News and Opinion, sponsored by RaboPlus

By Roger J Kerr

There were no surprises with the weak employment data last week, causing both interest rates and the NZD to decrease.

Yet again the moneymarkets and bank economists have been forced by the economic facts to push their timing of OCR interest rate increases back to June/July form the previous March/April predictions. Go back a couple of months to early December a number of the bank economists were confidently predicting the first OCR increase in January 2010.

Unfortunately you never see any explanation as to why those forecasts were so wrong.

These interest rate forecasters are either just guessing with these very changeable predictions, or they are just so removed from what is actually happening in NZ businesses and industry sectors that their economic theory always dominates over the reality.
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Consumer credit applications for credit cards, personal loans and hire purchase applications fell in April from a year ago and were also down from March, credit information provider Veda advantage said.

Credit card applications fell 13% from April 2008, and 17% from March; personal loan applications fell by 19% from a year ago, and 18% from March; and hire purchase applications fell 32% and 12%, respectively.

The signs are consumers are borrowing less as the economy and the labour market weaken and households try and minimise risk during the recession. Although unemployment rose by less than expected to 5% in March, it is still forecast to rise up to near 8% in 2010, meaning household spending is set to decline and negatively affect economic growth.

“The consistently downward trend across all credit categories points to a continued lack of confidence among consumers, and little appetite for borrowing that may expose households to unnecessary risk. Clearly, most New Zealanders believe the recession has yet to bottom out,” Veda said.

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