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Economic weather report: OCR on hold as jobless rate jumps to 7.3%
February 4th, 2010Bernard Hickey delivers an economic weather report in association with the BNZ on surprisingly weak labour force figures that showed the unemployment rate rose to 7.3% from 6.5%. This was much higher than the 6.8% economists had expected and higher than 6.6% the Reserve Bank had expected.
Economists pointed out however that a large reason for the rise was the rise in the workforce and a slight rise in the participation rate. Employment also fell, but only by 0.1% and in line with expectations.
Economists also said the results reinforced expectations that the Reserve Bank would be able to hold the Official Cash Rate at a record low 2.5% until the middle of 2010. Wholesale interest rates fell slightly after the surprise result and the New Zealand dollar fell. But fixed mortgage rates and term deposit rates are unlikely to fall in tandem, given banks face higher costs to gather term deposits and funds on international money markets.
Tags: Bernard Hickey, Economic weather report, Labour force, OCR, Official Cash Rate, Unemployment
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February 4th, 2010 at 8:19 pm
You probbabbly can’t convince even yourself any more.
“In mid October the bank had a 1 year fixed mortgage rate of 6.00% against a 1 year wholesale rate of 3.60% giving the bank an income margin of 2.40%. When wholesale rates dropped in November to 3.40% none of the banks dropped their mortgage rates so income margins across the board increased to 2.60%.
Wholesale rates have jumped back up to slightly above where they were in October, yet mortgage rates have gone even higher. With the latest price hike from ASB the banks income margin has increased to 2.81%. Between October and January margins have increased from 2.40% to 2.81%. That is a 17% expansion of its profit margin net of any change in wholesale costs.
CBA in Australia has a 1.91% income margin on its 1 year fixed rate.
End of quote
February 4th, 2010 at 8:23 pm
Last year 4 big banks made combined profit of 680 mil. (much lower then previous years), but paid out more then 2 billion in dividends at the same time.
Obviously their bosses/owners come first, no recession for them. At the same time they laid off some 1000 staff
February 4th, 2010 at 9:44 pm
Unless we do not create more/ new segments to our economy, unemployment will move up to 20% or more. Our economy is not only unbalanced but also unsustainable longterm.
Governments have to shrink, urgently rethink and adapt to the upcoming depression.
Please, read and understand this in a context to my many other articles.
Walter
February 5th, 2010 at 1:56 pm
@Alen: Its a business….its there to make a profit.
February 5th, 2010 at 2:03 pm
@W Kunz: Easy in theory…
Old segments may yet get re-expanded, ie its not economic to manufacture here because transport is such a marginal/trivial cost….once that’s no longer the case then we will be doing things here again…..or not doing them at all.
Example the flax industry collapsed decades ago, yet once oil becomes expensive making items from flax rather than oil might become profitable/practical again….
The big worry is what we rely on today for income….toursim, gone…what happens at >$120 a barrel for oil? Thats $170+ for jet fuel, no airline will be doing cheap (affordable by say me) flights anymore indeed national airlines will be tiny if they exist. Flying will be like it was around the Second World War an expensive and rare luxury….
Exporting farming produce….what are we going to do with all the food that’s now too expensive because of shipping costs?