Here's my quick summary of the key overnight news you need to start your day.
Firstly from Europe, hundreds of banks are rushing to repay cheap loans they borrowed from the European Central Bank a year ago, in a show of confidence that financial markets are returning to health three years into the region's debt crisis.
The ECB will get back €137 billion (NZ$218 billion) from 278 banks on Jan. 30, the first day that the three-year loans can be repaid - and nearly two years before they are due - the European Central Bank said Friday.
In Japan there has been somewhat of a surprise announcement by The Liberal Democratic party at the weekend when it unveiled a draft budget that for the first time in four years will raise more money through taxes than bond sales. Under the previous government, Japan had relied more on debt than taxes to fund spending, causing the country’s gross borrowings to swell to more than twice the size of the economy.
This new government is trying to give an impression of some degree of fiscal discipline as it tries desperately to extract itself from deflation. So far they have seen the yen fall in value, a key goal.
In the US, the next fiscal crisis battle is looming. Most of us have turned off this endless partisan brinkmanship, but the stakes get higher every time. This time, US$1.2 trillion in automatic annual budget cuts are looming - that's like stopping New Zealand's economy dead; zero activity - for more than seven years.
It's raised-rhetoric time and will be until the drop-dead date on March 1.
Half the automatic cuts will be to the military budget, the other half to essential services like Environmental Protection Agency, Food and Drug Administration, and National Institutes of Health. Even hurricane relief funds would be hit by a sequester. Republicans are saying that if it takes deep cuts to the military, so be it. They are prioritising a long-term fix to the endless federal budget deficits and endless borrowing. There would be significant consequences to no new budget agreement and those consequences will spill over to New Zealand.
The severe weekend storms in Queensland, and which are moving down to NSW today, are expected to take a big toll on insurers there. That could be a problem for New Zealand too because Australian insurers own most of the domestic market share here, and if they are under pressure from claims levels that aren't covered by reinsurance, it is likely that our premiums will rise as they try to "repair their balance sheets". Affected companies include Suncorp, IAG and QBE. In New Zealand their insurance brands include State, NZI, Vero, AAInsurance, QBE and AMI.
The NZ$ starts the week at 83.7 USc, 80.4 AUc and the TWI is at 75.4 as at 8:30am.
No chart with that title exists.
32 Comments
The severe weekend storms in Queensland, and which are moving down to NSW today, are expected to take a big toll on insurers there. That could be a problem for New Zealand too because Australian insurers own most of the domestic market share here, and if they are under pressure from claims levels that aren't covered by reinsurance, it is likely that our premiums will rise as they try to "repair their balance sheets". Affected companies include Suncorp, IAG and QBE. In New Zealand their insurance brands include State, NZI, Vero, AAInsurance, QBE and AMI.
Isn't it past time New Zealand self insured as the re-insuance operators will never stop raising their premiums? - we need to isolate our financial risks to those within our own borders. And if we cannot afford to, leave it at that - a slow death by a thousand (large) cuts - 30% -50% annual premium increases is the same outcome.
Im beginning to realise that insurance is a luxury i wont be having in the future, or at least at nothing like the level i do now.
So no mortgage then....that will have an interesting impact on house prices.
regards
That's what it has come down to in the US - State wards Fannie and Freddie are rumoured to underwrite 90% of all Stateside mortgages.
Fannie Mae's guarantee that the scheduled principal and interest on the underlying loan will be paid even if the borrower defaults. Wiki link
Which pretty much sums up the Green's policy...which is why Ive left the party. Other inocents are left with the moral hazard.
regards
What did you expect with AGW causing more un-stable weather but a rise in premiums? Its been heralded for years if not decades.
Im curious how you think NZ can self-insure? just look at Chch's bill, the only way to cover that would to have massive increases in the EQC fund and get it to 20billion and keep it there. So instead of $100 odd a year in the premium $400+. Just why you think the costs are isolated within NZ is strange I cant fathom it. Or that someone in a low risk area should subsidize someone in a higher risk area either.
Also didnt AMI mostly re-insure itself? ie hold assets its now had to sell ALL of? and still need a Govn backstop?
If we cant afford to insure or get insurance then that collapses the mortgage market over-night. No bank would take on the risk beyond the land value....So $400k houses would be $100k over-night...ouch.
"A slow death by a thousand cuts" for businesses in Chch yes especially. Hugh P. poo poo'd it when I said it......lets see how that goes (Ditto Council insurance) and its impact.
regards
I don't have any expectations in respect of Gaia's actions - just an inability to pay for demands i cannot generate income to fund.
Chucklefest.
I hope David does exercise restraint with the delete button, that is the best laugh I have had around here in months.
Perhaps interest.co.nz needs a sin bin. A week on the sideline to cool down :-P
........ speaking of " one-eyed " , did anyone else see that hilarious welcome to Australia speech , that PM Julia Gillard's " husband " gave to the visiting West Indian cricketers .....
He rattled on & on about annual prostrate checks ....... and how it's best to get a small female Asian doctor to perform said " investigation " .....
.... behind him , PM Julia was glaring furiously ....... and even the West Indians had a severely black look on their faces .......
Cobberdiggermate , get off the speech making junket , and back into your hairdressing career ...
That brought a smile :-)
how so?
regards
I agree, and hence lack of insurance will become a bigger risk and impact. Same can be said for no car insurance.....you would either pay up, or lose your house.
So if you cant fund why do you see the costs kept within our borders is any cheaper? I mean I can understand not insuring, you take on the risk (as a decent % in Chch did apparantly) and if you are say in your 70s and the house's worth doesnt bother you then thats not that an un-reasonable stance, worst case you get WINZ to house you.
regards
steven: un-insured: as a decent % in Chch were apparently
Interesting .. Where did you get that from. At the time of the quakes, I commented there would be a large number of people in the un-insured category, but there was no data available .. I was rubbished for it .. (I think Hughey) who assured us all the number of un-insured was neglible to nil ..
Hi,
Um....read on something like stuff, or it may have been on one of the programs after the news....
Actually, google is your friend, 5000 doesnt sound negligable,
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=106…
"We do not know how many people are uninsured, but ... I am advised that the national average of uninsured houses is around 5 per cent."
That would mean about 5000 damaged homes are not insured."
http://www.3news.co.nz/Uninsured-Cantabs-falling-between-the-cracks/tab…
My discusion with Hughey was that insurance could actually become un-affordable, especially for businesses who would just re-locate...of course that doesnt suit his outlook does it, if ppl leave he cant jump about claiming more land is needed.
regards
Whole point of insurance via re-insurance is to spread risk. Even the largest insurable event in the world, is never world-wide: it is territorially small, confined to one or (if Europe) 15 nation-states, and is therefore able to be coped with.
Seriously arguing for no re-insurance is a bet-the-farm, not it's a bet-the-nation stance.......and it's easy to imagine a national-wide event, like the main plate boundary skidding sideways a few tens of metres, which would wipe out that local kitty many times over.
...and it's easy to imagine a national-wide event, like the main plate boundary skidding sideways a few tens of metres, which would wipe out that local kitty many times over.
Risk analysis of this sort suggests re-location - why would any re-insurer take on such an apocalyptic forecast, if remotely possible?
They do because such a localised event is estimated as say a 1 in 350 year event, so set your premium at a 1 in 250 year level globally, at least historically. In NZ's case if there is another Chch event it may well be that we see the re-insurers withdraw, that would take our entire economy out...
regards
In that case I will take a chance of rebuilding my own meagre property improvements and or move after the event without a backward glance
The stark choice AMi left Chch premiums payers to contemplate until the Government came along.
So you simply dont insure, that is a valid stance. Worst case you get declared bankrupt and the Govn has to house you.
Yes, AMI's case gob smacked me, I sort of assumed that because I had insurance a payout would be honoured. Now of course there is talk that we are moving to an agreed value, a value you set with your compnay. Trouble is in a major event rent seekers (builders etc) will be able to charge huge amounts and hence cost will be inflated, which you have to take on.
regards
I think that if we get enough of a quake to ruin my house, which is on a hill then there will be no insurance for anyone and stuff all infrastructure left anyway, my risk is fire and our family house burnt down in the 40's. I have enough timber in the shed to build a house and would probably go earth block or Hebel anyway. Im looking at basic house cover, 3rd party on the cars and nothing else. If you want my Tv, computer, toaster etc, take them, however I will have cameras watching you.
Go the Hebel way AJ...fabulous stuff....the earth block way makes the Councils see dollars.
Apart from a very few items most of my contents I consider worthless, my computers were $400 on Trademe. Unfortunately some of the very few items are un-replacable or almost so.
In fact when I was in the UK the flat contents was 800sterling a year so I didnt insure, I didnt have that much of worth!
regards
Agree...
regards
Softly Softly .. don't rock the boat .. who to believe ..
From todays NZ Herald .. all in a days work
Chinese television aggressively advertising Auckland houses in daily 30-second commercials to potential buyers in mainland China, Hong Kong, Singapore, Malaysia, Taiwan.
Auckland Real Estate Agents, developers and buyers have complained that wealthy Chinese buyers are ramping up prices in Auckland's already over-stretched housing stock.
Auckland housing developer Grant La Hood of Citywide Homes said wealthy Chinese had pushed up prices and he renewed calls for deterrent measures. "I spend my days looking for suitable development sites and it's impossible to compete," he said of rich China-based buyers, allowed to purchase houses here without residency which is unusual internationally.
While .. Ian Thornhill of Barfoot & Thompson raised concerns after an Epsom deal when a Chinese investor bought a house then left it empty, saying he worried about the future for his family. "I don't think it's a good thing at all. Kiwis are getting really upset. They can't compete with Asians who have the money and they pay more," Mr Thornhill said.
Meanwhile .. In Vancouver, foreign buyers, mostly from China, have been blamed for increasing housing demand and prices and turning friendly neighbourhoods into GHOST TOWNS by not living in the properties.
Meanwhile .. NO OFFICIAL figures are kept (in NZ) on non-residents buying houses here. The Overseas Investment Office says foreigners only need approval under certain conditions, such as when a deal is worth more than $100 million, when more than 5ha of land is involved or if the land is deemed sensitive, such as farmland or adjoining a reserve or on the edge of a lake.
While over in the opposing corner is Dick Quax with a different opinion .. Auckland councillor Dick Quax BLAMED high prices on the council's policy of ring-fencing the city's growth. Auckland has a housing shortage estimated at between 20,000 to 30,000 homes. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10861802
Another example of the use of "multiple identities" and "multiple passports" in New Zealand
Headline: False-passport case highlights gap in NZ's border security
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10861848
And .. now .. the amazing premium on housing to get into Grammar School Zones and the rorts people are using to get an in-zone address. Wonder if the people above are the same ones. Maybe they can rent out the Ghost Town properties "address only":.
Headline: Top schools hire private eye to catch zone cheats
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10861867
Meanwhile .. In Vancouver, foreign buyers, mostly from China, have been blamed for increasing housing demand and prices and turning friendly neighbourhoods into GHOST TOWNS by not living in the properties.
Not too many years ago a restaurateur in Russell complained of the same - caused by absentee American owners.
Areal estate agent complaining about the ramping up of house prices.
Now thats a good one.
Maybe that's the problem .. not enough Grammar Schools
Auckland has only 6 Grammar Schools
Two are girls only, Two are boys only, the other two are co-educational.
The last one was built in 1952, opened in 1953 when the population of Auckland was less than ½ million people
Establish new ones in, Hamilton, Tauranga, Whangarei
Gees' eh..? and to think all that time back Bernard asked me to back up my claims with names... to name names...! and now , they( names) begin to worry...? a case of what have we done in the name of our own greed.......alas poor Yorick....! surely you jest...!
As i recall saying to the senior Barfoot person at that time, be careful what you wish for, you just might get it all, and then some, you don't want.
The answer iconoclast to the captured monies of the mainland hoardes, is to ,crash the market......collapse the dollar mayhaps.
Of course, there will be collateral damage, unintended consequence, scorched earth, but hey , if you wanna take your country back, I'm all ears to a better answer.....that is I mean, one that does not involve the OIO's input, or Aussie Malcolm's sound advice......selling us by the pound the lot of them.
The best of New year to you BTW.
And where are the European banks going to get the billions to repay the ECB that created the credit to start with......they will borrow it of course!
Nothing can beat a stable and soundly managed banking system...can it!
It does raise a question Steven, why not go uninsured..The premiums are causing more to consider this option. Flood, quake, Tsunami, ash, slip, crime, accident....what's left...oh yeah...fire.
Market is wide open to an enterprising company prepared to adjust premiums to the risk...instead of the current 'one bill fits all' policies.
Are insurance companies require by law to accept all insurance applications..no they are not.
So where is the enterprising company????
"The Government is bracing itself for more Novopay pain". press
Rubbish..the govt don't give a rats arsssss
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