ANZ's Cameron Bagrie says businesses have 'lazy balance sheets,' picks steady growth in business credit

ANZ's Cameron Bagrie says businesses have 'lazy balance sheets,' picks steady growth in business credit

By Gareth Vaughan

ANZ New Zealand chief economist Cameron Bagrie says businesses have deleveraged too much and now have lazy balance sheets.

Bagrie told interest.co.nz he was expecting a 5.9% rise in systems-wide business credit, including rural lending, in the year to September 2011. That comes after ANZ says business credit fell 3.3% in the year to September 2010. And it also comes as the latest Reserve Bank data shows business credit down a whopping NZ$894 million in September at NZ$70.8 billion from NZ$71.7 billion in August.

The Reserve Bank data, however, shows agricultural credit up NZ$251 million to NZ$48.3 billion in September from NZ$48.01 billion in August.

Bagrie said the business sector had deleveraged very quickly and very aggressively over the past 18 months.

"So their balance sheets at the moment look in remarkable order," said Bagrie.

"Personally I think businesses might have over reacted and they’ve deleveraged too much, such that they’ve now actually got lazy balance sheets."

ANZ's forecast for systems wide New Zealand business lending growth is in stark contrast to one released earlier this week from BNZ's parent National Australia Bank (NAB). It predicted a 2011 contraction of 1.9%.

Bagrie said ANZ wasn't expecting business sector credit growth to "rip away." There would still be deleveraging but there were signs of a pick up emerging.

"There are those (industries) that are looking a little bit better. We’re starting to see seafood, forestry, those sort of sectors (pick up). You don’t have an awful lot of players left in non-bank financials so there’s a lot more opportunities (for banks) coming strategically in that sector."

'Trigger could be pulled in six months'

He said activity was probably six months away from really beginning to move.

"Most boards and most CEOs I talk to, and I talk to a lot, are really waiting to see sustained evidence that this (economic) upturn improvement is going to be sustained," said Bagrie.

"Because what we’ve seen over the past 12 months, we’ve seen growth, but it just hasn’t been of sufficient critical mass to get firms really prepared to get out there and spend a few dollars."

"We need to see this recovery actually broaden. I think it is going to broaden in 2011 . But I think we need to see another six months before they start to pull the trigger in relation to investing and replacement capacity and that sort of stuff."

He said a decent chunk of the credit growth should come from earnings in export centric businesses rather than those centered around the domestic economy. He expected the rural sector to lag, however, behind the overall 5.9% growth with non-rural business credit growth higher than 5.9%.

Business sector lending growth would demonstrate part of a wider rebalancing of the New Zealand economy.

"The Minister of Finance (Bill English), the Reserve Bank talk about an earnings centric economic model. I refer to it simply as getting the horse back in front of the cart. We’ve got to make a buck before we can spend a buck."

In contrast to the solid business credit growth forecast, Bagrie expects household credit growth to be below the rate of Gross Domestic Product, which ANZ predicts will reach 3.9% next year.

ANZ sees systems credit growth of 0.3% this year, including all sectors - housing, business and consumer - rising to 4.5% next year and 5.7% in 2012.

NAB sees 0.5% in New Zealand this year, 0.4% next year and 3.5% in 2012.

* This article was first published in our email for paid subscribers earlier today.See here for more details and to subscribe.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

13 Comments

 "He said activity was probably six months away from really beginning to move."

In 6 months he will have another reason to explain why the economy remains dead in the water and....and he will have another prediction of a recovery to come about another 6 months down the road to misery....the banks will be dreaming up new ways to entice mortgage fodder through their doors...the survey mob will be cooking up a new batch of happiness brownees....The truth about the Christchurch quake's impact on the region will slip out in a footnote.....]

Meanwhile peasants.....do not be listening to the banking piper's music....get out of debt and avoid borrowing at all costs....buy only what you need...get that veg garden going and the chooks a laying. You are entering an age of austerity that is set to last for a good twenty years. Happiness will come from having no debts.

It's probably just as well Wolly's like you aren't running this country or the only growth we would have would be your vege garden. When this man talks, we should listen! I've heard Cameron on a number of occassions and a brighter man in this country you will not find. 5.9% growth is a big ask, but the fundamentals are there. Good on him for sticking his neck out again, better than those other economists who stick with the status quo for fear of being wrong on their own.

What fundimentals? you are taking absolute rubbish.....to grow at 6% will mean 6% more energy use...There is no more (ie the growth in supply of oil has all but stopped for 5 years) cheap energy this is the biggest...

There is for a better word "organic" growth ie growth that occurs without the need to increase debt....now while productive debt is good, lots of debt now is either consumption or failed/failing productive debt ie debt taken on to buy other companies where the resultant does not really improve productivity or produce anything more....its just bigger....the only improvement is the CEOs pay packet.....or debt taken on to pay interest on previous debt....its just a huge ponzi scam.

Growth in the consumer end is also toast and was stupid anyway.  The consumer now is paying down debt, they have been frightened...Nationwide cost cutting from the rightards means job losses when those occur ppl either dont get new jobs or get them at a lower salary (which is deflationary) and those who know them see that and are circumspect in their outlook.....So retail is going into a permanent recession and thats a big section of the World's economy/turnover....and if you are a manufacturer exporting into this you are also going to contract....

There is simply nothing out there to justify or support close to 6% growth....we will be lucky jsut to keep what we have.

regards

Lol..Jeez Wolly you were 'spoton' in the first paragraph..then you when all funny!!

Funny is medicine NeilD...two tablespoons of funny will keep visits to the doc down and save you heaps....I enjoy the Bagrie Bullshit Blather....he is obviously just learning the skills of spinning the stuff....10 marks for effort I say.

" We’ve got to make a buck before we can spend a buck."....now this is mind shattering stuff from a bank economist isn't it!....no really....what he was thinking was quite different and was along the following lines.....[ We've got to get people borrowing a buck before banks can make a heap].......

And so the game continues with the peasants unaware they are targets for the parasites and their own govt!....The poodle media trotting along and doing its stuff without a care in the world about who has to clean it up..or step in it!

What the bankster i didnt say was which was things will move.....he meant down.....

;]

I think ppl are beginning to get concerned/frightened of their jobs and the future....its looking very rough, so a huge confidence hit....for me one of the telling points was the no GST rush out and buy....there should if the consumer was confident have been some decent rise in spending, there was not....

and yes I agree with,

[ We've got to get people borrowing a buck before banks can make a heap].......

Following Steve Keen and a few other its pretty obvious that the financial industry is killing the real economy....What Steve keen was saying was in effect the workers were the first to bear the brunt of the financial ponzi scheme but then that moved to businesses and we can see how workers have suffered for the last 20 years.  What this joker is complaining of is after killing the worker/consumer they are now finding that businesses are clearing away from them.......its getting very hard to find enough jugulars to feed on....

Good

regards

 

 

Sit and watch....

regards

Please, Wolly send me an email concerning "Roamer Watch" and remember a real Eidgenosse (not a Swiss) never let you down.

Guten Tag

Vielen Dank für Ihre Anfrage. Für eine genaue Abklärung, ob die Pusher noch erhältlich sind, bitten wir Sie, uns die genaue Referenz-Nummer der Uhr mitzuteilen. Oder ev. ein Foto würde uns zusätzlich dienen. Gerne erwarten wir Ihre Antwort und danken für Ihre Unterstützung. Freundliche Grüsse

I'm positive I can get your 2 pushers.

Right so they dont need to go to the banks and lend and of course pay interest or use merchant bankers as parasites uh i mean go-betweens for takeovers or other un-viable activities so favoured in the last 2 decades due to low interest loans....so I bet the banks revenue streams are declining....

 

regards

It seems to me the banks are now on a policy course to clearly - separate the rotten, not so rotten and healthy apples from the shinny ones – running out of options.

Yes, agree Trev, anyone who has gone to listen to Bagrie would come away pretty impressed, he is one of the more intelligent guys around, and by the way does not go for the bs.

Why do some on this site think they are more intelligent, learned and insightful than anyone else around?? And if you are that clever, why waste your time blogging to nobody in particular all the time?

Actually there are some knowledgeable people on this website.  And we all think of ourselves as such, that's why we blog.  We want to share our expertise and love seeing it being reflected on

By " lazy balance sheets " does Cameron Bagrie mean not up to their tits in debt ? And that is a bad thing !