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Roger J Kerr says New Zealand has an opportunity to get an advantage from the current adversity. We have done it before. It just requires brave/bold leadership and execution  

Roger J Kerr says New Zealand has an opportunity to get an advantage from the current adversity. We have done it before. It just requires brave/bold leadership and execution  

The NZ dollar had a reasonably serious set-back to its recovery path this last week with a blip down to 0.5930 from previous rates above 0.6100.

The Kiwi dollar selling was in response to the RBNZ officials confirming to a Parliamentary Select Committee session that they still had negative interest rates at their disposal to use if they needed to in 12 months’ time when the policy to hold the OCR stable at 0.25% comes to an end.

It was difficult to fathom the motivation of Governor, Adrian Orr and Assistant Governor, Christian Hawkesby in making this statement.

Was it designed to jawbone the dollar down as they were unhappy with its recent appreciation and they have run out of bullets?

Or was it just painting a scenario of what tool they would still have in their monetary policy kitbag having exhausted all the others, like cutting interest rates to zero and printing money through quantitative easing?

One would like to think it was the latter and they were merely painting a scenario of what could happen if the Covid-19 pandemic was still rampant and the economy still reeling in recession in March 2021.

It is not a scenario we would all want to contemplate as it would confirm that there was no vaccine found that worked and community isolation was still happening. The probability of that scenario being anywhere near reality seems very small.

In any case, it is well known that the major banks in New Zealand do not have the computer systems to cater for negative interest rates and certainly would not be ready for that change in 12 months’ time.

If the jawboning was intentional to reverse the Kiwi’s path to downwards and hold it down, it has not worked too well as the NZD/USD rate had subsequently climbed back to 0.6030 by Friday 17th April.

Lack of global unity has made the Covid-19 fight more difficult

What has been surprising and disappointing about the global response to the Covid-19 pandemic is the total lack of cooperation and coordination between nations to address the common enemy.

Everyone, including New Zealand, has done their own thing.

The only institutions to work cooperatively together it seems have been the central banks with the US Federal Reserve being quick to provide USD swap lines of credit to others to reverse the shortage of US dollars in the global system.

The tone of poor government to government communication was set early by President Trump when he stopped flights into the US from Europe without consulting or giving any notice to the Europeans first. That action confirmed the “America first” isolationist and protectionist policies instigated by Trump.

It is clearly difficult for world leaders to show any respect for Trump or take him seriously given his uncanny ability to forget what he said a week ago, personally take all the credit for any success and dish the blame to anyone when things do not go so well.

From being the least prepared for a highly infectious disease, the US economy is set to be the worst affected as unemployment soars in the services and retail sectors that just fire all the staff and shut up shop.

Countries with more sophisticated health systems (e.g. Germany), decisive central leadership (e.g. New Zealand) and strict authoritarian rules of engagement over their populations (e.g. most of Asia) have fared a lot better than the US and parts of Europe.

What has been surprising to date is the failure of the US dollar exchange rate to weaken (it has not strengthened too much either) given the growth, budget deficit and debt problems the US economy is now facing.

The US dollar had retained its strength through 2018 and 2019 due to having higher interest rates than other currencies and also the safe-haven flows from the trade wars. These two factors are no longer present to support the USD, therefore the greater probability from here has to be sustained, multi-year US dollar weakness. For local New Zealand exporters selling in USDs this is the largest financial risk they face going forward, and it has nothing to do with New Zealand.

Equity market movements key to short-term NZD/USD direction

Upcoming economic data is going to be absolutely dreadful for all currencies; therefore, readers should not expect singled-out NZ dollar depreciation when our consumer/business confidence plummets, retail sales collapse and GDP growth goes negative for a quarter or two. Other counties will be a lot worse, particularly the US of A.

As has been seen in recent weeks, the main driver of day-to-day NZD/USD direction will be the movements in US equity markets.

Massive fiscal and monetary policy stimulus in the US, coupled with Covid-19 cases getting past the peak of the curve, have to date buoyed and sustained equity market index gains following the mid-March rout. Hence the NZD recovery back above 0.6000.

The unanswered question is how big is the risk of another large leg down in US equity values, sending the Kiwi dollar back to the mid 0.5000’s?

As previously stated in this column, as time moves on from the March collapse, the risk of a second leg down reduces.

Many commentators see a second equities sell-off when US corporate earnings for 2020 are released and the realisation of profits being decimated sinks in with investors.

The counter-argument is that the markets have already priced-in low 2020 profits and are positively looking forward to a bounce back in 2021 company profits. Whatever the outcome is, the influence over NZD/USD movements over coming months will be significant. My view is that investor worries about 2020 profits have already been priced into the markets.

Bold policy changes needed for NZ’s post-Covid-19 environment

When the NZ economy was in deep and unsustainable problems in the mid 1980’s, it took radical and profound policy changes (which caused some adjustment pains) from Sir Roger Douglas to turn things around.

As a result, we enjoyed positive economic growth, increased standards of living/wellness, strong employment and prosperity through the years from the mid 1990’s until today (excluding the brief GFC related recession in 2008 that was imposed upon us).

It was always instructive that the Clark Labour government from 1999 to 2008 did not reverse the Douglas economic reforms.

The strong communicative leadership displayed by PM Jacinda Ardern through the pandemic crisis suggests a re-election of her government come September.

However, it will be how the economy responds over coming months that determines the election outcome rather than popularity through dealing with a health emergency.

If the Jacinda and Grant team fails to make the right decisions for business and the economy over coming weeks/months and the unemployment rate is above 10% in September, the Labour Coalition government will likely be tossed out. No pressure then? If we stay in “level 3” for four weeks instead of, say, two weeks many small businesses will just die, and the economy and jobs will suffer.

Radical economic policy reforms are needed again and if the Jacinda and Grant team fail to embrace that requirement, the opposition National Party should adopt some great private-sector innovative thinking as their policy manifesto.

Suggestions about government sponsored 5G and irrigation/hydro power infrastructure projects from Rod Drury and immigration/investment schemes for global billionaires from Troy Bowker should not just be left as good ideas, but policy changed to make them happen.

New Zealand has an opportunity to advantage from the current adversity. We have done it before. It just requires brave/bold leadership and execution.  


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*Roger J Kerr is Executive Chairman of Barrington Treasury Services NZ Limited. He has written commentaries on the NZ dollar since 1981. 

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There has to mega money in being Wuflu free!
Just marketing innovation and NZ put out there on the world stage a hell of a lot more just for a start.

@kezza ,I am not sure how we could leverage that just yet

Eradication is the goal and if we make that we have something sellable.

What is this commodity that will be sold???

About the only thing I can think of, is residence visas. Hasn't that been done by the last three governments?

guaranteed uninterrupted supply line might be a very attractive selling point -- retool all our manufacturing to higher end product --

Zero new cases in queensland just announced..... without a level 4 lockdown.

I saw that , it seems too good to be true

Calling BS on Ozzy numbers.

Ozzy wins again


All experts should keep quite and also PM and all her minister and should just listen to self proclaim Expert & Gods Gift To NZ - Mr Mike Hosking.

How do people tolerate him ?

.. because Kiwi so dumb lah.
It's not just Hosking, we have Rewi W on Interest with his Pro China, National, Farming bias spouting our epidiomoligist advice with his degree from Hoskings alumni.
As an ex prof dealing with a specific field he must realise how crass it is to assume powers for which you havent trained.
...but then kiwis so dumb lah. I am sure it's a slogan at CCP central.

Mike Hoskin is 100% correct in his assertions .

The Government is basically clueless , and are making this up as they go along .

Luckily , we have an exceptionally strong Public Service and support network of skilled competent civil servants , who can guide the fools who make up the COL

I cannot name one Minister in our Government that has ever had a proper job , owned or run a business , created a job , or employed someone and pay them a wage .

Thats why , notwithstanding their platitudes about them " understanding " the sufferring of the productive sector , they have no clue .

Anyone who thinks otherwise is delusional or just plain dumb


The Government is basically clueless, and are making this up as they go along

Guess what? The situation is unprecedented and we have been getting small increments of knowledge on what we're dealing with here as days go by. That means everyone is clueless and is forced to make things up as they go along. Forget our Cabinet, the messages coming out of the global scientist community on factors such as virulence, communicability, etc. has been so confusing throughout.

Unless you have come across a manual that lays out detailed instructions on how to navigate a tourism, migration and bulk commodity-driven economy through a global pandemic with closed borders.

FYI the leader of the Nats has spent 7 out of his 8 years pre-parliamentary career as a Crown prosecutor, the first year being a law grad. He has as much experience running a business, hiring people or not living off taxpayers' money as many Green or Labour candidates!

Have you ever dealt with MBIE Boatman? Never has an agency's title been so misleading. Hardly a bod in that place with any decent business or economic experience.

Boatman - just to clarify your bias...could you tell us if you have ever not voted for National?

dont you mean have you paid your national party subs so you are an up to date member,

Wait for his "I've been all over the world so I know what I'm talking about", bit like Hosking's wench talking about her travails in 1st class.

you lost me on mike nonsense hosking is 100% correct

Winston Peters is highly competent. Slippery though, and old.

Do some research. For starters, David Parker: "A managing and litigation partner in South Island law firm Anderson Lloyd. He was also involved in many businesses, including innovative bio-tech export start-ups A2 Milk, BLIS Technologies, Botryzen and Pharmazen, as well as in more traditional industries. He is an experienced CEO and company director"

Mike Hoskin is 100% correct in his assertions

Because a life in media and becoming a media celebrity is a "real job"

If there was such a thing as an entitled greedy selfish kiwi list, we know who would be on it.

What we've done before? - future tax payers bail out. The same call for this one - We all knew the underlying of F.I.RE economy fundamentals - printing more money is just devaluing the 'current RE asset' - this cannot & should not happen - so? do it like in the past 30 years! - future tax payers bail out/international loan - PM already hinted; people that loss the job should not sell their house/investment, this is a positive signal for all RE agents, that no matter what? regardless of reckless Banks RE loan books, .. NZ shall be guaranteed the safe haven of RE bail out after all that is the major contributors in F.I.RE economy (Finance, Insurance & Real Estate)

we have been selling our citizenship for years at a give away price, so yes why not be upfront and sell some for 50 million a time.

The next year or two will allow the time and economic conditions to reset some of the those entitled practices and exorbitant fees of tradesmen. Here are some of my recommendations from experience:

Plumbers: I have found over the years that if you choose the right plumber their fees are fair. But I would
suggest that you buy made-in-NZ materials if you can if you do plumbing renovations, then you
can go back to the manufacturer if the materials (eg taps) fail and ask them who their
recommended plumber is; this plumber should do a good job at a fair price. If you know of a
good local plumber who's been around for some time, then they are also good.

Builders: some builders have used the construction boom to charge ridiculous prices and do sloppy work. A
recent house build for a friend down country resulted in 2000 faults from a major home builder. I am
not joking. Unfortunately, past politicians have decided that certified clerks of works should no
longer exist, so you can no longer hire a trustworthy independent supervisor at a fair and
reasonable cost to oversee the quality of your new build. So, seek the advice of a relative or a friend
with a knowledge of construction; offer to pay them something (modest) for their advice.

Electricians: Know exactly what you want them to do and get them to give you an itemized quote. If the
electrician is known in your area of residence then his quote will probably be ok. If not, get
another quote from another electrician to compare. Ensure the electrician uses quality fittings
(eg switches and outlets). Ask him for a certificate of completion if new additions to the meter
board are involved.

Real Estate: never buy a property from an internet advert without personally inspecting it with an
experienced builder (I would recommend a builder you know rather than an unknown house-
purchase inspector.) There is no substitute for a physical inspection to pick up stormwater and
drainage issues, rot and paint issues, roofing and gutter issues, sub-floor and basement issues,
and many more.

Bluey team/CCP supported media coded messages, with regard to neoliberal ruling elites on safe job keeping task in NZ;
Quick open the border !, outflow capital into NZ from overlord will compete against OZ US UK Canada.
Ask any of those Blue supporters, what can they do apart from? (1)Future tax payers bail out (2)Sell more RE to overseas. But in order for last one to works it's magic on maintaining GDP numbers - Open the border !
Reminder about F.I.RE insignia means:

Another Bold/brave leadership by RBNZ, I'm really glad they followed to the latter every bit of my comments here, congrats to to keep our comms. open, OCR down by 75, next may down more by 15? or 10?, then CAR delay/reduce it, put off DTI, reduce FHB level soon,LVR gone, deposit guarantee gone, smooth out that looming OBR (we already move out from NZ by then) - lost counts how many parameters economically that RBNZ is not following me through, glad.. but Sad at the same time, as becoming clear about this F.I.RE economy which being sacrosanct guarded fiercely by all NZ neoliberal/self interest camp.

Days to the General Election: 26
See Party Policies here. Party Lists here.