Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including early estimates from insurers and economists that the Christchurch earthquake could cost NZ$10 billion to NZ$20 billion.
Economists estimate lost output in the March quarter of 1-1.5% of GDP.
Calls are growing for the Reserve Bank of New Zealand to cut the Official Cash Rate by up to 50 basis points, starting as early as March 10.
Economists from ASB, ANZ and Deutsche Bank have called on the RBNZ to cut, arguing the earthquake was a national crisis and inflation pressures remained low.
However, economists from BNZ and NZIER said a rate cut would not be effective.
See more here on calls for an emergency rate cut.
Meanwhile reinsurance costs for New Zealanders looking for earthquake cover are expected to rise sharply on international markets. It may be impossible to find reinsurance at reasonable prices for Canterbury.
Meanwhile, overnight, the price of oil rose over US$103/bbl as production from Libya's oil fields has more than halved in recent days.
Saudi Arabia has pledged to increase output to make up the difference, but there are concerns about Saudi Arabia's ability to produce more for a sustainable period. See more here at Bloomberg.
US stocks fell. See more here at Bloomberg.
Nomura has forecast the price of oil could rise to US$220/bbl if production from Algeria and Libya are reduced.
The New Zealand dollar was weak around 74.5 USc overnight.
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54 Comments
Cut the cash rate 1% now Bollard! The dollar wil re-align itself and we will earn more from our exports, imports will cost more which will encourage people to save rather than spend.
The people need relief from increasing food prices, power, insurance, rates etc and one way to do this is to cut the cash rate and lower mortgage payments will offset other increased costs.
Lower interest rates will encourage investors to be more creative rather than putting money in the bank and this is what we need in order to stimulate growth.
The temporary spike in oil while the middle east countries sort themselves out will also be painful - so c'mon Bollard get the razor out!
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10708556
Well spoken Wally
You're back on my xmas card list. (don't get excited, they're recycled)
Yep, this is just a blip - the fact that the unrest can be traced to poverty, and the poverty to not enough resources (apart from oil, Libya has nothing but WW2 relics) per head, has nothing to do with it. Right.
Yeah right.
Yes. But bring in a Land Tax and Stamp Duty for all of New Zealand at the same time , excepting Christchurch, and use the raised funds to rebuild our EQC and stop the 'cheap' money going into property speculation. Exempting Christchurch will also mean that it will attract what spec. money is left to the city to rebuild it ,at an effective discount.
Thanks GF and speckles - did that give you access to the sort of deposit rates that Commonwealth Bank are offering (ie 6% for 7 months) or did that mean they stuck it in an Australian currency account (from ASB securities yielding a miserly 2%) ?
Most of the banks here offer crappy Aussie denominated accounts which pay mediocre interest - its access to the rather more juicy term deposits advertised here:
http://www.interestratenews.com.au/td_1yr.php
that is of interest. TIA.
Would recommend you seek Wolly's advice. He is an expert at this. The spread between the AUD and NZD has moved out from 1500 pips to 2600 pips in the last 6 months. Not sure it can go much further. However the risk will be the RBNZ and if it cuts the OCR the spread could shove out to about 2700. The AUD moves a lot faster than the NZD, and if China undertakes any further anti-expansionary moves the AUD stands to take an enormous hit. Ask Wolly if it''s not too late.
It's too late icon...not even I can predict shallow quakes...look for the inflow of reinsurance loot to push the Kiwi$ up and don't dismiss the commodity collapse taking place and killing the aus$...remember our commodities are food...that matters.
Ignore the Chch event and expect the Kiwi$ to reach 80au this year. That's the best advice I am getting.
...you mean Wolly speculated, and was fortunate to have been on the right side, bearing in mind someone must have been on the wrong side of that specualtion.
Andyh I figured you would be using it as a hedge, the intent was more of a general statement.
I am still scarred from seeing the fallout of people chasing the interest rate in finance companies,without even considering the risk (...that richard long seems like a nice guy) when in fact they should be assessing the risk, and deciding if the reward is worth it.
Really very easy , go into ANZ tell them to open an AU$ dollar account , and its done immediately . The interest rate paid is not any better on small balances, but you get the benfits of the currency gains which have been really god in the past.
You will be astonished at how many NZers do this and run Aus$ bank accounts both here and in OZ.
Kiwi's are not dumb , and Bollard will be aware of this risks of capital flight by savers if he messes with the already low OCR
Re. Bigblue
Please explain why cutting the OCR will provide relief to mortage holders? The mortage rates are driven by the banks cost of funds. A lot of the funding comes from overseas and is not dependent of the OCR.
The banks are calling for a cut in the OCR so they can cut the rates they pay on domestic deposits.
Cutting the OCR will result if a drop in the Kiwi, pushing up fuel and imported food costs. It will also take money from those, particulalrly the elderly, who rely on term deposits for savings.
Completely agree GG. There is no logic in a rate cut. Most will be on fixed rates and the inter-bank rate will be drive by what the Aussie rate is. The OCR is a signal, the BKBM is the real rate to watch.
Monetary policy is not going to target the people you want to help, it a Fiscal and structural problem.
Agree there needs to be a targeted response for CHC residents. Cut the red tape get the EQC/ insurance payments out quicker, the banks need to come on board and offer some relief without the twenty questions and the corporates need to come in behind and guarantee jobs and future employment in the region (besides building). It will be hard for the region to survive if 30-50 thousand people walked away if they felt there is no future here anymore.
"... he (Bernanke)has been wrong about the housing market, the mortgage market, the economic recovery, nascent price inflation, bank stability, a housing recovery, and just about everything. Serving as Secretary of Inflation, he manages the money creation diligently and liquidity facilities with such aplomb and dexterity. Thus he is revered. Unlike the Great Depression, for which he is a revisionist history expert, massive price inflation has begun to accompany the hyper-inflation on the monetary side. Bernanke was selected as the dumb professor in residence, the bag holder, the obedient lackey, and idiot savant"
http://www.marketoracle.co.uk/Article26497.html
You will not escape this approaching storm.
The only collapse the oil bubble of '08 triggered was itself. $147 to $32 in a few months made every other market gyration of the time pale. It also served to smash the myth of the in-elasticity of oil demand. The downside in demand proved very compressible while thousands of previously uneconomic wells were fired up asap to capitalise in high prices before they vaporised. So much oil mysteriously appeared it reached the stage where it was physically impossible to store any more of the stuff, hence the spectacular collapse.
Christchurch and the whole country will emerge better and stronger from this event. The spirit of compassion, co-operation and generosity that is now so evident has always been there, and the quake is the catalyst to activate it so strongly it will gain momentum and keep on going. Economic growth and social progress are just by products of real growth; that of the human spirit which is rising to the occasion.
When the sheep poured off the Canterbury Plains and into the chilled ships, Christchurch had a raison d'etre. What is it, today, that Christchurch is that is so unique that it cannot be done elsewhere in New Zealand, and is being as we speak? Surely; whatever Christchurch rises to be, it will be a third of its previous size?
Vera - I am fascinated by your contention that:
'while thousands of previously uneconomic wells were fired up asap to capitalise in high prices before they vaporised. So much oil mysteriously appeared it reached the stage where it was physically impossible to store any more of the stuff'.........
Perhaps I could direct you to this dataset compiled by the EIA (the authority on such matters) showing global crude production 1960-2009. You need to just take a cursory glance at the column on the far right, world production, and go down to the bottom for the most recent years.
http://www.eia.doe.gov/aer/txt/ptb1105.html
To help you out I'll quote them for you:
2004: 72.48mbd
2005: 73.72
2006: 73.44
2007: 72.99
2008: 73.69
2009: 72.26
Dont you think its rather odd that with all those thousands of wells supposidly firing up and with that glut that you mention that it wasnt actually picked up in the official statistics?
Strange eh?
The price of oil collapsed because demand collapsed due to the GFC/oil shock. It most certainly DID NOT collapse because we suddenly started producing vast new volumes of crude - as those figures prove. What they also demonstrate is that in response to a huge price rise there was no demonstrable production rise - production of crude oil appears to be stuck on a plateau - makes you think eh?
Andy, thanks for the EIA link but I am already familiar with those figures. Of course the '08 price/production spike didn't result in an overall production tally increase for the year. This is because as always it quickly creates a glut and price collapse and subsequent output decline. Production can increase quickly but not for long. There is only so much storage space to put the stuff.
Hi all, this from the Reserve Bank on ATM locations in CHCH:
To assist bank customers in Christchurch, the location of operational ATMs in Christchurch can be found at these maps below. The information has been put together from other sources of publicly available information, and may be subject to change from time to time. Please check with your bank's website as power and access can affect ATM operations.
http://www.rbnz.govt.nz/nzbanks/ATMbranches.html
Cheers
Alex
OWM- remember that an investment is an assumption that somewhere in the future, you will be able to buy 'more' via a dividend, interest or share payout.
All those rely on the future getting bigger each round, to do the bigger underwriting (everyone is just like you, in otherwords). Take a good look at that Apollo shot of planet earth.
http://www.spaceimages.com/earth.html
Clearly, that process had to tank at some point - and that point would be the biggest rate of activity thus-far seen. Peak energy had to signal that limit (sorry to those here who hear little else from me).
There will be opportunities on the way down, if the system adjusts to a permanent - if bumpy - decline. Some winners and some losers under the parachute. Anticipating the things that will be essential is one suggestion, but given what clearly happens when the disenfranchised have access to facebook and twitter, I wouldn't bother.
I'd put it into getting self-sufficient and resilient. Been there done/doing that.
Advice (FOC)
1. Dont take advice from annonymous blog sites
2. Get advice. With new regulations, the scoundrals have been thinned out in the investment advice space...financial advisor, financial planner or sharebroker. All have their vested interests to bear in mind with any advice given.
3. Use that advice to educate yourself to ensure you understand the risks involved in your investment, including the risk that if your money is stuck in the bank and inflation explodes, you are losing money.
4. see #1
Thanks FairFax. Wasn't aware that Interest.co.nz is anonymous. Would think the posters are anonymous. Nevertheless, I generally don't trust anyone. Now when you say new regulations what do you mean exactly? Also what does the downgrading of the banks mean to the stability of the institutions? When you say stuck in the bank, what are you referring to exactly?
infrastructure must of course be a priority, but so should the cathedral.
The cathedral is the heart of the city, it needs to rise again from the ashes. This will lift the people's morale - emotional rebuilding is just as important (actually more important) as infrastructure rebuild
That's interesting Matt...perhaps it would be best to clear the rubble and leave the thing as it stands to remind engineers and building inspectors why safety should come before the dollar.
The cathedral should not have been open to the public given the fact the "experts" said a mag six was on the cards!
Who approved it being open?
"As the bridge was taken apart, each piece was numbered to aid re-assembly. The bridge was reconstructed ... , and re-dedicated on 10 October 1971." ( Rennie's London Bridge - wiki)
They also strengthened it. A memorial of some sort maybe? Maybe there are other buildings that could accompany it. A new local setting?
I really hope they do not rebuild it. It'd create the same risk in a similar event again. Leave it as it is after making sure what's left is strengthened enough that it won't keep falling down, or remove it and have a park instead. PS: I loved the Cathedral and Cathedral Square, but I'm never gonna sit there for lunch again.
Christchurch may be rebuilt, but I dunno how many people will be left to live there. The concensus seems to be among my Christchurch family and friends that the north of the North Island is the place to be now.
They aren't all packing up and heading for sunny northland but a few of them are making plans.
If the Australians hadn't been so hammered by cyclones and floods recently, I suspect everyone in Canterbury would be looking in their direction now.
Chances are Christchurch will be but a pale shadow of itself for a long time to come.
Agreed. According to stuff 10,000 person a day have flown out of Chch since Tuesday. Probably temporarily but I'm sure some people will leave definitely.
I spent a few hours yesterday looking through my atlas but after eliminating every area on the ring of fire, any politically unstable country and any country with dangerous animals including but not limited to snakes, sharks and crocs there wasn't much choice left. Back to France doesn't appeal much (not really many risks there but the French are really grumpy lol).
Not that I think we'll really be leaving but with family super worried and the stress of the last 6 months it's probably normal to question our choice and look at other options. Friends in Wellington are doing the same in fact - seems that even though they haven't experienced it it's made them think hard about living there. I guess the one reason we'd leave is if our lifestyle is "compromised", ie too much stress/anxiety and lack of work.
Northland really *is* a good option.
The climate is wonderful and house prices are low compared to many places in NZ, certainly within the NI.
There are opportunities too, both within cities like Whangarei and Kaitaia, and the magnificent but more rural coastal places.
And on top of that it's quite probably the most geologically stable region of NZ.
Do you actually know the number of foreign nationals flown out? It is a large number. Actually it feels like 10,000 per day have moved to north canterbury.
A lot may have left but you need to keep it in context, this was a horrfic event but the majority of the working population work on the fringes in commercial subdivisons. I know many not personally affected while also many in the CBD and out East who were heavy affected.
"You need to keep it in context". I realise that, and believe me, after the Sept 4th earthquake everybody (well, except those in Canterbury) was telling us to do just that, get over it, stop stressing about the aftershocks and consider ourselves lucky - after all we'd had "our" quake, no one had died and surely we were now safe for another 80 years.
Rationalising and putting things in context is all very well, and that's what we've tried to do. Just yesterday I was trying to reassure my mum telling her that even if the death toll climbed to 400 (which I hope it won't) it'd still be just 0.1% of the population, in other words 99.9% of Chch people are fine. Well, fine is definitely not the right word but at least, alive.
The fact is, putting things into perspective unfortunately doesn't take away the trauma and the fact that many people won't be happy to stay in Chch, let alone work in tall buildings in the CBD. Of course, we knew before coming to NZ that it was, is and always will be earthquake-prone but you look at past events, see that the last deadly one was eighty years ago and tell yourself the risks are limited. It's easy not to think about it until it actually happens. When it does happen, it makes a big difference even if the risks haven't increased. And of course as I said there's also the issue of work. In what way we'll be personnally affected I'm not sure but a number of people will be that's for sure. If people lose their jobs, they may have to leave and go where they can find one even if they don't want to.
Thats absolutely pathetic David C! Rich mate, my mother is from Christchurch and I was born there, so you can f$%k up with those sort of comments about not liking the people of Christchurch. F OFF!
It could be rebuilt in a manner with modern technologies that ensured it looked pretty much the same, but was considerably stronger
Did the Americans stop building tall buildings because they were worried about another 9/11? No, because that would be weak and they stood true to their principles
I think most if not all other historic buildings that have been damaged should be demolished and NOT rebuilt, but I think the cathedral is one exception
Whenever I visit the Chch Cathedral I think of Ken Follet's Pillars of the Earth.
Where there is a will (and money, patience and time) there is a way - and a way (of strengthening) which I am certain could be engineered to withstand all the forces of nature recently thrown at it.
At Te Papa there is a public display of the manner in which the foundations have been built to withstand earthquakes - and it (I imagine) is built on reclaimed land subject to severe liquifaction.
I believe the key buildings of character in Christchurch central (if we have the will) could be successfully (and safely) retained in any reconstruction. It would be painstaking, labour intensive reconstruction, which could take decades, even generations. But I am certain the children of my toddler grandchildren would thank us for it.
Our parochial, colonial heritage is important. Not important enough to compromise lives, but I believe we can have both heritage and safety. We are that advanced.
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