good
But what is this going to do to interest rates? Will overseas investors want to put $$ into NZ long-term, considering our volatile exchange rate etc? Will it tend to push deposit rates for term deposits higher as more domestic money is needed to fill the gaps? If there is more need & return for domestic funds, will this suck out $$$ from the overblown NZ property market? Is this a way of increasing saving rates & reducing spending? And finally (& more pertinent to today’s OCR announcement), is this an effective tightening of monetary policy?
Is there any reason to think that the answer is anything but a resounding “Yes!” to all the above questions? (except for the 2nd one)
July 30th, 2009 at 1:21 pm
Jimmy, I am right with you there .. returns on my funds and equities have blown the socks off anything I could have seen from property.
.. as you say its a ‘no brainer’ really… which is why I find it strange that the ‘no brainers’ are still investing in property !!
July 30th, 2009 at 1:30 pm
The no brainers who are buying property are mum and dad investors, who have been burnt by the very poor rules and checking on the failed NZ finance companies.
However in 10 years when they need to liquidate, they could end up losing a lot of money, due to the lack of capital gain.
July 30th, 2009 at 1:31 pm
Matt S – its not strange at all
The masses are often deluded on all sorts of things, including tastes in music and fashion, voting behaviour AND PROPERTY
July 30th, 2009 at 1:42 pm
Matt S,
I suspect its because the ‘no brainers’ are being controlled by other forces ie they are not even aware of other possibilities and the relative risks/benefits. They have been manipulated and spat out so much by previous self interested financial advice that they wont believe any one anymore, even those telling them the truth. If you told them shares were returning 100% a month they would not believe you even if it were true. So they stick with what they know, and thats property. They will only change when they get woken from their stupor by the inevitable crash.
July 30th, 2009 at 2:51 pm
Just had a chuckle re: Tony Alexander’s latest views:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10587627
July 30th, 2009 at 3:03 pm
“We have a supply-demand imbalance at current prices with insufficient dwellings. Thinking of three such wayward pundits in particular – one needs folk clicking on a website to earn revenue so his motivation is clear. Another sells books – so his motivation is also clear. Another has been wrongly predicting a housing
market collapse since at least 1988 when one first attended one of his talks.”
Wayward Bernard?
Insufficient dwellings? Only according to TA’s “anecdotal research”. ANZ are of the view that we have an oversupply of houses
Oh yeah, TA’s bank doesn’t have any motivation to talk up housing now do they???
TA again:
“Speaking of affordability measures – keep in mind that they give zero insight into where house prices are going and are only really useful for voyeuristic commentary on the pain those on lower incomes might be experiencing trying to get into the housing market”
What crap! there is a logical limit to how far house prices can be divorced from incomes so affordability measures ARE relevant as to where house prices will go, although they of course are not necessaily a determinant
“There is another who are straight down the middle of the road and produce excellent research – but their forecasting is not flash – especially when it comes to
financial variables.”
The BNZ’s forcasting hasn’t been too flash either, just quietly. Predictions late last year of the exchange rate this year have been way off the mark
And TA’s housr price prediction? Firs tof all it was for flatness. then it was for drops of 5-10%. Then when the falls got close to 10% he speculated a fall of perhaps another 5%
Now he has revised down again to no further falls
If you call that accurate forecasts….
July 30th, 2009 at 3:10 pm
and he is now predicting prices to “edge higher”
July 30th, 2009 at 3:11 pm
Who is Tony Alexander?
July 30th, 2009 at 3:30 pm
In 1986 I had a customer who was so convinced there would be a correction to stock market that he sold everything he could. Obviously all his, and his company’s share holdings; hegded his stock options; sold his house in Toorak…eveything…Nothing, but up, up,up…In July 1987, before he went on holidays he relented and took his loss and bought back in. Neeldless to say, he went belly-up; so eventually did his (very large) public company.
The next few months, MattinAuck, will be some of the toughest descison making parts of your ( apparently) young life….
July 30th, 2009 at 3:32 pm
Wally : “Who is Tony Alexander ?”……he’s a wally !
July 30th, 2009 at 3:51 pm
At least TA makes a compelling arguement with reasoned analysis as opposed to some of the mindless drivel spouted by the 3 or 4 people on here screaming and praying for the collapse of the housing market to teach people a lesson.
TA has access to more data than pretty much anyone else commentating, for a start. 2nd if you have a rising population they have to live somewhere and there is a very clear correlation between population/house prices/supply of dwellings and he is correct in that the supply has not kept up. This is nearly entirely due to LOCAL government not releasing enough land and or making sure property owners who sit on developable land have the correct incentives to develop it.
IT HAS NOTHING TO DO WITH LACK OF CGT otherwise NZ would be one of the only countries with accelerating house prices, its not.
Income relations to house prices clearly are not correlated as has been seen in the last 7 years, clearly if it became too extreme something would give.
The clown peddling his book for the equally stupid SST provided NO reason for his supposition. I remember him calling for a 30% price decline a few years ago. Take an AD out next time you want to flog your rubbish, its well known how badly he got burnt in property circles.
July 30th, 2009 at 4:06 pm
So this Tony Alexander, whoever he is, is saying that the reserve bank governor (who is paid half a million per year) is wrong, when Bollard said that house prices would fall around 20%, and that house prices are greatly overvalued. These people who make these claims that the professionals are wrong, always have a conflict of interest. eg Realestate agents, bankers etc. who are trying to sell a product, and will always defend that product,
July 30th, 2009 at 4:10 pm
I read this article the other day, unbiased bank economists- yeah right.
http://www.nzherald.co.nz/australia/news/article.cfm?l_id=15&objectid=10587236
July 30th, 2009 at 4:14 pm
Tony Alexandra is the man who got it right when all you lot got it wrong!
July 30th, 2009 at 4:32 pm
Paul : Did I get it wrong. The wife says I do………..always………..hang on, which ” it ” are you referring to ?
July 30th, 2009 at 4:53 pm
Rob : the Kiwi peso closes trade in NZ at 64.99 c US ! ………..Wooly Bully Bolly……go Wooly Bully……For only $ 500 thou/ year, we are saved………I sleep soundly at night, knowing such skilled hands are upon our levers of finance !
July 30th, 2009 at 5:09 pm
David
I disagree
TA frequently relies on anecdotes – hardly scientific
He claims there is a housing undersupply, with no analysis to back it up. ANZ actually did some proper analysis, they found there is actually an oversupply of housing
Also TA harped on for several months about big migration gains without looking at the details of the gains (ie .fewer kiwis leaving rather than more immigrants coming in). About three months after I had been making such comments on this website he recognised this fact in one of his weekly bulletins.
But its not just tA. I don’t rate the other bank economists either, with the exception of the ANZ who I think provide very balanced and insightful analysis
July 30th, 2009 at 5:11 pm
Reserve Bank waits until September
The Reserve Bank has left the Official Cash Rate unchanged at 2.5 percent this morning. The New Zealand Manufacturers and Exporters Association (NZMEA) say that this move has effectively delayed further action on our economic recovery for a further six weeks.
Reserve Bank Governor Dr. Alan Bollard noted that, “The level of the dollar in particular, is not helping the sustainability of future growth, and brings with it additional economic risks.” He went on to say, “The forecast recovery is based on a further easing in financial conditions. If this easing does not occur, the forecast recovery could be put at risk. In these circumstances we would reassess policy settings.”
NZMEA Chief Executive John Walley says, “We take this to mean that if we do not see a fall in the currency the Reserve Bank will cut the OCR again; our question is why wait?”
“Economic growth is being hindered by the exchange rate and wholesale interest rates and attempts to talk them down have clearly failed. Action is needed; we are losing export revenue every day these conditions continue.”
“The decision to take no substantive action is difficult to understand when results from across our export sectors remain poor. Just this week the Prime Sawmill in Gisborne announced its imminent closure due to a high dollar. The high dollar is threatening jobs everywhere.”
“The OCR has now shown itself to be an ineffective tool at both ends of the economic cycle, and its side effects on the tradeable economy have been a disaster. An additional tool to control the volume of credit needs to be added by the Government. In the short term however, it is important that the Reserve Bank reduces the OCR to try and deliver better conditions for exporters, and ultimately everyone.”
Too right – “The OCR has now shown itself to be an ineffective tool at both ends of the economic cycle, and its side effects on the tradeable economy have been a disaster.”
C’mon Bill – change…
July 30th, 2009 at 5:11 pm
“Experts have spent years developing weapons which can destroy people’s lives but leave buildings intact. They’re called mortgages.” Jeremy Hardy
July 30th, 2009 at 5:39 pm
I agree with Mr Walley! “An additional tool to control the volume of credit needs to be added by the Government.” in fact Wally has been on about this for yonks. Trouble is, throttling the credit supply requires decisive action, not something the govt is too keen on especially when it might hurt bank profits. So we plod on toward the cliff edge, regardless of the FACT that property is unaffordable, the banks are free to sucker one and all into big fat mortgage debt.
July 30th, 2009 at 5:51 pm
Kin at 10.10 gives the explanation for Tony Alexander and all the other bank economist’s recent ramblings on property. The banks are desperate to keep the market up or at least steady. They may also have a worried eye the commercial property markets overseas.
July 30th, 2009 at 5:54 pm
The NZ dollar is only vollitle against the US dollar, all other currencies, it is relatively stable. Doesn’t Bollard know that the $NZ is a commodity currency for traders, so lowering the OCR more, won’t have any effect. It may drop a bit for a day or so, but it will climb back up a few days later. I think he is all talk, and he has no intention at all of dropping it any further. If he does, it will also show that he doesn’t think the recession is over. I think he should ahve risen it by 25 basis points, to show the market that the worst could be over. That is if he really believes the recession is over.
July 30th, 2009 at 5:58 pm
Ross, kin – Andewj making similar point here on NZ rural:
http://www.interest.co.nz/ratesblog/index.php/2009/07/27/struggling-dairy-sector-to-hit-recovery-further-downstream-anz-warns/#comment-31231
This site can be scarey at times.
July 30th, 2009 at 6:11 pm
We need to cut back on imports, increase the marketability of our exports, and get back to basic saving and investment in real production rather than paper wealth like property…
The only way to do so is give the RB back some of their tools, and get the dollar down to the 46 to 50c with the US dollar ASAP… it has always dropped to this area when the proverbial hits the fan, giving a good kick start to recovery…
Which leads me to a question……what would drop the dollar, and hold it there for 6 to 9 months?
July 30th, 2009 at 6:16 pm
Steps, if the Aussies spud into a lake of sweet crude off Taranaki, the Kiwi$ will be at parity to au overnight and therefore about 82uscents! A very real possibility. What would that do for overleveraged exporters earning in US$?
July 30th, 2009 at 6:18 pm
I went to work in the USA in 1981, I was 19.The dollar was %1.05 to the US $. We were getting top dollar for our beef, dairy was going well as was lamb. Why could we do so well then but now flounder around when our $ is only worth .66c.
July 30th, 2009 at 6:29 pm
Rob, well said. The currency fluctuations have largely been the volatility of the US, the Aussie, Euro, and GBP cross much more sedate. The Governer has other tools he can use to control excessive lending and he has been in a slow, steady and measured way but I think he should have cut today by 50 basis points to try and decouple us in a small way from the Aussie.
Matt in Akl I havent seen what has been produced by the ANZ, but its really hard to take seriously that houses are overvalued when we have been in recession for 18 months now, we have suffered the biggest worlwide financial shock in 60 years etc etc etc and yet here we are with demand returning quite vigorously. Mainly first home buyers too.
I have a rental I was paying 10.7% on a year ago and now it is fixed with the BNZ at 4.99%, things are looking pretty good and I couldnt give a stuff what it was worth as its an investment so I might check the value in a decade or so.
July 30th, 2009 at 6:31 pm
Andrewj Says:
July 30th, 2009 at 6:18 pm
I went to work in the USA in 1981, I was 19.The dollar was %1.05 to the US $. We were getting top dollar for our beef, dairy was going well as was lamb. Why could we do so well then but now flounder around when our $ is only worth .66c
Because NZ is wanting to artifically drop the NZ dollars value, to create the ‘illusion’ to farmers selling milk, that their milk is worth more than it actually is. However a lower NZ dollar, means we have less buying power overseas. They would be better to reduce the milk price, to get more people buying. This all goes in cycles.
July 30th, 2009 at 6:31 pm
Steptoe
Which leads me to a question……what would drop the dollar, and hold it there for 6 to 9 months?
Electing Phil Goff with Cunliffe as finance minister
July 30th, 2009 at 6:42 pm
David,
“IT HAS NOTHING TO DO WITH LACK OF CGT otherwise NZ would be one of the only countries with accelerating house prices, its not.
”
You completely miss the point. No one said CGT would rule out bubbles – merely that it is a disencentive to speculate on capital gains and therefore REDUCES the magnitude of the bubble. Do you honestly think that investors are not going to consider the impact of tax on an appreciating asset. If you dont you are in cuckoo land.
NZ’s housing bubble IS significantly worse than most of the rest of the world that have CGT (eg UK and the US). NZ is on a par with Aus. Aus does have a CGT but this was HALVED under Howard so its impact was reduced. As outlined many times before, many commentators see this as a contributing factor to the Aus bubble.
July 30th, 2009 at 6:50 pm
Rob,
I thought it was because our inflation rate was continually above those of our trading partners?
If the $ is bad at .70 good at. 55 it must be fantastic at .30 and awesome at.10
July 30th, 2009 at 7:05 pm
It is just a pipe dream to control NZD, when the volume of NZD traded is so huge. Black swans are on to NZD trade…..
July 30th, 2009 at 7:28 pm
I posted this on another forum with some typo’s here is the update..
I am new here. First post, I moved here from Canada where our OCR is .25% and our dollar is nearing parity with the USD (92 cents today) we are their largest trading partner too.
I can’t beleive some of the posts regarding OCR and exchange rate.
I may be totally missing the obvious..but looking at the NZD in comparsion to the USD and all the talk and hot air about a lower dollar and about exchanges hurting everyone seems now seems way overblown.
Big deal NZ has a 65 cent dollar.
Has everyone forgot the past years?
Eg.
Mar 2008 the NZD was 81 US cents
July 2007 the NZD was 78 US cents
April 2006 the NZD was 71.5 Us cents
I could go on but the NZD is at a average 5 year low against a currency in trouble and in decline.
Interest rates are at record lows too. Below Oz for the first ever I believe.
How did NZ possibly cope then when interest Rates were high and exchange rates were high compared to now?
What is that makes the USD/NZD at 65 cents so horrible in comparision to the past 5 years?
It seems to me the NZD at a below average 5 year exchange rate and the USD in a in death spiral is not something NZ want to keep up with..why join them?
I agree with some of posts here the RBNZ does not control the exchange rate.
They should raise the the OCR at least 1% above Australia, stop penalizing the very people they are try to encourage to save. Stop the save more spend less rhetoric..
A big plus is all the pensioners and savers who rely on their savings interest would start getting reasonable returns again which would in turn save taxpayers $ in welfare benefits, pensioners could probably survive, banks could raise capital and it would help our elderly and retired day 1.
Everyone seems to agree the the OCR does not have any effect on the exchange rate or even interest rates charged but banks.
If the OCR dropped to 2 % it may benefit short term property owners but it WILL pensioners who live on their savings. Things would cost less (imports) Savers would have more dispoabale income and start to spend again helping the local economy, bank lending rates seem detached from the OCR anyway.
Maybe I got the the wrong idea but I thought the the rbnz wanted to discourage excissive borrowing and encourage people to save more.
If so why don’t they put they put their money where there mouth is, talk is cheap.
A 49 cent dollar against a declining currency, 2% rates really, NZ’ers want this?
What is the end game.
Instead of raising taxes, raise the OCR, stop penalizing the savers if that is really the plan and a social safey net that is public funded may not need to be as big as it will.
Let the banks pay our seniors and savers not taxpayers.
What the rbnz have to lose?
Control of exchange rates? Control of Interest rates?
July 30th, 2009 at 7:36 pm
David,
“I havent seen what has been produced by the ANZ, but its really hard to take seriously that houses are overvalued when we have been in recession for 18 months now, we have suffered the biggest worlwide financial shock in 60 years etc etc etc and yet here we are with demand returning quite vigorously. Mainly first home buyers too.”
hmmm – maybe its got something to with the fact that the RBNZ has artificially deflated interest rates to historic lows. Do you expect these to be this low for ever?? And unemployment has a long way to go before it has peaked. It is a “lagging” indicator. Allowing for long term rates of 8%, despite the 10% drop in housing, it is still 2-3 times as expensive to buy a house v rent. Even allowing for currency conversion, NZ now has a more expensive median than the US – and they earn > twice us. NZ has a Current acct deficit of 8.5% that will only get worse when rates rise again. Our economy is a basket case, we have rapidly increasing debt and no good ideas let alone a productive enough economy to repay it – if you think one of the poorest countries in the OECD can somehow mange to maintain one of the highest house prices in the OECD in the long term then you are dreaming.
July 30th, 2009 at 7:44 pm
John John,
Good points. You forget that the RBNZ are idiots, or at the very least seem to think its a bad thing for imprudent borrowers to wear the cost of their foolish decisions and therefore it makes more sense to put the burden on those who are sensible (savers). We have parents who reward Johnny for eating too many sweets and not doing his homework, and punish Timmy for eating his greens and washing up. Is it any wonder the average NZer is a basketcase when it comes to investment decisions. Sweets may be bad for your teeth, but it beats getting belted on the backside. Eventually the teeth will rot away but we dont want to think that far ahead.
July 30th, 2009 at 8:02 pm
Banks trade our dollar at 118 times our GDP why? Australia is 65 times, Korea 9. You think thats because we have the best economy in the world or perhaps you think its because they just like seeing those kiwis pass them by.
Can anyone tell me why we are the “lucky currency” that gets traded so often?
I think it’s called FX trading and being such a small economy we can and are being manipulated by the ever gratefull traders at our friendly banks.
People wake up, we are being played! and it’s killing our economy.
July 30th, 2009 at 8:02 pm
Hi everyone!
Anyone seen the new safety ad on TV where the freight train collides with a car on a level crossing?
Word is they show part 2 at Nat convention on sat .
BUT guess what’s being substituted for the car ???
July 30th, 2009 at 8:24 pm
Simon 7, I wish it wasnt that serious but it is.
Matt you said: Perhaps the reasons Bollard didn’t mention these is that these factors have been totally hyped out of proportion by Bank Economists ???? Or perhaps, more likely, he doesn’t want to talk up the NZ economy because he wants the dollar to fall?
Matt what’s the difference between Enrons Energy traders, Morgans Oil Futures traders and Bank FX traders.
Not a lot.
One says, “we are out of generation capacity and demand is exceeding supply” and the price goes up.
The next says “Unprecedented demand” (while demand falls) and the price goes up.
And the FX traders say the economy is “up today” and tomorrow “sorry down today” and make it as unstable as possible but always taking a position that benefits what they are just about to say.
The difference is the banks as a whole have a long term interest in lifting the exchange rate as they get a double hit as they revalue their loans / capital. So the trading is never natural it always has an upward bias.
July 30th, 2009 at 8:48 pm
John John
Welcome to NZ and a Quick NZ economics lesson:
NZ is heaviliy dependant on exports, especially commmodity exports and tourism.
Both prosper when the NZ dollar is lower.
Because commodity prices have dropped so much, the hope was that a lower dollar would help counteract the adverse impacts of these price drops.
“How did NZ possibly cope then when interest Rates were high and exchange rates were high compared to now?”
When interest and exchange rates were high the NZ economy was booming like the rest of the world. Commodty prices were high so it didn’t matter so much. Furthermore, our domestic economy was red, red hot, largely on the back of a massive housing bubble. I don’t need to outline how sick our domestic economy is now.
July 30th, 2009 at 9:01 pm
Hey I have work next week. That makes 4 weeks in a row this calendar year. Best so far this year, and July-August is a floorsanders quiet period. Maybe things are getting better.
July 30th, 2009 at 9:03 pm
Jimmy – the current account defecit at 8.5% is Icelandic in size and you might want to send Key and English a Christmas card this year, if Labour were re-elected I would have been selling up and off like a shot because we would have been crucified. I dont think NZers as a rule understand the imact Key has had with the credit rating agencies and our overseas debtors. The guy at the ANZ reckons Key saved him 75 basis points on a US bond issue and was pivotol in seeing the issue filled.
You do have a productive economy, you do have some of the smartest people on earth, you have created an amazing economy on the back of growing protein at the bottom of the earth. The sky is not going to fall in because things aint that bad here, we only got carried away at the fringes because generally we are a conservative lot. I have spent the last 3 years clearing up a 200 million dollar loan book, trust me the worst has passed and we survived.
July 30th, 2009 at 9:05 pm
Andrew say this and if he is right…..why is the dollar going up?
Andrewj Says:
July 30th, 2009 at 5:40 pm
Well looks like farm debt is up nearly 600 million for the last month. More than double housing. In one year farmers are borrowing more than Fonterra sells in a year.
Interest payments leaving the country to offshore banks are increasing at 60 million a month. This is becoming a major problem,there are no new conversions this is pure organic debt to cover losses. Borrowed to pay the interest and its compounding.
I talked with a bank manager this afternoon, many of his dairy clients have costs in excess of $5.60 a kg milk solids. I was bold and went for the kill, stating my belief that the Aussie banks which included his were broke, he agreed.
Farm debt growth is happening because the alternatives are frightening especially to firms Like SCF which is rumored to carry a lot of short term dairy conversion debt from North Canterbury and National bank which is heavily exposed to high risk conversions.
July 30th, 2009 at 9:44 pm
David you said: I have spent the last 3 years clearing up a 200 million dollar loan book, trust me the worst has passed and we survived.
National debt as percentage of GDP is now 98%. That’s world class debt!
I try not to defend any party but your comments re Labour and Key might need some tempering.
Labour reduced government debt to GDP from an inherited 42% (from memory) to around 17% just prior to the crash and it was still around 20% when National took over. So it wasn’t government spending that caused the issue it was private sector debt. National had a good balance sheet to play with as a result and English and Key will reluctantly agree.
As for JKs performance: Productivity begins and ends with control over the banking sector and monetary policy and that has not been addressed. Every 1% lift in the exchange rate is $200 million out of our economy. Think how many companies have to be born to replace that $200 million in exports and where will they energy and capital come from right now.
I am not interested in cycle ways or how fast we shuffle paper I want serious changes and I have yet to see that.
Labour cost to the country was lost opportunity, where we could have been if they had a little more vision and courage. But the first thing National did was to can the R&D tax credit!!! JK can’t talk us into the top half of the OECD when our economy is primary products and tourism. No amount of productivity in these areas will lift us out of the bottom of the OECD. We need fundamental change not tweaks.
July 30th, 2009 at 11:37 pm
Another person in agreement Selwyn:
http://www.interest.co.nz/ratesblog/index.php/2009/07/27/struggling-dairy-sector-to-hit-recovery-further-downstream-anz-warns/#comment-31275
July 30th, 2009 at 11:56 pm
David,
The disaster in NZ is not with our banks and corporates whom you may have cleaned up – in fact our strong banks are in my opinion symptomatic of the real problem ie they are the beneficiaries of stretched households. The real disaster is household debt. As a proportion of GDP it has tripled over the last 15 years. It will contine to sky rocket as long as house prices remain high because more debt will be incurred by new FHBs than is being paid off at the other end of the ladder due to higher house prices now relative to 20 years ago. The worst is not over. It is one thing to have an economy where only 15% of mortgage holders bought into an inflated asset. That is what currently exists. In 10 years time 60% of mortgage holders will have bought into inflated assets (if there is no crash). We will go from having bottom heavy debt, to heavy debt all the way through to the top. The impact on households discretionary spend will therefore be reducing at an exponential rate, and interest payments to overseas creditors will also contine to increase at an exponential rate. EVERY YEAR houses remain at 6.5 time median houses (as opposed to 3.5) is another year where a new batch of FHBs needlessly take on an extra 250,000 in debt, and piss about 20,000 per year more than they should overseas. The impact of this is already obvious in our burgeoning current account deficit. Our tradeables have improved since 1990, interest payments on bigger mortgages is the culprit. The situation is likely to get WORSE. If we have a crash it will stabilise, but not improve till we become more productive. In short, WE ARE IN THE POO. The only possible way to get back on track is a big housing crash.
July 31st, 2009 at 7:39 am
Jimmy
Yes NZ is in the Poo. I feel sorry for the younger generations that have enormous pressure to exceed (or at least live up to the naive dreams their parents had for their kid’s future). It’s the whole pension fraud/welfare state that is the problem. I am not blaming a generation in particular – just lack of vision and balls for a policy change – short term (3 year) thinking. This problem was pointed out by many commentators over the last 30 years, so there is no excuse for ignorance or believing NZ’s case is different. How can growth at the cost of future generations ever be sustainable?
FHB’s had little choice if they bought into the home ownership dream of wanting to provide a secure future for family – in fact I would say that they are going to be seriously f*** over – and probably derided as being irresponsible to boot (modernist dream – end game). Whatever happens they would have got pressure from either, not buying in (as prices increased beyond their capacity to service), or retrospectively from buying in to the biggest bubble NZ has seen. Who could blame these twenty – thirty some things from moving off shore to start again in fairer/younger climes? Is it really their fault that over the last 15 years incomes to house price ratios have been seriously distorted? Work out where the problem is and then address it – it’s so obvious. Taking on a huge student loan (regardless of it’s interest rate) to secure a better future has been a debt trap for most – think of the underlying message here. One can only assume that it doesn’t pay to better ones self – or have a dream. Why bother when the state will provide less risk, effort and pain for a life exchanged for dependency, handouts and secured votes.
Yet most of NZ’s population still do not want to address the fate the lies ahead. I see a battle constructed between imagined recoveries in urban markets vs. rural decline. Eighteen months ago I warned that NZ was going the way of Iceland – currency manipulators have little regard for the lives they can ruin/teach a valuable lesson to. No – we are a special case was the reply. Really? – Iceland has gone back to fishing cod. Roots refound.
Amazingly, in Iceland the elders have sacrificed promised pension entitlements to aid the country – would NZ’s citizens do the same if it all went pop? I sit here from the comfort of a country that has already corrected – reality bites. Painful as it has been (and will continue to be), I would rather be here than in denial/NZ. A war of generations is the only outcome of inadequate policy and short term gain. JK you stand judged as a currency trader masquerading as a politician. Please show your spine and deliver the necessary medicine or move to where ever the next banksters paradise might be. I am so regreting voting for you – hope is gone.
July 31st, 2009 at 8:29 am
People will whinge if he puts it up and they’ll whinge if he takes it down.
There’s not much Bollard can do about the fact that world wide interest rates are extremely low still and they still want to buy the kiwi.
July 31st, 2009 at 9:45 am
Andrewj said…”I thought it was because our inflation rate was continually above those of our trading partners?
If the $ is bad at .70 good at. 55 it must be fantastic at .30 and awesome at.10″
You are correct, if somewhat tongue in cheek Andrewj, awsome it would be if you were positioned to take advantage, but then ? .
Historically the regrowth economy has followed a weakening dollar(kiwi) and the pattern has been reasonably consistent, however there now seem to be more forces trying to pre-empt the natural rise and fall to of, course “their” advantage.
One blogger alluded to the USD being the only currency having any major effect on the AUD and therefore on the kiwi. That was incorrect and poorly researched. The Yen has had a direct corrrelation to any movements in the AUD KIWI and USD.
Yes we are the cork on the ocean, but foolish to think we are not tethered by the interested parties, and not necessarily those currency crack boys either. Rhetoric and speculation aside, you can bet “the Bully Boy foreign Banks” are in the drivers seat for now, and that will be good for some and bad for others… and so it goes and so it goes…
July 31st, 2009 at 10:18 am
Christov
It appears that in June money supply contracted by some 2 billion$. Is this a classic deflation scenario? Debt is being paid down with savings? If so then we are in for an interesting time, as its a phenomena that we rarely see in God’s own. Is it also a depression scenario?
July 31st, 2009 at 12:31 pm
Andrewj your line of thinking is as usual thoughtful and sound fiscally, which leads me back to a blog of long ago when all the economic indicators pointed clearly to unsustainable levels of debt per capita while the lenders continued to lend at unprecidented levels. Externally the risk alarm should have rung off the wall but…… much to my ( and Bolly’s) surprise the “kiwi” continued to march upward and property remained the no.1 investment internally .
So sh.t nothing made sense, up was down, down became up and at that point the realisation that “Bolly” had no influence whatsoever to our economic landscape.
You could scenario it to death, speculate conspiricy even involving the RBNZ that really led nowhere. Untill you consider quite simply “in whose interest” as the prime motivator.
There was talk at the recent WTO meeting (and thats all I know about it,) of Australian Banks proffering to underwrite bad bank debts in NZ should the proverbial hit the fan. Now thats a huge call wouldn’t you say!!
Of course it was “just” talk a bit like handing you a pillow and telling you it’s to soften the blow.
“In whose interest” is always a case of who stands the most to gain, just may have the most to lose . And so with the disoriented Captain “Bolly” firmly back in his cabin feeling somewhat emasculated I’d imagine, the ship is being steered by those whose interests are better served by understanding the map they have chartered.
May God Preserve Us and Advance Australia Fair? Fare? ah….F..k it.
July 31st, 2009 at 1:07 pm
Christov Says: you can bet “the Bully Boy foreign Banks” are in the drivers seat for now, and that will be good for some and bad for others… and so it goes and so it goes…
Doesnt have to be that way Christov. Why aren’t we all asking for what the Productive Economy Council is…..an enquiry along the lines of the 1956 Royal Commission on Monetary Policy, Banking, and Credit Systems..
http://www.pec.org.nz/2009/07/productive-economy-council-urges-labour-to-expand-scope-of-banking-inquiry/#more-37
July 31st, 2009 at 1:35 pm
Selwyn – you ask, “Why aren’t we all asking for what the Productive Economy Council is…..an enquiry along the lines of the 1956 Royal Commission on Monetary Policy, Banking, and Credit Systems.”
I think it’s because vested interest have more influence on NZ’s governments than the wider electorate – simple. Why else would the reps. on the FEC – who represent the interests of the whole country – ALL be in support of an inquiry, then the govt. reps cave at the last minute?
Sure, Bill E’s not so silent hand may have been in the glove, but I wonder what other more silent hands have a hold of?
July 31st, 2009 at 9:32 pm
Kin says:
Is this the reason why our property prices don’t seem to be rational ??
“The destruction of bank collateral is what’s behind the shrinking of bank profits and balance sheets. The largest part of Aussie bank collateral is in property, especially residential property. If banks don’t keep lending to the property market to support demand and prices, prices will fall, damaging bank collateral and forcing the banks to tighten credit (housing finance) which leads to even further house price declines. Vicious circle. Feedback loop. Take your pick.”
Kin, after the old Goldsmith scam became the basis of modern debt based monetary system 300 odd years ago the private bankers continued to portray that the system was still backed by gold when infact it had become a forward lending of created credit against the future utilisation of natural resources into income and assets. This system continued to be controlled and abused by the slaveminded few and led to massive over issuance of credit in ratio to ability of finite resources to be converted to currency for repayment. This led to the balance of power ructions that caused WW1 & WW2. After WW2 the private bankers, who the world was in deficit to via massive war debts, insisted upon the continuation debt based monetary system, once again under the ruse of it being backed by gold. The gold standard remained by ruse until reneged upon by the US Federal Reserve in 1972. But in truth the insiders of international banking knew back at The Bretton Woods conference 1945 that it was going to be backed mainly by residential housing assets that much of the forward loaned created credit would build. This was made clear by the below speech on BBC from John Maynard Keynes and supports your observations Kin:
INTERNATIONAL UNIVERSITY SOCIETY
Reading Course and Biographical Studies
- Section Two
Transcript of a speech on BBC radio 1942 – How Much
Finance Matters – by John Maynard Keynes, recognised as
one of histories leading authorities on the intricacies of
international finance.
Pg 185 – 86;
Let me begin by telling you how I tried to answer an eminent architect who pushed on one side all the grandiose plans to rebuild London with the phrase “Where’s the money to come from?” “The money?” I said. But surely, Sir John , you don’t build houses with money? Do you mean that there won’t be enough bricks and mortar and steel and cement?” “Oh no” he replied; “of course there will be plenty of that.” “Do you mean” I went on “that there won’t be enough labour? For what will the
builders be doing if if they are not building houses?” “Oh no, that’s all right,” he agreed.
“Then there is only one conclusion. You must be meaning, Sir John, that there won’t be enough architects.”
But there I was trespassing on the boundaries of politeness. So I hurried to add: “Well, if there are bricks and mortar and steel and concrete and labour and architects, why not assemble all this good material into houses?” But he was, I fear, quite unconvinced. “What I want to know” he repeated ” is where the money is coming from.” To answer that would have got him and me into deeper water than I cared for, so I replied rather shabbily: “The same place it is coming from now.” He might of
countered, but he didn’t: “Of course I know that money is not the slightest use whatever. But, all the same, my dear sir, you will find it a devil of a business not to have any.”
Pg 187 – 88
Now let me turn back to the other interpretation of what my friend may of had at the back of his head – the adequacy of our resources in general, even assuming good employment, to allow us to devote a large body of labour to capital works which would bring in no immediate return. Here is a real problem, fundamental yet essentially simple, which it is important for all of us to try to understand. The first task is to make sure that there is enough demand to provide employment for everyone. The second task is to prevent a demand in excess of the physical possibilities of supply, which is the
proper meaning of inflation. For the physical possibilities of supply are very far from unlimited.
END
July 31st, 2009 at 11:54 pm
Selwyn, just in the interest of clarity, for anyone serching the net, the New Zealand Royal Commission into Monetary, Banking, and Credit Systems was held in 1955, the report was released in 1956.
You state that our current debt to gdp is only 98%. Could I once again encourage you to the very detailed charts of a man who comes from the executive world of finance that tell a very different story.
http://www.johnpemberton.co.nz/html/debt_graph_info.htm
The above charts show a net total debt position year end Dec 2008 of $431 billion 322% of GDP. Its very hard to track down the figures for the total net debt position all in the one convinient place, but luckily for us John is a persistent man who knows his way round financial stats.
To come up with Balance of Payments International Investment Position it is said that liabilities owed by foreigners to New Zealanders is subtracted from liabilities owed by New Zealanders to foreigners. The end result currently stated by RBNZ to be $176.6 billion (98.2 percent of GDP) at 31 March 2009, compared with $167.4 billion (93.2 percent of GDP) at 31 December 2008.
http://www.stats.govt.nz/browse_for_stats/economic_indicators/balance_of_payments/balanceofpayments_hotpmar09qtr.aspx
They claim $431 billion reduced to $176 billion by such methodology would make a reduction of $255 billion. The direct subtraction of such overseas investments would imply we the return on those investments must widely benefit many New Zealanders.
New Zealand was ranked in a recent OECD report to 9th worst for income inequity.
Take into consideration that our National Superanuation Fund is only currently worth about $12 billion( http://www.nzsuperfund.co.nz/files/Commerce%20Committee%20Presentation%2014%20February%202008.pdf ) , that household debt is 160% of disposeable income (http://www.rbnz.govt.nz/keygraphs/Fig5.html )
Something doesnt add up as it is made to appear, and one has to wonder just who holds all this wealth overseas that many New Zealanders are mean’t to be benefitting from? I ask if it might be the Stephen Jennings, Michael Fay, David Richwhite, Chandler Brothers etc , who have been at the scene of most every obscene nationstate receivership caused by the even obscener central bankers, there like vultures to feed on the carnage of forced quickfire sales of public infrastructures all around the world.
July 31st, 2009 at 11:58 pm
SharonV – atleast you admit voting for National. They are still well heading the prefered party poll, yet I am yet to findhardly a sole down here in the Taranaki who will admit to voting for them. Appears that National voters are a bit like Coronation St watchers.
We know many must be but not many will openly admit to it.
August 1st, 2009 at 10:26 am
Selwyn, I fear Les Rudd may be right in his response, I also know that apathy is what is relied upon when control is usurped. hmmm quandry ? Individually we are comical “type” terrorists at best,and collectively we will not find the answers in political will, as” all “parties would be hamstrung by current circumstance.
Ian Parker… great post! enjoyed the link although I think I feel worse, at least I don’t think I’m mental anymore. The numbers just did not compute.
Take care with that naming thingy the usual suspects have a nice life on Mercury or can be found the rest of the year in Geneva through the financials.
To find the usurpers I would lean more to the lenders that lend to the money-lenders,hmmmm let’s say for instance Deutshe Bank leave noticable snail trails, a little dickie bird whispered a long time past that the cage rattled to the top in a sh.t your pants fashion concerning Australasia/pacifica…. sooo there’s got to be a little story there yes!
Before we can achieve anything as a collective ie:(moving mass money at orchestrated and entirely inconvenient moments) you need thier attention.
This is an excellent site to express current dissatisfation or joy, it is also a great site to build information ,share ,and formulate soooo.. lets keep doing that for now.
Oh! and goodnight Bolly stay tucked up won’t you.
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