GDP falls 0.2% in Sept qtr vs expected 0.2% rise; Due to falls in primary, goods producing industries; NZ$ drops under 74 USc

GDP falls 0.2% in Sept qtr vs expected 0.2% rise; Due to falls in primary, goods producing industries; NZ$ drops under 74 USc

By Alex Tarrant

New Zealand’s Gross Domestic Product fell 0.2% in the September quarter, due to falls in activity in the primary and goods-producing industries, Statistics New Zealand said this morning.

The fall in economic activity over the quarter compared to market expectations of a 0.2% rise in GDP. The contraction came after five consecutive quarters of growth out of the recession which began in March 2008 and lasted five quarters.

Most economists said the weak result made it more likely the Reserve Bank would hold off hiking the Official Cash Rate until the June quarter at the earliest. Westpac even said a September quarter hike was now more likely.

The New Zealand dollar fell below 74 USc immediately after the news. Wholesale interest rates nudged lower.

'Still on track,' English says

Finance Minister Bill English said the New Zealand economy was still on the path to recovery and that he was "actually quite confident that the economy will build momentum in 2011 and beyond".

“Unemployment has peaked and is coming down – although not as fast as we would like. However, we are enjoying strong export prices and we’re hosting the Rugby World Cup next year, which will be good for the economy," English said.

“It’s important that we look through the quarter to quarter figures and focus on our long-term challenge, which is building a sustainable recovery built on savings and exports rather than borrowing and consumption," he said.

“On that score, we have seen some encouraging signs in recent months. If anything, the figures today reinforce the need for us to press on with our programme to build faster growth around the earnings sign of the economy. That will be the Government’s firm focus over the next few years,” English said.

'Not as strong as we thought'

Stats NZ also revised down GDP growth in the June 2010 quarter from 0.2% growth to 0.1%.

The Reserve Bank of New Zealand was expecting GDP to rise 0.3% over the September quarter, with today’s figures suggesting the central bank will be comfortable holding the Official Cash Rate at 3% until the June quarter of next year.

Annual GDP rose 1.4% compared with the September 2009 year, Stats NZ said. This followed an annual rise of 0.6% in the June quarter after six quarters of annual contraction.

Double dip?

“The decline in GDP this quarter was due to weakness in the primary and goods-producing industries,” Stats NZ national accounts manager Rachael Milicich said.

Stats NZ said the main contributors to the decline in economic activity in the September 2010 quarter were manufacturing, down 1.7%, following a 4.3% decline in the June quarter; fishing, forestry and mining, down 5.5%, mainly due to lower mining activity; and construction, down 2.5%, with declines in both residential and non-residential building.

Partly offsetting these declines were increases in transport and communications (up 2.1%), and wholesale trade (up 2.4%), Stats NZ said.

The Canterbury earthquake on September 4 could have had a negative impact on GDP in the September quarter as many Canterbury businesses were closed and people were unable to work, Stats NZ said.

It was impossible to isolate the impacts of the earthquake, although the Canterbury region generally accounted for 12% of national GDP, Stats NZ said.

Expenditure down

The expenditure measure of GDP fell 0.4% in the September quarter, Stats NZ said.

“For the same period the volume of goods and services purchased by New Zealand households was up 0.5%.

Household spending on durable goods (furniture and major appliances) and services (communications and domestic air travel) increased, while spending on non-durable goods fell (mainly due to alcoholic beverages).

Economist reaction

ASB economist Jane Turner said the lower than expected GDP figure, as well as the downwardly-revised June growth suggested New Zealand's economic recovery stalled in the middle part of 2010:

GDP was much weaker than the market, ourselves and RBNZ were expecting. The weakness is a result of weak housing demand and activity, poor weather conditions and a decline in manufacturing activity. We expect that both manufacturing activity and housing construction will recover over the next year.

However, weather conditions present ongoing challenge to NZ agricultural production. There remain some signs that underlying demand may not be quite as weak as the figures suggest. Business confidence has firmed.  Indeed, the strength capital imports point to an increase in business investment on the horizon. Furthermore, the strength seen in transport and wholesale activity is not consistent with an economy going sideways.

Nonetheless, with a negative GDP number proving a disappointment ahead of Christmas, the RBNZ will certainly be in no hurry to resume lifting the cash rate until it is very confident that the economic recovery has regained traction. We continue to expect the RBNZ will resume lifting the OCR in June next year, although rate hikes over 2011 will be very gradual.

HSBC economist Paul Bloxham said he still expected growth through 2011, but that the risks of a later rate hike from the RBNZ had increased.

Looking ahead, a slower recovery in demand and exchange rate strength in early Q4 - albeit retraced in recent weeks – are likely mean that growth has stayed weak in the closing months of 2010. Household spending in Q4 is likely to be fairly weak, due to some Q3 pull-forward. Business sentiment has also been weaker than in the first half of the year.

We continue to expect that the economy will recover through 2011, driven by the current elevated level of meat and dairy prices, which will support incomes, rebuilding efforts in Canterbury and a boost to service exports from the Rugby World Cup in September/October 2011. Supporting this medium-term view, the labour market is making a gradual recovery, with the trend unemployment rate 0.5 percentage points below its late 2009 peak: although, at 6.4%, it is still well above the natural rate. These numbers are weaker than was expected and it looks as though growth will continue to be weak in Q4.

The fundamentals remain healthy though, and we still expect a recovery in demand through 2011. We continue to expect the RBNZ to resume its tightening cycle in Q2 2011, though today's numbers clearly provide some downside risk to this expectation.  

ANZ economist Mark Smith also saw the potential for a later hike in the OCR.

The RBNZ is well and truly on hold until at least June next year, and a later resumption of the tightening cycle cannot be ruled out.

There are a number of headwinds still facing the New Zealand economy, with deleveraging still a powerful growth suppressant. We still see better prospects but this is very much a second half of 2011 story  

JP Morgan economist Helen Kevans said a double dip can be avoided, but she has extended her forecast for the next rate hike until June from March.

The threat of a double-dip recession in New Zealand has become very real, but we think this outcome will be avoided. Post-earthquake reconstruction work, higher export volumes and elevated commodity prices, and the positive economic effects related to the Rugby World Cup will help GDP accelerate in 2011. In 3Q10, though, the economy unexpectedly contracted again, with GDP falling 0.2% over the quarter (J.P. Morgan and consensus: +0.1%) compared to a downwardly revised 0.1% in 2Q (previously 0.2%).

The barely-there growth that preceded today’s negative GDP print means the economy has expanded less than 2% since it exited recession in more than a year ago. With the recovery underway clearly having stalled, and having taken into account the recent run of disappointing data, RBNZ Governor Alan Bollard has more scope to leave the current, stimulatory policy settings in place for much longer.

We had, until now, expected that the tightening cycle would resume in March. We now believe, however, that a June resumption is most likely, by which time the economy should be growing again. For now, low interest rates seemingly are having a less stimulatory effect than in the past.  

BNZ economist Doug Steel said the following:

For now, and in the current environment, it is not only about activity growth. It is about putting what activity we have on a firmer footing. This seems to be the case at present with more saving, leading to less credit per dollar of income.

New Zealand is de-leveraging and reducing risk. We saw evidence of such in yesterday’s Q3 balance of payments data with an improving international investment position. Clearly, there is still a ways to go,as rating agency Standard and Poor’s pointed out again yesterday. Still, we are moving in the right direction in this regard and should be viewed as a positive in its own right, even if it means slower growth in the interim.

The soft looking consumption growth in today’s data, despite being boosted by some pre-GST spending, is more confirmation of cautious spending behaviour. But we think that stronger nominal income growth will eventually put upward pressure on interest rates, assuming the world economy hangs together and without a decent lift in productivity growth. How much pressure is also dependent on the wider, and more variable, credit spreads, but the direction is clear.

Even after today’s soft result, we suspect that the economy and market will have a different feel to it come the New Year. For a start, a decent break can do wonders for seeing the glass-half-full rather than half-empty. But more fundamentally, we think the first two major data prints of the New Year – the QSBO and CPI – could well set the 2011 tone of stronger economic data and more inflationary risk than is currently priced into a market that has been put through the ringer and back again in 2010. 

Westpac's economists changed their view to a September quarter hike after the weak figures.

The state of the economy as at September 2010 is clearly weaker than previously thought. The negative output gap has become a yawning chasm, meaning there will be little pressure on medium term inflation for a while yet. The RBNZ has indicated that it expects to leave the OCR on hold until Q3 next year. Today's data reduces the likelihood that hikes will be brought forward, so we have altered our OCR call.

We now expect the next hike to occur in September 2011. Despite the weak historical numbers, we still think there is every reason to expect a stronger performance in 2011. The housing market is showing signs of stabilisation thanks to lower interest rates and healthier net migration. This should improve the consumer mood next year, although it'll be no party. 2011 will feature a Rugby World Cup and substantial earthquake reconstruction activity. Hopefully, 2011 will not feature such severe droughts as 2010.

And finally, New Zealand's terms of trade have been going from strength to strength. This basically means New Zealand Inc has had a national pay rise, which should eventually perk the economy up. There was only a small market response, perhaps reflecting market fatigue at the interminable run of weak NZ economic data. The NZD fell 15 pips and swap rates across much of the curve fell 3bps.  

Political reaction

Finance Minister Bill English said New Zealand's recovery was still on track and the latest figures fit with his comments the recovery would be bumpy.

New Zealand’s economic recovery remains on track, despite figures today showing a small contraction in gross domestic product in the September quarter, Finance Minister Bill English says.

“Before this result, we had seen five consecutive quarters of growth since coming out of a deep recession. I’ve said all along that this recovery would be a bit bumpy at times, and that’s proved to be the case.

“We’ve also stressed that building faster ongoing growth will take some time. New Zealand’s economic imbalances have built up over more than a decade – exacerbated by the global recession – and so it will take us more than a year or two to fix them.”

The one-off effects of the Canterbury earthquake and snow storms in Southland also showed through in the September quarter, Mr English says.

“Having said that, I’m actually quite confident that the economy will build momentum in 2011 and beyond.

“Unemployment has peaked and is coming down – although not as fast as we would like. However, we are enjoying strong export prices and we’re hosting the Rugby World Cup next year, which will be good for the economy.

“It’s important that we look through the quarter to quarter figures and focus on our long-term challenge, which is building a sustainable recovery built on savings and exports rather than borrowing and consumption.

“On that score, we have seen some encouraging signs in recent months. If anything, the figures today reinforce the need for us to press on with our programme to build faster growth around the earnings sign of the economy. That will be the Government’s firm focus over the next few years.”

Statistics New Zealand confirmed today that GDP fell 0.2 per cent in the September quarter – the first quarterly fall since March 2009. This left the annual increase in GDP at 1.4 per cent for the year to September.

Labour Party Finance spokesman David Cunliffe said New Zealand's traditional trading partners were leaving New Zealand well behind in terms of growth:

New Zealand’s economic performance is becoming bleaker and bleaker under National’s mismanagement, says Labour’s Finance spokesperson David Cunliffe.

David Cunliffe, commenting on the release today of GDP figures for the September quarter, said the 0.2 percent decline, following an increase of just 0.1 percent in the previous quarter, showed that things are getting worse not better.

"Of huge concern is the continuing freefall of Kiwi manufacturing, down another 1.7% after 4.3% the previous quarter. Fishing, forestry and mining are down 5.5% and construction 2.5%. This is a broad-based slowdown across productive sectors and would be far worse if we did not have record prices for dairy products to cushion it.

"These statistics prove the slowdown trend is not just part of ‘necessary rebalancing’, as National pretends. Cutting capital formation (investment) in transport by 8.3% in a quarter, by 7.4% in residential building and 6.4% in plant and machinery will leave the economy less capable of rebounding in future,” David Cunliffe said.

 “National has had two years at the economic tiller, and still has no economic plan to promote growth and jobs,” David Cunliffe said. "A double-dip recession is now a real possibility, although this may be temporarily offset by Christmas period sales in the fourth quarter. These statistics reaffirm the bad news in last week's HYEFU showing that our economy is heading backwards, and as a result the government's accounts are collapsing.

“National’s mismanagement of the economy has been characterised by three failed ‘initiatives’,” David Cunliffe said.

“Its $23 billion of tax cuts have done nothing to revitalise the economy, but has put more money in the pockets of National’s rich mates while making life tougher for struggling low and middle income earners; its cycleway has created just a handful of jobs; and its ideological tampering with labour laws is knocking the stuffing out of hard-working Kiwis.

“While National fiddles, the increase in unemployment since it took office is costing the country about three quarters of a billion dollars in foregone tax revenue and the direct costs of the unemployment benefit,” David Cunliffe said. “When other assistance is thrown in, the true cost is much higher.

“Meanwhile, our closest trading partners are leaving New Zealand well behind in terms of growth. National can no longer hide behind the global financial crisis back in 2007-08 for its economic mismanagement,” David Cunliffe said. “If our closest neighbours and trading partners can do it, why can’t National do it here?

“There is no excuse. National came in to government with no idea other than to give tax cuts to the wealthy. It has blindly pursued that path, whatever its folly and whatever continuing damage it is causing to the large majority of New Zealanders.

“National’s Christmas message is simple: ‘Haves’ a happy Christmas and ‘have nots’ --- tough luck.”

(Updated with Cunliffe reaction, English reaction, ASB comment, HSBC comment, ANZ comment, JP Morgan comment, BNZ comment, NZ$ moves. Interactive chart below)

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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63 Comments

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Q4 looking just as bad. When Q4 2009 growth (1%) drops out we have annualised negative growth per capita while borrowing $0.3b/week.

John/Bill: it ain't working, can we have Plan B please?

When your back is against the wall....there is no plan B.

regards

New Zealanders should start voting with their heads instead of  their feet.

Household spending on durable goods (furniture and major appliances) and services (communications and domestic air travel) increased, while spending on non-durable goods fell (mainly due to alcoholic beverages).

So some of the drivers on the positive side were likely debt based spending. Haha.

Perhaps someone should give Bollard a call and get him to explain why he hiked interest rates twice this year and killed the recovery that had started.

The myth that interest rate hikes have an 18 month lag to take affect is well and truly shattered.

Don't worry Pongo, Bolly will be in the air to do the swing and dance before you notice. He is probably rehersing his lines right now.

How high does debt have to go, before we start regarding interest rate cuts - to encourage us to spend more and take on more debt - as just digging our own hole deeper?

Quite easy....with volitile, mxed data its hard to forecast what is happening 6 months out....as JK said with "conventional" (Ne; neo-classical) thought we should have had 6% growth.....we didnt get a 10th of that......

Bollard didnt kill the recovery, expensive oil and the rest of the world still in or near recession stalled our economy.....you cant sell if no one is buying.

Not a myth, statistical facts I think, ie the data charts show that effect while most ppl were on fixed mortgages....so the time lag was 18 months....

If you are saying the 18 month lag is now gone, yes sure, but so do most ppl.

regards

The New Zealand dollar fell below 74 USc immediately after the news.

And now we're back above 0.74 USD again. Forex speculators know that even after a disastrous result like this our monetarist puppet-on-a-string RB governor can still be relied upon to push all the right buttons.

Some sold the news, but they are quite a shock.

I think "NZ deleveraging is a myth"...  if u look at the latest credit and monetary aggregates... ther is no evidence of deleveraging...  A decline in the level of credit growth maybe.

The only sector that has paid down debt, in a meaninigful way, has been the business sector.

Could'nt agree more Pongo...apparently we were out of recession and they were scared of inflation...1 term of good results and now 3 terms of bad...unless he can bring it back down I suppose when we do reach recession again. Love it how they keep using the earthquake as an excuse... hardly anyone has been paid out yet, wait until they do.

My big brickbat for 2010 goes to......

the majority of economists in this country who without fail continue to make absurdly incorrect forecasts

merry xmas 

[    12 hours later , and there is still a big fat guilty silence from Bernard ............ So house prices didn't fall by 15 % in 2010 , then ?    ]

Gummy

No one calls me big and fat anymore. House prices got down around 10%, not the 15% I predicted.

But just wait.

My magnitude was right. Just the timing was out.

cheers

Bernard

Bernard, it depends on the measuring stick you use.

 

Do you have an NZ house price in Gold graph?

 

Bernard : It was your silence to Matt in Auck's jibe , that I was calling corpulent , not you .

Point of fact big guy , you look in need of a burger or two . I'll treat you to a Champ Burger at the local Jollibee , if you are passing through the Philippines anytime . ........... And we shifted the hammock after a near miss from a wayward coconut  . Little buggers do pick up speed from a 20 metre fall .

Merry Christmas Mr Gloomsterisationalysing Hickeysterical . Thanks for being such a good sport !

The ANZ guys were closest with their prediction of a 0.1% fall. In the Westpac preview there was a comment that the GDP figure had a standard error of 0.2%. That covers ANZ, but not the RBNZ, which was at the top end of expectations.

Basically more evidence that the government's 'export-led recovery' is only a recovery in terms of prices. Volumes are not rising which = not much job demand from the manufacturing sector. One would assume if volumes were to rise, demand for jobs would first from exporters wanting to produce more.

Merry Christmas

Cheers

Alex

ANZ are definitely the best of the bank economists

:)

Yep, I know what you mean.  We have a couple of dogs at home. One of them is definitely the best lotto number picker.

Bollards projections were far too optimistic when he hiked, the affect was quite chilling and I guess psychologically people were thinking here he goes again and we were looking at double digit interest rates which makes any investment un-economic.

Bollard took a risk that he projected things would take off again in the household sector, he got it totally wrong on his bet so perhaps he should contemplate finding other work when he is on holiday this summer.

My award for "Central Banking Hubris", goes to the Australian Federal Reserve, who are unusually intelligent about the role of land supply regulations in driving house price bubbles, but advised central government NOT to introduce reforms to this, because THEY, the Federal Reserve, could "handle it" (the housing bubble) through the "tool" of the base interest rate.

DUH, DUH, DUH.

Oh dear ...

Double dip gets more likely - 23 December

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during December 2010, shows total sales in November 2010 decreased 5% (export sales decreased by 9% with domestic sales decreasing 2%) on November 2009.

The NZMEA survey sample this month covered NZ$405m in annualised sales, with an export content of 39%.

Net confidence rose to 23, up from the 0 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 102, down from 102.5 in October, the change index (capacity utilisation, staff levels, orders and inventories) went up to 101 from 100 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 107.5, up on October’s result of 107. Anything less than 100 indicates a contraction.

Constraints reported were 77% markets and 23% production capacity.

Staff numbers for November increased year on year by 3%.

“Sales results have remained extremely variable amongst manufacturers as some markets have picked up but some firms are still struggling to find sales,” says NZMEA Chief Executive John Walley. “There continues to be growth in sales to Australia and Asia, but firms selling domestically or to the United States and Europe are struggling.”

“The exchange rate remains the elephant in the room of an export led recovery.”

“Respondents have reported that they have lost contracts because of the high New Zealand dollar.”

“There is some optimism about next year as the improved confidence rating shows but orders remain very short-term and uncertain. There is also concern that continued quantitative easing next year may cause the exchange rate position to worsen.”

“We need to see a new resolve from the Government on growing exports in the New Year. Poor conditions for the tradeable sector and the cavalier attitude from the Government towards our debt problems are an increasingly serious issue. Fast growing debt and actual growth falling below forecast require action. As Kerry McDonald, head of the Savings Working Group noted, if we do not address the debt situation ourselves then we are vulnerable to a major economic shock.”

“Some cost cutting is needed to address the Government debt position but a focus on tradeable sector growth is the key issue. That means a more stable exchange rate and a balanced tax system.”

Alasdair Thompson of EMA (Northern) seems to be getting concerned as well Hugh:

http://www.johnwalley.co.nz/141-interesting_query.aspx

Keep up your good work and remember - there is more than one way to skin a cat, turkeys don't vote for Christmas, grasp nettles, never caress them and finally, don't eat yellow snow. That's it, wisdom exhausted for this year.

Merry Christmas.

Cheers, Les.

some great input this past while Hugh...All the best. enjoy

Yes, and my thanks to you Hugh for your indefatigible work at introducing sense and intelligent research to an area that is in what I call flat earth mode. That is, they cling to their views long after they are out of date. The worrying thing is that major scientific advances often wait for the generation that clings to the outdated world view to die before they are widely adopted.

Keep up the good work, it does not go unnoticed.

Just as your input does not go unnoticed Roger.W.........don't know how I missed you in the line up. 

yep...Felize navidad to you Hugh,old son....been a good rave throughout 2010..s'pose you're going to Texas for the Xmas break ?

Poll time: Is the New Zealand economy already in a double dip recession?

Look right and up or just go here.

http://www.interest.co.nz/node/51810

cheers

Bernard

I'll take this window  to thank you Bernard...Alex ...Garreth....(even Rodney ) and the team at Interest.co.nz for some superb topics ...great editorials over the last year.

I have indulged myself in your threads far more than I had ever intended to....and that is a testimony to the quality of your work.....not to mention the outstanding posters that frequent the site......whom I will try to get to one by one before I bail.

It almost makes you want a highlights show ...but in type...

Thanks again to Yourself and the Team I hope you enjoy Las Vegas (watch out for Whitney) and wish you continued success in the coming year.

Cheers...and I'll have a drink to you.... (<:}

P.S. as it is unlikely I'll be bumping into any of the Ministers...I'd like to thank Cunnie for "funniest thread of the year".......Billy Bob..for ..( I can be frank if you want)  Bolly Bib ...for" tell us something we don't know."....Maurice Williamson for ....I take back everything I said ...I mean literally.....and I'm not just saying that either.

And finally May Wang for just buggering off and putting paid to any xenophobe myths that surround we good people.

cheers ostrich....and thank you  for not letting the Jones boy have it his own way. All the best to you and yours.

Cheers Christov

We'll welcome you back in the New Year.

A fun year ahead. Election. More European crises.

And a double dip recession...

cheers

Bernard

4 % GDP growth in America .

Flight from the bond market ,as yields edge up .

Commodities up another 10 - 20 %

China " assisting " Europe to stabilize .

Swiss franc surges further ,as a " safe have " currency .

Bill English finally grows some goolies and reads JK the riot act , prior to the election , no more " me too " to the seriously dopey policies of Labour past & present .

Winsome Peters does his Arnold Schwarzenegger impersonation : " I will be barrrrrrrrck ............. Hasta la vista , Jonkey ! "

NZ house prices still refuse to fall 30 % ............ or even 15 % .......... bugger ! We're all still rich . Double bugger ! We still have equity in our highly mortgaged little boxes on the hill-side , all made of ticky tacky . Were that it  not  so , ay Bernard !

 

What till after xmas,,,when job losses will start to impact as well. Most employers won't annouce them close to xmas, but in the New year a different story.

Yes, ANZ economists are worth listening to, especially Cameron Bagrie. Seems we will muddle along next year with a mixture of positive and negative factors, nothing too dramatic one way or the other (unless there is a flare up in the Middle East)

9% floating rates in 2011, Mr Hickey? Ahmm...

Wasn't it just 6 months ago you had little wager (involving cold coffee and your head) that rates would be over 9% by 2012?

Time to concede early, now?

Chris_J

Fair enough. The weather is very hot. Need something to cool me down...

Wait. Got the coffee....

Upending now....

Errrgghhhh...that wasn't pleasant. Was careful though to not to do it over the keyboard. That would have been messy.

Although I am cooler. There are pros and cons.

I should have stuck to the usual economic speak. Pros and Cons. Or on the one hand this... and the other hand that.

Cheers and have a great christmas Chris_J

;)

Bernard

I hope the camera was running.

Text only seems thoroughly unsatisfying (although it's not like me to question Bernard's veracity, is it?).

But back to the topic at hand: It's looks like the double dip's been wrapped up and placed under the Christmas Tree especially for Bernard!

But was there a recovery at all if we didn't actually recover?  The economy at 30 September 2010 was still 1.77% smaller than it's peak in Q4 2007.

In fact the economy is still smaller than it was at 30 June 2007.

So after 13 quarters we've actually recovered nothing.  Q4 2010 will probably be even more negative, so that fabled double dip now looks a dead cert.

The perfect present for a grinch.

Merry Christmas Bernard and an inflationary New Year, with low interest rates to all.

Merry Christmas to you Chris_J

cheers

Bernard "The Grinch" Hickey

most of the pros I know are cons

Try Manchester Street , Christchurch . All the pros are honest , hard working girls ....... .......... and fa'afafines .... No cons .

Updated with HSBC's Paul Bloxham's comment above.

"The fundamentals remain healthy though, and we still expect a recovery in demand through 2011. We continue to expect the RBNZ to resume its tightening cycle in Q2 2011, though today's numbers clearly provide some downside risk to this expectation. "

cheers

Bernard

Have added comments from JP Morgan and ANZ. Both seeing June hike at the earliest.

cheers

Hike-it-Hickey : For getting it so wrong , you must write 300 lines :

......." I was ruddy wrong , Les was right , cheers Les and John ".........

I can't disagree with David Cunliffes criticisms, but what he fails to say is that Labour would be exactly the same if not worse.

Problem for NZ is that we have the two main political parties waving the socialism, big government, state control flag and between them are tag-teaming each other in running NZ inc into the ground.

The only thing that will turn our economy around is a credible and viable 3rd party based on Libetarian social policies and free market economic policies. 

Bollocks.

Neither your approach nor Cinliffes are valid.

We are in a different paradigm now.

Peaked out in energy = peaked out in things do-able.

You need to address debt, you also need to do things as a society.

Meaning, some folk are going to have to earn less.

That's not lassie-fair, nor socialist.

Those are obsolete terms.

I agree with Matt S .

Labour & National are taking turns at rooting the country's economy . We need a smaller government . And much better regulations and watch-dogs to protect investors , and to limit the inflow of cheap credit into the housing market .

Though it's not Friday....Yay anyway....I'd like to dedicate my last yarn of the year to the outstanding posters who frequent this site...thank you so much for the ups the downs the smiles the frowns......... too many to mention but I'll give it a go......

Gummy bear hero.....Powerdownkiwi...Rob O the North.....Wooly/ Wally..Walter / AKA KUNST..Kiwi Dave...Matt in A....Matt S...Steven.....Nicholas A.....Ostrich....Kate.....Mr Parker...Les Rudd...John Whalley... Hugh P...Phill Best.....scarfie...... Tribeless...Chris J....Michael...Malarkey....Horace....Sore Loser.....rc....Roelof...Troy............The Moderator......and I am so sorry if  I have missed any number of people that have added value to my reading enjoyment of the last couple of years but it goes without saying .........well in fact that's wrong because...I'm gonna say it...

                                           A Very Merry Christmas to you all.

                                             and.......A Happy New Year  .                                              

  and So

  Working people frequently ask retired people what

they do to make their days interesting.

Well, for example, the other day, Mary my wife and I

went into town and visited a shop.

When we came out, there was a cop writing out a parking ticket.

We went up to him and I said, 'Come on, man, how about giving a senior citizen a break?

He ignored us and continued writing the ticket.

I called him an “asshole”. He glared at me and started writing another ticket for having worn-out tires.

So Mary called him a “shit head”. He finished the second ticket and put it on the windshield with the first.

Then he started writing more tickets.

This went on for about 20 minutes. The more we abused him, the more tickets he wrote.
Just then our bus arrived, and we got on it and went home.

We try to have a little fun each day now that we're retired.

See you in the New Year.

And here's my contribution for a filthy Thursday :

The fetchingly cute cop was out on night patrol with her dog-handler friend . ...   .... " ooooooooooh ! "     she says , " it is so cold out , I wish I'd worn my panties tonight ".

" No problems " her buddy replies , " we'll get Rusty to have a sniff of your snatch ....... and he'll head back to the locker room , and fetch your undies ".

So they shove Rusty's doggy nose up her skirt ( as you do ) , and he gets a big happy doggy whiff of her ............. Then he bolts back to the police station .

Five minutes later Rusty is back with the knickers in his mouth............ he also has a door knob , two truncheons , and three of the desk serjeant's fingers .

A big thumbs up there GBH.

Thumbs only ?...... So that was you , Serjeant Christov ! ......... Nice work .

Merry Christovmas and a Hickeysterical New Year .

Fantastic best laugh of the week, with Christov close behind.

Must have been the 80's eh:) Something about the culture.

Sergeant was probably Rickards. 

What a lovefest...and so this is christmas and what have we done?...

Had a lotta laughs and learnt a bit...happy christmas,team...time to head out now and buy a big bag of prawns,hams, wines and beer ( and some nymphets, Gummy) for tomorrow..

We're all going down the beach to sit under a bright red pohutukawa tree wearing silly santa hats and swim ,eat, laugh, swim , eat, drink and...........................?

rock on you-all....ain't love grand ??!!

Hey Rob : You gotta have a Christovmas here in Asia sometime . They go truely overboard with the lighting  displays , carolling , and the boom boxes ......

..... Speaking of boom , ABS 2 ( local TV network ) showed the amazing array of fireworks you can buy here . They sell stuff to gladden the heart of a suicide bomber , serious power !

Happy birthday God , dude . ......... Cheers !

Have added BNZ and Westpac comments.

Westpac is now saying they see a September quarter hike in the OCR.

cheers

Bernard

WTF? OMG, LOL! CIA gives WikiLeaks taskforce naughty name HT Troy

The CIA has launched a taskforce to assess the impact of 250,000 leaked US diplomatic cables. Its name? WikiLeaks Task Force, or WTF for short.

http://www.guardian.co.uk/world/2010/dec/22/cia-wikileaks-taskforce-wtf

cheers

My forecasts for calendar 2011:

- National house prices to drop 2-3%, Auckland prices steady

- GDP growth around 2%

Unemployment of around 6% at mid year mark

Lets see if I can back up highly accurate 2010 forecasts!!!

FYI here's what westpac have to say:

"We still hold the view that consumer caution won’t be sustained through 2011. As the economy gathers momentum over

the coming year, bringing more jobs and income growth, we expect growth in consumer spending to broadly match that of income, growing by around 2-3% per annum in real terms." 

I think thats a crock.

of course it's a crock, but they only exist if growth exists.

You can understand their need to believe.

Well Bernard this seems to have become the default Christmas thread. 

I imagine it will be pretty quiet tomorrow, as the week has been in general. PM's flat and the NZD for some reason goes up after it become clear we are in the s***. Can't figure that one out so I guess we will have to put that one down to the 'season'.

Here is a good couple for you from my current read.

Bernanke went to Japan in May 2003, and as a result Japan printed 35 trillion yen in early 2004, or approximately 1% of world GDP. This was all done so Japanese investors could buy US Treasury Bonds, with the spin offs to both economies that contributed to a delay of what transpired in 2007/8. Apparently the printing slipped under the radar of the financial media.

And to follow the statement: "The way it works is simple: An economy is geared to produce for real demand. Or is it misled by artificially low interest rates to produce for a level of demand that doesn't exist. The deceit can go on for a long time. But, eventually, some form of adjustment must take place--usually, a recession restores order by reducing both production and consumption. Generally the correction is equal to the deception that preceded it.."     The New Empire of Debt - William Bonner and Addison Wiggin.

Take care all.

Remember cobber , don't drink and drive ........... If you hit a road bump , you may spill some over the car seats !

Merry Christmas .

I'm wonder, who that Santa Claus was - not .... ?