Crikey! Falling business investment is a serious threat to term deposit savers. The last time business loan demand slumped, TD returns fell -0.5%. If that happens this time, we would be at record lows

One obvious alternative is KiwiSaver. Or if you don't want to lock up savings till retirement, perhaps other non-KiwiSaver Funds. The trick is to not obsess about fees; focus on after-tax, after-fee returns.

You could use your cash as a deposit for a rental?

Moving into USD a few years ago might have been more lucrative, into an ETF tracking the S&P500 as an example (IVV etc).

Foyle,

I make no claims to being an expert,but I have been a stockmarket investor for over 40 years;in the UK and since 2004,in NZ.
Few,if any,investors have the ability to time the peaks and troughs of the market and I certainly don't try to. My focus is on sustainable dividends. Nevertheless, as the market has continued its inexorable rise,raising P/Es well above their long-term average,I have been gradually taking some money off the table and have increased my cash from around 5% to almost 15% over the past 2 years. The bulk of that has gone into short-term PIE TDs. The net interest rate is almost irrelevant,as my main concern is to have ready access to it,as and when the next market correction comes along.
Nothing is foolproof,but this strategy has served me well in the past and I believe/hope that it will see me through the next crisis. I have also put some into government stock-recognising the lack of deposit insurance- and a little into speculative holdings such as Invivo shares. I can enjoy the wine,even if the company never floats.

Household deleveraging is next, but what this may signal is actually less business lending being made against housing security. Banks often tighten the purse on the little guys first when the credit tap tightens.

Old adage 'If you borrow a million dollars from the bank, you've got a problem. If you borrow a hundred million dollars from the bank, the bank has a problem' and are likely to be more flexible with you.

In the pre-built housing market, buyers=sellers. It's a zero-sum situation. Sellers who realise gains might put their funds into a bank deposit, but the buyers need to borrow a similar amount from a bank to complete the purchase. So that won't explain it.

When you add new builds, that would require most buyers to borrow.

So, no, it is unlikely to be from 'cashing out' - unless an unusually large number of buyers are using out-of-system cash resources to buy without mortgages (ie immigrants), but other data doesn't support that at all (first home buyers are a fast-growing segment).

The mismatch is on the business investment side, not the housing market.

I look forward to stand on the same metaphorical pile of ashes declaring a Pyrrhic victory. I do however find it ironic that COL supporters such as yourself are only willing to throw voices behind spinning a positive business sentiment rather than putting your money at risk?

Yvil, agreed. Going forward, this has to be good news for borrowers who are fortunate to have the income to meet their obligations. Unfortunately though, in a downturn, many find themselves without overtime, jobs and are found struggling with vacant rentals.

Most of the domestic deposits are invested in terms less than 12 months. As we appear to be entering a downturn, convince me why this is a good sign when asset markets are toppy. Banks make money by lending it. If sentiment really takes a dive, funds can be shifted to perceived sanctuaries and quite quickly.

It's worth noting the Australian parent banks are sourcing an uncomfortably large proportion of their funds offshore in the midst of a downturn. In the end NZ will feel the chilling effects in one way or another.

Bad news for depositors but good news for borrowers as this means NZ banks are less reliant on offshore funding for on-lending to NZ borrowers. D Chaston said in June NZ banks source only 16% of their funds from offshore for NZ lending, this is now clearly reducing, hence sheltering NZ borrowers from possibly rising offshore rates

Just so you understand correctly, NZ or Australia banks don't "rely" on wholesale funding for "lending capacity". For example, the banks cannot borrow NZD from Japanese housewives so NZers can speculate on houses. The primary value of wholesale funding is for banks to generate greater profits as the cost of offshore funding has been lower thereby increasing bank profits.

but the government is in spending mode, not cutting mode.

"Don’t like subsidising other people’s lifestyle!"

So get rid of the Accommodation Supplement you say??

The man - if you're a landlord, someone else is subsidising YOUR lifestyle. There is nothing a landlord can do for a tenant, that the tenant couldn't do better as an owner. Sense of community buy-in would be better too. Landlords just live off the tenant's income. I'm not alone in this view:

"Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains — all the while the landlord sits still. Every one of those improvements is affected by the labor and cost of other people and the taxpayers. To not one of these improvements does the land monopolist contribute, and yet, by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived…The unearned increment on the land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done".

— Winston Churchill, 1909

And imminently sensible, may I say.
I rid myself of debt about 3 years ago. Possibly slightly too soon but happy now to have done so.

It's just an age thing and the secret to life is knowing when you have made it and you just enjoy life instead of trying to make that next million dollars.