Will the current prosperity last? Will our politicians and central bankers act to improve things, or make them run off track? We want your opinion about what is likely to happen, on anything that affects our economy

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It is that time of the year again when we look forward to a New Year and imagine what is in store for us.

After a very long decade of expansion, all the signs are that the current business cycle is coming to an end.

As 2018 rolled on, uncertainty and risk rose in the international trading environment. The year has ended in turmoil with the US Government 'shutdown' and confusion and instability hanging over the world's largest economy. The world's second largest economy (and our largest trading partner) is suffering growth indigestion.

2018 was also a year where our new Government, who was surprisingly conservative in its first year, allowed the economic good times they inherited to roll on unhindered and without any major changes.

But will New Zealand start 2019 in a similar low-level tinkering fashion? Has do-nothing-little become the new political mantra?

Certainly there has been a clear change in the leadership style of our central bank; there is now no doubt about where they stand under Governor Orr.

What will these two lever-pullers do in 2019?

Here is the 2018 data:

Benchmark updated: Dec-18 Source NZ$   NZ$ US$   NZ$ US$
    2008   2017 election   2018 latest
Consumer confidence ANZ-Roy Morgan 102.3   126.3   117.6  
Crown surplus (bln) Treasury -$0.5   +$12.3 +$8.8 +$8.4 +$5.5
Exchange rate TWI-17 RBNZ 63.3   75.6   71.9  
Government net debt bln Treasury $10.2   $66.3 $47.5 $57.5 $37.6
Country's net overseas liabilities % GDP RBNZ -80.4%   -58.5%   -52.1%  
Exports (Goods + Services) bln pa Stats NZ $45.0   $71.8 $51.4 $80.0 $52.4
Current account deficit bln Stats NZ -$14.1   -$7.5 -$5.4 -$10.5 -$7.0
C/A as % of GDP Stats NZ -7.5%   -2.8%   -3.6%  
Unemployment rate Stats NZ 4.1%   4.6%   4.4%  
Employment rate Stats NZ 65.4%   67.8%   67.5%  
Participation rate Stats NZ 68.0%   70.6%   - 70.6%  
Inflation / CPI Stats NZ +5.1%   +1.9%   - +1.9%  
Official cash rate RBNZ 7.50%   1.75%   - 1.75%  
2 year fixed mortgage rate (avg) interest.co.nz 8.56%   4.78%   4.48%  
GDP growth Stats NZ -1.7%   +2.7%   +2.6%  
Median income, week Stats NZ $919   $1,807 $1,294 $1,846 $1,192
Median house price $(000) REINZ $335   $525 $376 $556 $363
Median rent $/week 3br house MBIE $295   $400 $286 $450 $294
Health spending (bln) pa Treasury $11.9   $18.4 $13.2 $16.5 $10.8
Income tax rate (max) IRD 39%   33%   - 33%  
GST IRD 12.5%   15%   - 15%  
Annual net permanent migration (000) Stats NZ +4.3   +72.1   +62.7  
Core public service (000) FTE SSC 45.9   47.3   49.7  
Number of people on a benefit (000) MSD 269.6   277.2   284.3  
                 
Population (mln) Stats NZ 4.270   4.818   4.930  

The US dollar equivalents are recorded so that these benchmarks can be assessed on an exchange-rate adjusted basis. (2017 is NZ$1 = U$0.7163, Q3-2018 is NZ$1 = US$0.6544.)

So, what do you think will happen in 2019? (Please focus on the economic aspects.)

Were you brave enough to record your guess last year? You can find it here and check out how good a forecaster you were.

We love bagging economists and their forecasts, but it seems to me many/most of us who had a crack at what will happen in 2018 got it materially wrong - and in major ways. There were also some flukes that came in but that "accuracy" didn't seem to extend to other wild guesses, even from the same commenters.

Can you do better for 2019?

This story is to encourage you to record your 2019 predictions.

They can be on any topic that has an impact on the New Zealand economy: anything, including property, interest rates, exchange rates, insurance, rural issues, the dairy payout, our migration issues, our relationship with China, the big international economic influences, even the shifting international power balance. But please try to ground them in the economy. (For example fashion or celebrity comments are not relevant, but climate change issues are.)

You will need to be logged in to comment and respect our commenting policies (and respond to others' differing views in a respectful and civil way).

Over to you.

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?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a 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.

173 Comments

This should be interesting David, many people on here like making predictions but without an actual date. I'm still going for rising interest rates in Q1 2019.

Can you confirm the year is right?

I may have agreed with you if oil prices were still high..

I am no economist. Don't know the first thing about it.
But what worries me the most is the way the Ak council is spending money. And getting away with it. With no prudence whatsoever. Ramped up extremely quickly to the debt rating limit already. And planning to do off balance sheet debt now too. No transparency. Little or no cutting back of in-house overheads. And lots of extremely expensive consultants being employed.
Rail tunnel contractors running for the hills voluntarily and involuntarily. Was 2.8 billion. Now 3.4 billion plus yet to be priced extra platform length cost increases. Final bids ages away. Cost overruns during construction no doubt.
Huge water interceptor project on the books.
Nothing of benefit to North Shore ratepayers whatsoever.
Aaaaaargghhhh. Its a nightmare.

Yes, and so I predict they'll keep spending in this fashion.

And so keep looking for new and innovative ways to screw more money out of the ratepayers.

All from a mayor who campaigned on cutting costs!

And yes, no one cares!

Council now doing some creating accounting shifting its huge debt to another entity like watercare so it can borrow more

As long as the general public use personality or name recognition as a basis for voting in elections, we will continue to be shafted by incompetent leadership and legalised theft. We need councils to concentrate on efficiently providing the basic services and stop wasting our money (its not theirs) on feelgood projects. Auckland Council should have an administrator appointed to review their operating model and whether the ratepayer is receiving adequate and comparative value for money.

Which feel good projects?

Well I would hope less shit in the ocean would benefit some of the Shore residents at the very least. A large price to pay for it though.

Its laminar flow in the harbour not turbulent. So the poo does not come over to the Shore side at all. Cheltenhem beach is one of the cleanest in Ak. This proves that the poo stays on the Ak side and eventually either sinks or gets zapped by the sunlight. So when the Councillors say that it is good for the Shore, they are lying. It should be paid for by targeted rates for the Ak side. Again, north shore residents get shafted.

I’m sure there are a few projects on the shore. Off the top of my head I can think of Skypath, seapath, lake road changes, busway extensions, takapuna town upgrades. I can’t think of any projects near us on the isthmus except the interceptor which is hardly exciting.
Rail link is looking a bit dodgy. At 3 billion I support it but I’m starting to wonder if they are struggling to get a tender anywhere near that amount. Maybe a cut back redesign is needed.

I predict that a lot of these projects won't go ahead. The Lake Rd one is a very minimal one. Half the budgeted cost of the proper fix. The Council in their wisdom re-zoned the land alongside it as mixed housing urban so land acquisition costs (if any in their cut down project) will have gone through the roof.
And Len Brown has already taken one station out of the rail tunnel design.

As a dedicated North Shore patriot with the exception of the busway all those projects could be halted with barely a tear. The only project that I would cheer is for the bridge to be removed and not replaced.

immigration will not be below 60k for the whole of 2019
the government will change direction on kiwibuild and set up its own builder rather than rely on private builders ala the old MOW
the fed will stop raising rates

By December, Auckland property prices come in at -6%, NZ overall -2%. Unemployment rate @ 5.7% and NZX-50 at 5600. (edit) official cash rate at 1%. I was one of the many that braved it and had a crack at what will happen in 2018, I certainly got it materially wrong! I think the only thing I got right was that Trump would still be President! Anyway, the tone at which the year begins, isn't always how it ends.

Lets see how we go this coming year ;-)

So what you are saying is dont buy auckland property -6%, but for the rest of the country you're forecasting positive 4 percent growth. I am personally happy with zero capital gain outside auckland and take reasonable yield instead. Zero percent capital gain would be a good performance compared with 2019 sharemarket returns which will probably take a battering losing 10 percent due to rising US interest rates and president Trumps ongoing wars with Congress.

Houseworks, Hamilton has peaked. I'd say 2019 is the first of many years of sub zero returns. BTW, you're already on record as boasting of being negative geared. The door is shutting on offsetting losses against income from other sources.

Regions have peaked and will follow Auckland down.

You are sadly mistaken pops....maybe you do not know a good investment when you see one so keep getting low returns from the wrong stuff. Our properties turned to gold which means that we are not negatively geared like you assume. Keep trying and dont give up pops.

UH-HUH, UH-Hmmmm. Sounds like another seminar :-)

Your property price prediction is essentially the same as last year, which was wrong. Are you going to repeat the same prediction year after year until it comes to fruition? Like someone rolling a dice and yelling out 4 time and time again, and when it eventually lands on 4 they are very chuffed with themselves and say “told you so”.

by Retired-Poppy | Sun, 31/12/2017 - 09:37

Here's my predictions for 2018 but I hope somehow the good times keep rolling and I'm proved wrong!

1/ September quarter shows negative growth driven by drought and weaker consumer spending, backdrop of lower interest rates but much tighter lending conditions.
2/ NZX-50 falls to 6100 by December.
3/ Auckland property prices fall another -5% by December, nationwide -2%. Provinces following Auckland - down.
4/ Realestate.co.nz total Auckland listings at 16,200 by November 30.
5/ NZ Government deficit -3% GDP on increased spending, tax take projections weaken.
6/ September quarter CPI comes in at 0%, evil word “deflation” is again uttered. RBNZ will have lowered OCR rate to 1.50% by years end.
7/ Official unemployment rate rises steadily to stand at 6.75% by December. Unofficial rate double that.
8/ US 10-year bond at 2.50, 30-year 2.25% by December
9/ US Dow plunges from new August high 27000 to 18000 in October, US looks to be again entering recession by December. Officials at pains to say this is a “healthy” correction……
10/ Trump still president, US warships visible from North Korea beaches - its a blockade. China distracted with its invasion of Taiwan.

Woohooo! I'm flattered to have captured the attention of our resident Spruikers! Your increased desperation is duly noted.

Yvil, for someone who has spent the entire year sniping and changing his narrative depending on the sentiment of the article, this is entirely expected :)

I predict you will spend the entirety of 2019 doing the same thing!

by Yvil | Fri, 04/05/2018 - 13:36

"So be brave and let the great depression happen, it's the purge the whole system needed. It's much better than the long slow downward spiral we're on now, which will still lead to a depression"

Yvil, how deep should our bunkers be?

And it’s not like Poppy’s predictions were wrong but generally in the right direction. In most cases the data went in the exact opposite direction of what was predicted, and by a substantial margin. Case in point, unemployment predicted to be a whopping 6.75% but it went in the opposite direction and is now near rock bottom low at 3.9%.

Poppy, when will you learn that your world view is upside down and that you need to change your thinking accordingly?

BLSH, I think what irks you is my predictions are not without foundation. I am honored that you take my presence seriously. More so than this time a year ago, the facts are heavily stacked against the dangerously complacent and you'll sooner or later wake to this fact.

Try and learn from the ride and pass on those lessons to your kids. They'll one day thank you for it.

*Try and learn from the ride and pass on those lessons to your kids*

I hope that you're taking your own advice pops

Houseworks, if I hadn't already, I wouldn't be where I am today. For my kids, a good starting point was watch for rogue Landlords who break the law"

by Houseworks | Wed, 04/04/2018 - 20:21
"Sometimes don't even get my bonds lodged which I realise is a huge no no although I know I'm not alone in this transgression. It can be expensive if pinged touch wood"

father poppy forgive me for I have sinned. I knew you as a DGM guy would react to the bond comment, but couldn't have realised how much you would dump at every opportunity, it says a lot for your personality. Furthermore you will be pleased we have sold that property as a result. We made a gain in the process, am I allowed to say that, I dont want to upset you

Houseworks, good for you :) By knowing when to leave Landlording to the more positive geared professional, makes for a good start. Now that your under the guise of the IRD under intent, try not to break any more laws. What would this teach your kids?

BTW, much to your embarrassment, several commentators noted the original bond comment. It was one monumentous gaffe that you've been hurriedly covering up ever since. It made it near impossible for you to be taken seriously. Quite sloppy really.

Enough said.

Ahem we are still landlording on a decent but smaller scale....confusing for you?

What's (IS) true, is that one can role play the life of the successful on an anonymous forum. Your efforts at taking full advantage of this are certainly noted.

(Standing ovation)

No this is what's true, retired poppy playing at being a reputable commentator and he doesn't have the slightest idea

"Submitted by Retired-Poppy on Mon, 31/12/2018 - 11:15
I ... had a crack at what will happen in 2018, I certainly got it materially wrong! I think the only thing I got right was that Trump would still be President!"

Let's see about 2019 poppy, will it be accolades for you or more brickbats? You have a hide like a rhino so you will probably dismiss the brickbats and continue spouting effluent.

Houseworks, where's your (specific) predictions for 2018? In fact, where's your predictions for 2019? Like with fellow role players Yvil and Agent TTP, to avoid accountability, you contribute very little.

Why snipe at the predictions of others when you can show others you have the courage to make your own predictions.

You must admit, I do make a valid point.

2019 prediction. Not positive reading by me. Might be a closet DGM.
*S&p 500 -32%
*Nzx 50 -24%
*NZ House prices yoy decline 6.7% starting April 2019.
*RBNZ to increase capital holdings in Bank by half of what was proposed in December
*mortgage rates rising by .75% a percent while RBNZ does 1x hike of .25%
*immigration falls to 52k yoy
*Aussie banks try to plunder NZ for capital (RBNZ new capital requirements stop this)
*Brexit happens and UK drops into recession and then starts lifting fast by end of year (I think mid to long term Brexit will be positive for the UK)
*NZ/UK FTA signed
*Annual Trade surplus due to CTPP and us replacing US exports in Japan
*Milk price to fluctuate at current level +-10%
*Two more vote staged of EU exit
*The US wall is funded and started
*NZ Govt debt to GDP falls to 17%

*Populism will become respectable. But old politics will retain it's grasp.

Until people realize that it is no different from the "old politics" it supposedly replaced.....

The thing about populism is that it’s not actually popular. If they implemented policies a majority of people supported it wouldn’t be that bad. Therefore if Trump was a populist the first thing he’d do is regulate guns. So really you should call Trump a unpopulist.

Things to look out for in 2019
#1 Trumps Hair
#2 Trumps orangness
#3 Trumps badness
#4 Trumps stupidity
#5 Trumps tweets

Don't forget :-

# Trumps continued push for his wall that will never happen

# Trumps impeachment

I think the wall will get started this year. Trump's visit to the ME and how he had to fly in under cover of darkness with massive security after trillions were spent and decades of war should highlight how cheap a wall is at a mere 20 Billion or so.

These wars are a complete waste of money and lives and achieve no improvement in peace and security while a wall will be economically stimulating and provide a level of actual security.

While war is pointless and a waste of time , money and especially people's lives ( in those who are killed, displaced etc) - the "beautiful wall" is just as much a waste of time and money - an illusion of security from what in reality. Unless it is adequately maintained and manned how long before is is beached or people find another way around the wall (over or under it - think Berlin wall) - it will only dissuade the "honest" immigrant. The "beautiful wall" is nothing more than Trump making a promise which he now has to keep in order to not lose face ( it was only an issue when certain Conservative commentators voiced an opinion that they wouldn't vote for Trump if the wall wasn't built - Trump's fear is losing the next election - not the "wall") . Why wasn't this wall funded in the past two years when the Republicans had both houses of Congress - why has it only now become an issue. It is more a political issue rather than one of real substantive need.

I can't believe that you're still supporting Trump Zachary! But hey, if you think an ineffective wall is going to stop people from crossing their boarders in to the US, think again.

The most they'd do will be to improve the fencing, I doubt they'll want to spend the actual cost of what's been estimated at 25 to 70 Billion when you take the overall costs to support and create the wall.

The only positive economic stimulus will be in the sales of ladders and rope.

If you want a more entertaining explanation as to why the wall will not work, I suggest you watch this from John Oliver: https://www.youtube.com/watch?v=vU8dCYocuyI

there is a good reason you have to update your drivers licence so often in the States, AI will soon ID everyone you won't need a wall.
https://www.youtube.com/watch?v=oNltR4iCRCA

The people who will really be delighted if this idiotic wall project goes ahead will be the smugglers, of people, arms, drugs, whatever commodities. If you're illegally moving something across that border, either direction, what could possibly be more conducive to that than a massive project at the border, with roads being built into the wilderness, massive movement of people and materials back and forth, lots of 'empty' trucks to use on the return journeys, lots of hastily-recruited and easily corruptible workers and border staff ...

That's the spirit...nothing like a big construction project to spur illegal enterprise.

Zachary - why would you spend $25 billion to build a 3,000 mile long wall when the clever-ones will simply set up ferry services either end in the Gulf-of-Mexico at one end, and Pacific Ocean at the other, just below San Diego, just like they're doing across the English Channel in Zodiacs

Oh poop. Will/way. It'll just block wildlife from their natural range.

""Will the current prosperity last?"" - obviously no if you want all those figures to remain static for 12 months. But taking a decent long view as an historian might view it 100 years from now then yes prosperity will last. House prices could halve, unemployment could double and we would still look like a prosperous country with that kind of perspective. We have become attuned to the good life, we don't anticipate one in three of our children dying in childhood or fear frequent empidemics that kill over 50% of the local population or unemployment on the scale of the thirties.
So ten years from now we will look back and not notice any difference between 2018 and 2019. Of course they would have made a similar prediction in Dec 2013.

Hard to imagine the OCR was 7.5% in 2008. Oh the good old days, and people wonder why house prices have shot up since then. Median incomes have doubled have doubled as well, but house prices and rents still have a way to go before they catch up!

Median Household Income hasn't doubled since 2008. Not even close to it....2008 = ~$60k; 2018 =~$85k
https://figure.nz/chart/yiJz6VUr64vQ68Du

My income finally doubled, if you take what I was earning in 1990 ! Don't believe the figures, typical incomes in NZ are minimum wage and now they have raised it a few bucks, even more people are on it.

I struggle to find the data that is shown in the table embedded in the article. The median income is shown to more than double in the last ten years. Doing a search for data gets me this: https://www.stats.govt.nz/information-releases/labour-market-statistics-...
which shows a 10 year gain closer to 35% than >100%. I worry about the provenance of some of the data in the table. It looks like some of the data may have come from 2000 instead of 2008. The income appears to have doubled between 2000 and 2018, but clearly not for 2008 to 2018 despite the numbers in the articles table above.

Just noticed that health care expenses are shown to have decreased by 10% in the last year. Either this is erroneous, or the "nine years of neglect" is something that we will be looking back upon fondly in comparison!

Any chance for some proof-checking on the data shown in the table?

https://www.stats.govt.nz/topics/income - median income JUN 2018 is NZ$997 - I was like, wow...MI doubled in 10 years, what have I been doing with my life?!

Methinks someone has their averages and medians mixed up

Neither the average nor median appear to have doubled though. We are awaiting clarification.

Took the median from 2008 and compared it to the average of now maybe

I find it hard to believe that median income has doubled from 2008 to 2018. Are the figures above correct? $919 - $1846 ?? Looking at StatsNZ I get a figures of $588 - $769 for median personal income and $1,152 -$1,635 for median household income.

https://www.stats.govt.nz/information-releases/household-income-and-hous...

If income went up 100% and rent went up 50% according to the figures above then things seem pretty good but Stats NZ possibly reveals that personal income only went up 30% and household income 42%.

I'm possibly reading things wrong as usual but surely median incomes haven't gone up 100% have they?

As for predictions it is very difficult this year. I'd say things pretty much continuing as usual. 2-3% GDP growth and 2-3% house price growth. A fairly dull yet stable year ahead.

Yep, I'm very surprised by the 2008 - 2018 data too,
Median wage up 100% ?!? but house price up only 66% that would make it sooo much easer to service a loan today given interest rates have almost halved. David Chaston, can you please confirm the median income data?

I predict nothing will change and next yer will be the same as the last. Boring world we live in ;)

David is right, It's tough to make predictions, especially about the future.

But in the spirit of the season:
• Auckland house prices are down at least 5% on November 2019
• Interest rates rise in NZ (OCR and retail rates)
• The fed slows interest rate rises
• The stock market and global economy is more resilient than people think but also week - so flat for the year in terms of stock prices.
• KiwiBuild gathers steam but people question the purpose as house prices crest.
• Private sector builders operating on the outskirts of Auckland get into trouble and prices drop.
• It may be more a 2020 prediction but somewhere like Rotorua, Dunedin or Hastings gets hammered in terms of house prices reminding us that extrapolating Auckland rises to the regions is foley.
• There is another big surprising AI breakthrough that reminds us that the future will indeed be different from the past.

I think 2019 will be interesting. As in "interesting times":

Will China implode and the CCP lose its cherished "mandate of heaven"?

Will Germany implode economically and reject immigration?

Will the EU shatter?

Will a real Brexit Revolution (as in the old meaning, the restoration of ancient rights, as in the Glorious Revolution) actually happen, (as in "cliff edge Brexit", "no deal Brexit", as real actual Brexit is depicted)? Or will the weaklings submit to their rightful EU overlords and do what they are told is best for them?
https://en.wikipedia.org/wiki/Glorious_Revolution

2019 is thirty years after 1989. 1989 saw the fall of the Berlin Wall and the collapse of the USSR, as well as the bursting of the Japanese bubble. The collapse of the CCP and the EU is quite possible. No one saw the collapse of the USSR coming except Jacob Rees Mogg's father and Vanity Fair, certainly not the CIA. I think there will be some major world changing events, possibly one or more of the above. 1989 will not be year when nothing happens, it may be a year in which decades happen, to misquote Ulyanov.

Ha, it seems last year I predicted the opposite, a year where nothing happens:
I predict ... a period of quiet stagnation with a Lot of Earnest Discussion.

I guess that's my prediction for NZ for 2019 too.

Yes that uncertainty and risk in the international trading environment will be likely to continue, until the Americans will hopefully have the good sense to get rid of Trump. We've see what a huge impact of having a lunatic at the helm of a major super power has had on the world.
So here's my prediction for 2019.

Auckland's property prices will continue to slide especially in the upper price brackets (Anything above $900K). There are three reasons for this; 1) The AML rules are to come in to effect early this year, 2) China will continue to keep tight controls over their capital flight rules and 3) the Foreign Buyers Ban will continue to reduced overseas investors.
The rest of NZ property market will gradually increase providing prices remain affordable to wage levels.

Immigration will probably decline gradually unless unpredictable global events cause an upward shift.
Oh and I wouldn't be surprised to see a 'empty home tax' brought in for AKL once the census results are released later next year.

Mortgage rates will continue to edge down slowly to prevent property markets from crashing (Oz as well), though I think you'll still see it 15 to 20% lower than it was at it's peak in early 2017 for AKL, Just depends on how effective the new AML rules are.

Over all I think 2019 will be a much better year! :)

It doesn't make sense that the regions will continue to rise while the choicest property in all of NZ will fall, especially with mortgage rates edging downwards.

I'm racking my brains trying to think what "huge impact" Trump has materially made on the world.

Trump has made discussion about immigration policy possible and has caused a reaction against Hollywood moguls raping actresses with impugnity (I mean, gosh, who knew?). There you go.

It's all to do with 'affordability' Zachary. I only predict prices going up slowly in the regions if people are still having to move further afield or out of the very expensive cities such as Auckland.
We've seen Wellington continue to rise slowly since business are doing well due to more affordable living costs.

It's a very simple equation; High property prices driven up by overseas investors = Business decline due to high cost of living (Business don't thrive if they're having to pay very rents plus high salaries to attract and maintain staff).

It's very simply a balance between wages earned, cost of living and affordable homes (Whether that's renting or buying a home).

Really can you not see what impact Trump can have on the global economic out look? Have you been living in a cave? :)

I'm just not seeing these declines CJ099.

Oh, the "global economic outlook", so it hasn't happened yet.

I see you are grappling with the concept of 'prediction' Zachary.

Now I see why you are a Trump supporter.

No, you wrote, very poorly I might add, "We've see what a huge impact of having a lunatic at the helm of a major super power has had on the world." Has had is past tense. "Huge impact" is a little different to a vague uneasiness about what may or may not happen in the future.

Honestly Zachary if you can't see that Trumps trade wars have had an effect on China and the rest of the world then you must be living in a cave.

And I know there's no point in trying to even explain this to you because your a Trump supporter and will support a lunatic like Trump to the end.

Good, we have moved from "huge impact" to "had an effect". I declare victory.

You're hilarious! Actually to us it has been a 'huge impact' since the Auckland property market has dropped and will continue to drop because of Trumps 'trade wars'.

Remember China had to clamp down on capital flight which negatively impacted our market long before the foreign buyers ban. :)

Oh yes I believe that both Australia's property market (Sydney and Melbourne) and Canada's (Vancouver, Toronto) have also been negativity impacted by Trumps trade wars, so yes it has been global. :)

So "no points gained and certainly no victory for anyone"! :P

I see you are taking cues from your dear leader.

Watching the likes of business channels like CNBC, Bloomberg, etc its hard to not to conclude he has not and a huge impact on busness confidence and future prospects now the tax custs have worn off. Indeed watching the US markets crash and wipe out all gains for 2018 is a pretty big material impact So not unsafe to conclude that Trump has indeed had a huge impact on how investors and corporations feel about the future. Then these crashes have caused the FED to do a double take...hmmm. News jsut in EU zone chops EU growth from 1.9% to 1.3%....recession risk.....

"I'm racking my brains trying to think what "huge impact" Trump has materially made on the world."

....that's the whole point he's not important.

"the choicest property in all of NZ" - Yeah Right, enjoy following your comments Zach but on this one you are well wide of the mark. You need to get out more my mate and open your eyes!

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By 2019 end:
1 year fixed interest rate 8%.
Most share markets around the world down 40%.
Some banks showing signs of going under.
Average house price down 20%.
Commodity prices going up.
Workforce cut backs.
Some big companies going bust.
NZD to USD exchange rate 56 cents.
Government coming up with new ways to increase taxes.
A bit grim I know. Following the worst December in the stock market since the great depression, it's also very possible.

Have a Happy New Year, Insider. :)

Cheers.
Bit pessimistic isn't it.

A bit? sure is, with mortgage rates at 8% NZ would be in a deep recession in 2020

I thought banks benchmarked their new lending at 7% interest rates (according to what i've read on the comments section here)? If mortgage interest rates hit 8% and caused a deep recession as you say, then surely a 7% benchmark is too low?

Yes new loans are benchmarked at 7%, but the majority of loans are not new and were written under much looser lending criterias

And written under much higher interest rate environments. Are you suggesting that people who took out mortgages leading up to 2009 were benchmarked at a rate less than 7%? (the variable rate throughout 2008 was just under 11%).

Quite right NZD, borrowers who took out loans pre 2009 will be fine, I think the people at risk would be the ones who borrowed 2012 - 2016, when interest rates were low and bank lending was looser

You make a good point, 2016 (for Auckland) does appear to be the peak and interest rates were more or less rock bottom by then.

The Responsible Lending Code was revised Mid 2017 putting more onus on the lenders to assess borrowers for substantial hardship (severely limited what I could borrow when I bought), people who bought in 12 - 16 may not have had such prudent assessment of their application.

Also, the reason I'm saying NZ would hit recession if interest rates were 8% is that, even if borrowers will still be able to afford to pay the much higher rates (some won't and go will go bust),
1) so much more income will be directed towards paying for the higher interest that disposable income will be significantly diminished, less coffees, eating at restaurants, going on holiday, buying clothes, new cars, new phones, new furniture, tech stuff… you get the idea. That means that businesses who barely make a profit now will go bust, that in turn means people will lose their jobs which of course means they will spend even less and not be able to afford their mortgage, a bad downwards spiral.
2) at 8% interest rates very few people will be buying houses and many more will be selling to ease the pain of the higher mortgage costs, house prices would then definitely heading south which means banks could call in loans on highly leveraged borrowers, mortgagee sales would then further accelerate the drop in house prices, another downwards spiral.
The above is my view IF and only IF interest rates were at 8%. I believe the RBNZ shares this view and it will do whatever it takes to avoid interest rates at 8%

I fully agree with your points and the impacts of 8% interest rates. So aside from dropping the OCR (this influences but doesn't set the bank's mortgage rates) what else would the RBNZ do?

Let's say hypothetically the big 4 banks get into strife in Australia and they all put their interest rates up to 8% over here as a form of life support. I'm sure APRA would be in support of that. Anyone with an interest only mortgage or about to refix would be screwed. What would the RBNZ do about that? Tell them no?

Luckily we do have some non OZ owned banks here. I don't think the 4 OZ banks can raise interest rates higher than 0.5% above other banks in NZ (Kiwibank, HSBC, TSB etc…) because they would lose too many customers. I would certainly move banks if there was a gap of 0.5% or more

You assume that the NZ owned banks won't go along with raising rates pretty much in lockstep, to enhance returns to their shareholders and depositors.

That and the NZ owned banks have sufficient capital to lend to a sea of new debtors.

I think he took the "Happy" out of Happy New Year with those predictions.

Looks about right! Except for No 1.
If the other 8 transpire, I years fixed will more likely be 1%. Not because the wholesale cost of funds will be lower than today, but because no one will be borrowing and banks will be into 'forgiveness' mode - allowing defaulting borrowers to remain in situ without penalty, just like the US banks did 10 years back.
Oh, and you might be a bit light on No 4!

I somewhat agree that banks would want to lower rates in "forgiveness mode", I just think they will be in trouble and wont have the option of offering low rates. We are little old NZ not the US, our government cant afford to use quantitative easing to supply cheap loans. Not that the US could afford it either.

I agree with bw, if things pan out as T I predicts, i.e. badly, there's no way the banks could increase interest rates and there's no way the RBNZ would increase the OCR, it would be very much the other way around.

You may find some resistance in the share market due to computerized trading now that just sells when shares are up and buys when they are down. The share market left to that entirely would be like perpetual motion almost. Panic selling will be tempered by it, it is a phenomenon that I do not believe has had its entire effect analysed.

Interest rates will never go to 8%, IMHO 1% more likely. I mean when you say share markets down a huge amount, houses down a significant %, banks on the brink but 8%? I mean really? why? that makes no sense.

So far commodities like oil follow demand more than anything else so if we are in recession price collapse is more likely short term than price rises.

NZ Govn and new taxes? yes longer term I think that's a given. Too big a % of NZ pays little or no tax, that will get fixed probably 2 or 3 years after the "big event"

Sharemarket to be flat for the first half of the year,but bargains available now.
What ever happens to house prices,they will still won't be affordable.
No matter what policies the Labour led,Winston wagging coalition bring in poverty will not end.
I will remain unemployed/able and not recieve Govt assistance because i worked hard and saved hard in another life.
Enjoy 2019 shes gunna be a rippa for the brave.

Auckland House Prices up 4.5%, record rent increases (expect dozens of "rental crisis" headlines) - with the government announcing some kind of rent control. Mortgage rate 1 year special at 3.75 at some point from the big four banks. Rest of NZ property up 6%. Global shares extremely red, but nothing calamitous - perhaps down 5 to 10%. China starts to unravel with major economic crisis - and their own share market collapsing. NZD down somewhat. Gold increases 10%. Silver = up 15%. Bitcoin end of year = $12k (and bolstered over here by a falling NZD). Most other cryptos struggle (small caps are essentially dead). Kiwibuild utterly fails and is rebranded as a social housing build, accomplished by simply taking into account existing HNZ projects. NZ First collapses in poll support. Judith Collins replaces Simon Bridges (despite having good poll support). Star Wars Episode 9 is actually good. Oh....... and last curve ball: a CGT will * not * be passed through parliament.

Hmmm very interesting predictions, I don't disagree too much (except for Bitcoin)

The Star Wars prediction is very bold as well.

I hope your episode 9 prediction comes true but I predict it will be underwhelming.

GDP Growth: 2.75%

Unemployment: 4.5%

Inflation: 1.9% for the year

OCR: 1.75% all year

Residential Property: Auckland HPI: +1%, Auckland Median 0%

Shares: Air NZ +14% @ $3.30, A2 Milk +28% @ $13.65, Auckland Airport -13% @ $6.05, Infratil +20% @ $4.10

Kiwibuild: Will fall miserably short of 1000 unit target set for 1 July. No more than 600 built by that deadline, including kiwibuy houses that would’ve been built anyway.

World/NZ Economy: Global risks remain and economic slowdown continues, falling towards to bottom of current cycle in 2021/22. No recession for NZ in 2019 (“fall in GDP for two successive quarters”)

Tax Working Group Recommend conventional capital gains tax, not “deemed returns/risk-free rate of return“ CGT.

Net Migration +40,000 for the year

National Median Rent +5.8%

Politics Simon Bridges loses leadership of National Party

Urban Development Authotity: Legislation introduced. Just like kiwibuild there will be lots of hype but nothing meaningful will come of it in the end.

*predictions are for this time next year

Memo to BLSH... sell investment property, buy shares.

People will continue to overestimate their ability to predict and/or control events. With the usual consequences.

2019 ... 40% of New Zealanders get richer, 60% get poorer. SNAFU.

I'll run with Mark Twain: Make predictions - but never about the future !

up
11

That Central Banks will continue to do 'whatever it takes' to keep deflation from the economy.

In a world where banks would rather buy NZ Government bonds at %2.4 than invest in the real economy.

"Instead, yields are falling pretty much everywhere – the mysterious, confounding “strong worldwide demand for safe assets” has returned with a vengeance. There’s supposed to be nobody left to buy up these things, and yet “someone” remains out there in the markets with a voracious appetite for the most liquid assets. Might be a clue or something."This is a global trend, not surprising because it’s always a global trend. In Japan, the yield for the JGB 10s just today dropped below zero for the first time since last September. All the talk of the Bank of Japan’s QQE suddenly becoming miraculously effective after half of decade of inefficacy proved once again premature at best.

Another global bond warning to add to the long and lengthening list.'

The reason central banks undertake a QE or some other form of LSAP is because rates are already falling announcing what is already very wrong. They respond and then have the audacity to claim that the response was successful because rates fell. This explains a lot as to how the world’s economy can have lost an entire decade of real growth.Global yields are dropping again because there is still the same thing wrong with the global money system. QE doesn’t help, it can’t help because central bankers speak the language of expectations and pop psychology not money. Liquidity preferences are the only thing left.

That’s December in a nutshell.
https://www.alhambrapartners.com/2018/12/28/yields-falling-who-could-be-...

After the China Black Swan event, I think the Fed and the ECB will be abolished.

Now I'm really getting brave :-)!

How could the global economy crash? Let us count the ways
https://www.scmp.com/comment/insight-opinion/hong-kong/article/2179045/h...

I made one prediction last year and it was correct!!!

"NZD/USD will lose value. Maybe as low as $0.63 at some point."

It peaked at 0.74 in Feb 18 and then dropped for months, bottoming at 0.64 Oct 18.

Okay...predictions for 2019;

-China slowdown will accelerate but the CBC will mostly manage it well and continue to soften the landing.
-Brexit will be delayed till later into 2019 but ultimately the UK will more or less have to accept the Chequers deal.
-Immigration to NZ will continue to decline but not drastically
-NZD will stay around current levels in Q1, strengthen in Q2 and then weaken again along with AUD as China slows by the end of the year. NZD still in the 0.60's though.
-NZ GDP will slow somewhat but not drastically
-Auckland and Queensland will follow Sydney and Melbourne down to the tune of 10% by the end of the year. Everywhere else will stagnate but probably not move down much. This will be driven by bank lending criteria tightening not recession or unemployment.
-NZX will be down a bit but not massively
-Cryptos will rally a bit in Q4 but not massively.
-EU and UK will continue to slow.
-Fed will slow or cease rate rises
-RBNZ will continue to accommodate and maybe drop the OCR 0.25% but banks will only pass that on to the most desirable borrowers.

'With the 10Y yield dropping the lowest since January, the record 10Y Ultra net spec shorts have gotten crushed. Unfortunately no CFTC update this week'
https://pbs.twimg.com/media/Dvlu9x_VYAEwXdR.jpg

The first year I did this (2016, I think) I predicted at least one OBR event in NZ - so big, embarrassing fail there by me. Happily in the intervening years, I feel Orr has done a good job strengthening capital requirements and cooling off the irresponsible lending by way of LVR rules, particularly for investors in our housing market.

But, I think he'll face an external shock in 2019 and this time the Black Swan will arise out of China.

So, GFC2 is, I suspect, heading the global way next year and I wouldn't be surprised if such a crisis draws us even closer to Australia economically. They have minerals, we have water. Will 2019 be the year of the UBI and might there be a common currency on the horizon for NZ and AUS?

https://www.truthdig.com/articles/universal-basic-income-is-easier-than-...

Please, God, no common currency. Aussie vampire banks would suck NZ dry like German ones did to Greece.

Am thinking that if such an initiative ever did happen, those banks would no longer be in charge of credit creation. That responsibility would have been taken over/back by the respective governments.

UBI: lets retry child benefit. Serves all those good purposes as per your link but for families. Trivial admin cost; zero corruption (except for inventing kids), helps kill poverty. Give it to both parents if they are active guardians and it will reduce breakups and single parent families. Can be done via QE or just bite the bullet and put up income taxes.

We already have WFF for that reason, are you trying to encourage more productive middle class families to turn into baby factories?

My predictions of last year:

"by Yvil | Mon, 01/01/2018 - 20:40
Thanks R P, I think 2018 will be "more of the same" and less different to 2017 than many think. I.e, NZ property prices will still be flat (but I know you have a different view)"

which need to be read with my predictions of 2 years ago:

Submitted by Yvil on Sun, 01/01/2017 - 16:23
In 2017:
- The Feds won't be able to lift rates 3 x
- Trump will only carry through few of his election promises
- Europe will continue to struggle in a paralysis of status quo
- Auckland house prices will stagnate (0% growth, no crash, no price appreciation)
- There will be a continued shift to the right worldwide
- There will be no clear winner in the NZ election hence Peters will be kingmaker again"

Spot on but both more or less "more of the same" predictions. So we know the party's over, but the real question is what the hangover looks like.

Kate, yes my prediction for 2018 was "more of the same" which it ended up being but the prediction for 2017 certainly wasn't. It's easy to forget that house prices were still rising in 2016 and that National had a huge lead in the polls in Dec 2016 and that Trump was shouting out loud all the things he was going to achieve shortly after being elected. Now, with the benefit of hindsight, you can easily say "yep that was obvious"

Yvil, are you standing by your prediction that 2018 onwards will be remembered for the beginnings of a long slow downward spiral that will still lead to a depression? You made this gloomy prognosis in May 2018.

If you're going to do yet another backflip, now's the time to do so. I guess if you make all different predictions, one of them is bound to be right.

Yvil?

REINZ HPI for Auckland down 5% YoY,
REINZ HPI Nationwide basically flat YoY, due to the regions catching up somewhat to Auckland prices before starting their decline.
1 OCR rise next year, in the first half, then no more rises, but mortgages rates will be up 1% to 1.5% anyway.
S&P 500 down 10%, Nasdaq down 15%+
Unemployment rises to end next year at 5.2% (ish)

I will let Ray Dalio lay the framework out for what is generally my position. https://www.linkedin.com/pulse/help-put-recent-economic-market-moves-per...

So, it appears to me that we are in the late stages of both the short-term and long-term debt cycles.

It is all about credit, and its inversely related interest rates. I predicted in 2013 that interest rates would trend down based on my own work on the subject. We are at a peak in the downward trend. Dalio explains what that means pretty well.

A good read! Thx. Of note:

“The market movements are like a punch in the face to investors, who never (saw) the punch coming, and it changes psychology…Typically at this phase of the short-term debt cycle (which is where we are now), the prices of the hottest stocks and other equity-like assets that do well when growth is strong (e.g., private equity and real estate) decline…. When the cracks start to appear, both those problems that one can anticipate and those that one can’t start to appear, so it is especially important to identify them quickly and stay one step ahead of them….Right now, the world’s major central banks have the least fuel in their tanks since the late 1930s so are now in the later stages of the long-term debt cycle. Because the key turning points in the long-term debt cycle come along so infrequently (once in a lifetime), they are typically not well understood and take people by surprise.”

The only point I'd question is the capacity( foolishness!) of the Central banks to have another go at 0% financing. I reckon they will - what else can they do? and so make the ultimate situation - worse.

When a guy like Dalio writes an article like that it pays to listen, he must have been right more than wrong to get where he is. One point where you could depart a little from his view comes from the world of Jeff Snider, is in whether the central banks really have that much control. Snider tracks it back to the consumer, the FED just responds without a lot of choice in the matter. Afterall most credit creation is now through private lending and borrowing.

Credit is everything. If anyone here really wants to stick there neck out then let them pick where the money supply and interest rates will be at the end of the year. The Bond market is already giving clues and none of us here have the collective wisdom to beat that call.

Scarfie and BW re; Ray Dalio

Here's my problem with the quoted stance from Ray Dalio (and also John Maudlin) neither are clear on actually where we are in the "Long Term Debt Cycle" and the LTDC is itself without much evidence.

Now,let me start out by saying I have a helluva lot of respect for Ray Dalio and am fascinated by the meritocratic and empirical based nature of his firm. I like the way he explains things and he's very successful. Definitely worth paying attention too.

However, "Long Term Debt Cycle" is highly speculative. Mostly, the basis and evidence drawn on to support the hypothesis is on only one previous cycle. Bearing in mind the phenomenal changes to the world economy that have occurred over the last 100 years (central banking, inflation targeting, monetisation, globalisation & free trade, nuclear armament, massive demographic changes, abandoning the gold standard, fractional reserve system... etc) I simply can't swallow it.

Short term debt cycle. No problem. Evidence is there. There are variations, these are also well illustrated but also self fulfilling. But this is simply not true for the supposed "Long Term Debt Cycle".

Debt has maybe always existed. Certainly since before money was in widespread use. People have always owed each other. First recorded debt appears in Ancient Sumer, which is also when writing first appears... there is a strong case that it was debt that led to writing being invented in the first place, most Sumerian tablets are recording transactions, debts and quantities of various commodities.

Throughout history and until very recently, all successful and dominating economies have also been fueled by slavery and colonisation, both the product of war or some form of military dominance. Whether that be an army succeeding in capturing a strong hold and looting it, or dominating an entire population and requiring them to pay taxes or enslaving people and getting wealthy from the human capital.

The "Long Term Debt Cycle" is cited to be 50-75 years long. Well, where is the evidence for this cycle going back in to history? Where is the basis for suggesting that this Long Term Debt Cycle can be correlated to other events in history. The last 50-75 years *HAVE* been so very different that I think there is a valid case for questioning the hypothesis.

We can certainly agree that during times of increasing poverty, wealth inequality and hardship there are repeating themes of populism and war mongering throughout history, but they are not always correlated or caused by debt bubbles, often they have been caused by plagues, famines and wars.

And also, what exactly is the "late stage" of the "Long Term Debt Cycle"? Initially everyone said that the GFC was the end of the LTDC and now we are in the late stages of it again? And also, NZ doesn't have anywhere near the likes of corporate or government debt that the US or China has. NZ also has the Kiwisaver ever growing to provide stable and long term investment in predominantly Kiwi businesses and infrastructure. Households have high debt but unlike the US, EU and to a lesser extent China, RBNZ and NZ gov have considerably more fuel in the tank in terms of fiscal and monetary policy. Not dropping the OCR, which is at historic lows but QE, tax cuts and other government debt fueled spending potential etc. And is there even a limit to world banks and governments QE and debt fueled spending? Not if Japan is any example... sure their growth has been negligible for the longest time but who cares? The Japanese are healthy, happy and mostly thriving, despite being a seriously ageing population. So perhaps what is considered extreme monetary and fiscal policy is an unfounded boogeyman?

There is also the possibility of "debt forgiveness" which has been as much part of human history as anything else debt related. Kings and Queens of all nations have forgiven debts at various times and in various circumstances, none of which have always been motivated by any kind of debt cycle or economic issue, sometimes it was for avoiding conflicts, rewarding favourites or for religious reasons. We certainly can't extrapolate that history to now in quite the same way but it's not an extreme measure when using a historical lens.

IMO the hypothesis of the LTDC is very poorly evidenced. It may yet be proved correct but the evidence is simply not there. I agree with Ray Dalios that the widening wealth inequality of recent history is fueling populism. However, no one knows how that will play out because populism is wildly unpredictable.

We also don't have ANY history to draw on to make predictions for our recent economic climate because all the world has done fundamentally new and different things economically in many areas over the last 50 years so we simply don't know how that will play out either.

Whilst the Yield Curve has been flattening and we can suggest that the short term debt cycle is ending in the next 2 years (which is Ray Dalios prediction) I really don't think there is evidence to make suggestions on how the world will deal with its debt, populism or other post-GFC features.

Also data. We have more data and more capacity to be empirical than at any time previously in human history. That's huge. Of course, not everyone has access to, believes in, trusts or reads the data but those in charge of governments, banks and corporations need to rely much less on extincts than they ever previously had. Fear and greed remain to propel it all still and that will never change, but greed and fear are impacted upon by data and empiricism.

I understand your points. All valid, and as you suggest, 'proof' is what we all need!
I'm not a great believer in technical analysis, to be honest, but I accept that others are, and so it becomes self-fulfilling to some degree - ignore it at your peril. One of my traders was so convinced he 'ran off' to work for Robert Prechter in The States ( Georgia?) some years ago. So take the attached link for what it's worth! It and other work along similar lines suggest that The Grand SuperCycle is completing right about....now!

https://elliottwavegold.com/2018/04/sp-500-elliott-wave-analysis-17th-ap...

bw the thing is... all of that can be explained within the short term debt cycle theory. There is no reason or evidence to assume there is some grand bigger cycle. I mean, go back 10 years and everyone was saying the GFC was the big climax of some grand, "once in a lifetime" cycle and now we are expecting another one? Either the GFC was the peak of the Long Term/Grand Cycle or it wasn't.

The idea of some long term, grand cycle is very seductive. Human beings like patterns and theories that explain things, it makes is feel safe about a world that is inherently chaotic and unpredictable. But i'm sorry, there is not enough evidence or data to support the theory.

The short term debt cycle is very well evidenced in recent economic history but there is really nothing to support the idea of a grand, super long term cycle. I think we can safely say that debt creates an economic cycle of varying degrees and that the current expansion is slowing and maturing.

There is definitely a debt cycle, it is a matter of quite simple statistical mathematics. Debt compounds until it can't be paid. Falling interest rates are a symptom of that cycle. Two measures that are indicators are the quantity of the money supply, or interest rates. On the upswing part of the cycle interest rates expand to their maximum extractive value. This latter part is more a matter of human behavioural science, people always want something for free and will take as much as they can get.

But you are right in terms of a timeline, each cycle is unique. Ultimately human behaviour is consistent though.

The Seneca Curve is the most interesting indicator. Again it isn't specific, but it can probably narrow it down to within a decade or two. In business cycles it is the Sigmoid Curve. Catch the bit at the end of this talk. https://www.ted.com/talks/geoffrey_west_the_surprising_math_of_cities_an...

Any asset commanding a yield will ultimately behave as money, and a part of the debt cycle. Ask yourself what happens when interest rates and yields get to zero. They will, official interest rates already are in a lot of places. The FED will get there eventually and initiate the end of this cycle, although I still believe the FED follows the consumer not leads them.

The human population growth curve marches assuredly towards zero growth, it is has been on that path since the inflection point in 1961. Demographics is also a key part of economic growth. That wasn't a part of the last debt cycle, so the outcome of the next one could be very different.

Then there is resources......You are aware of the Club of Rome right?

Scarfie, I don't even slightly deny that there is a debt cycle, what I am questioning is the "Long Term Debt Cycle" hypothesis.

Also, debt does NOT always compound .

If debt fuels productive growth, the growth more than pays back the debt, also inflation eats into the debt, AND debt is restructured and also "forgiven". Individuals declare bankrupcy, governments default and the IMF and World Bank wrote off more than 77 billion of debt in 2005 to over 18 poor countries (not without conditions though). There are so many examples for when debt doesn't compound!

Give me an example of interest rates hitting 0% after 50+ years of compounding debt other than in the last 100 years? It appeared to happen once and then happen again now, but there are so many other variables that contribute to all these factors that you simply can't isolate a mythical "compounding debt" issue as the main or causal factor. Not to suggest that compounding debt isn't a factor, but i'm unconvinced that it is the all pervasive, dominating factor that the Long Term Debt Cycle hypothesis rests on, is all. I think there is way more chaos and variability in the system than that.

Now, in terms of human population demographics I totally agree with you, I believe growth is linked firstly to expanding human population and secondly to natural and technological resources (which are in turn inexplicably interconnected). However, what does that have to do with the long term debt cycle theory? If anything it undermines that theory because it suggests that it is not debt but population growth that will ultimately cause some great decline (which is what I believe is a HUGE factor in what effects global economics as soon as net population peaks and starts declining, but is already at play in various countries and economies where their populations have already peaked and they have subsequently sought to import population growth and piggy back on the economic growth of emerging markets).

One of the things I consider with Dalio, and some others, is that it is highly likely there are things they can't really say.

I don't think you are considering enough factors, and a long enough time scale in your analysis of debt. For instance look up a historic chard of the US 10yr. The periods from 1945 to now looks like a faster and more extreme version of the period from 1790 to 1945. Can you give examples of economies where debt is been used exclusively for production and caused no inflation? Think about psychological effect of debt on both borrower and lender. For the lender you have let the genie out of the bottle to unearned income, one it is out you won't get it back in. Just try and talk a property investor into the errors of their ways for the same behaviour. Lol. Forgiving debt is a default, the person that owned the debt as an asset loses the asset. That is part of the cycle. You have two choices when a currency is debt based bearing interest, exponential growth of money or default. I have been pointed out for years the mismatch between CPI, GDP and M3 money. For the four year period until NZ's M3 series was stopped it was running at 7% when inflation was only supposed to be running at 2% according to CPI.

Have a think about my rework of the Quantity Theory of Money, from M.V=P.Q to (M.V)+i= P.Q, where i is Interest, I did this back in 2013 and made predictions from it. The money supply will keep expanding and velocity will keep dropping. I am talking trends here, so there is room for rises and falls within the trend. Jeff Snider has proposed that western consumers have stopped borrowing and spending on Chinese goods, which is why China is in trouble and the FED is tightening. They tighten in response to a shrinking money supply, which is putting the cost of money up. Defaults will follow, it just takes time to work through the system. You don't have to get to zero interest rates to cause a break down, it just needs failure to pay to appear enmasse. The right side of the equation is GDP. You can have shrinking production and rising prices cause a reading showing false growth. Further thinking in recent years has made me realise that any asset that commands a yield behaves in the same way as money. So your proposal about productive only borrowing just isn't the case at all, it always finds its way back into asset prices.

I also coined the term Peak EROI, which I used in reference to the peak of population growth in 1961(well maybe I didn't, but I first used the term here so see if you can find and earlier reference on the internet). It was an energy event and was essentially the point of peak energy per person. Energy underwrites all economic activity. I am surprised you ask the link to people and debt. A debt based currency is ultimately a ponzi scheme, it survives because of new inputs at the bottom. In my lifetime in New Zealand there have been a number of changes to debt issuance, or methods for trying to make up for a declining birthrate resulting in new inputs shrinking. Student loans is a good obvious one, some are less obvious. Immigration has to be seen in this light, I don't 'believe the government will stop it because it would collapse an economy based around selling houses we already own to each other at ever increasing prices.

Re The Seneca Curve; again... if that curve is correct then the GFC was the cliff. Are you suggesting that we are due another cliff?

Sigmoid curve, sure, business cycles, individual company growth. But i'm not 100% sure about his point about cities. Cities don't grow exponentially throughout history. There are cities that once had vast, wealthy populations that now no longer exist. Just as there are small rural communities that existed in some areas and now don't. London's population for instance has not been constant or constantly growing, plague, disease and war has emptied many a city. Some grow back, some don't. I think the issue probably isn't so much the physicality of a city but the immutability of human nature. Also, the Ted talk talks about increasing crime but crime has been in retreat since the sexual revolution, which is an example of how technology can effect huge impacts on human experience. And the idea that if innovation needs to keep growing at a faster pace everyone will have a heart attack is also questionable. Innovation speeds up not simply because of increased numbers of people but because we build on the previous knowledge and experience of predecessors. We don't have to invent the wheel plus a bunch of new technology to save ourselves in every generation. We already have the wheel, and many thousands of years of wheel innovation. We don't require horses to pull wheels. We didn't always use fossil fuels, we had growth, economies and problems before our reliance on fossil fuels but we still had cities, growth come and go because we don't always use the same resources and same tech. Necessity is the mother of invention, not wishful thinking generally. As the mess of over consumption, population growth and limited resources comes home to roost, the impetus to find solutions and innovations will increase. Non-fossil fuel reliant tech has already been through several generations of innovations and there is no reason to think that it won't continue. Humans discover a tech, and keep innovating that tech until we don't need it anymore because it either isn't necessary or some clever so and so comes up with something better. Sometimes mother nature is beyond our scope for technological adaption but even then we are always trying to innovate. Vaccines and treatments as new diseases appear, earth quake safer buildings, insulated homes etc. Our innovation may not grow at a fast enough pace to save the millions of species that we are causing to become extinct and let's not rule out unforeseen extinction events, world war and human population peaking around 2050.

The interesting thing about the Seneca Curve is that decline starts slowly at first. No GFC wasn't the cliff, growth still managed to continue for a while. But look at it as growth has been slowly consistently since that time. Again you don't have to hit zero for a crisis to happen.

I can't make an argument for someone else. One thing I will point out is that peak crime happens in the 15-25 year old age group. It has been declining because this age group has been slowly shrinking. It is also a factor in road deaths, NZ was at times like the Wild West in the 70's with all the young drivers com bined unsafe vehicles.

Our innovation may not grow at a fast enough pace to save the millions of species that we are causing to become extinct and let's not rule out unforeseen extinction events, world war and human population peaking around 2050.

I totally agree. We have spent 250 inventing ways to exploit abundant energy that became available. Now the energy supplies are slowing we are trying to invent the energy. Can't do that though, we can only make do with less.

Taint Friday...but cannot wait for then..

I predict BitCoin, will be replaced by BitPaper and PartHouse.

I think FunnyMunny will be taken seriously by all who invest in Shonkey Houses.

I think Munny Laundering will become white washed and allowed to follow Shonkey from pillar to post.

I think Russian Oligarchs will vote with their feet, preferable to Putin on the agony, Putin on their style...that's what all the young folks are doing all the while. (Lonnie Donegan....Google him..young uns).

I think Trump will go down in History....(Hopefully soon). Make Americans "Braves" again....at the Battle of the Little Big Horn...he Trumpeted....................... Toot Toot............... Russian troops..not withstanding.

I think Russia will be a leading force in all conflicts. Americans, got nuffin on them.

I think we may forget about Jamal Khashoggi, in the interests of Oiling the Works.

I think all Killers will walk free from prison, from drugs, from Banking and other nefarious crimes. It is the American way...after all is said and done, it is in our Interest....is it not......Long Sentences, not withstanding.

I think Taxing Funny Munny and Interest is past its Prime. Do we need a Ministerial Party to celebrate Jacinda?.

I think Building Houses is so last Year. Will it be there next year to keep an unavoidable affordable roof on things....or will it turn flat.?

Will neither a borrower, nor a lender be, "Think Other-wise"....Let us form a Common Sense Party...to see.

Will Interest bearers, be bullish, bearish, or scared stiff of doing neither.....until the cows come home....and we all go Vegan.

Will borrowing become a habit, will debt, become a reality, will we all have a world economy, or just spend it all like water...at a dollar or two a bottle.

Will petrol and diesel, go up or down, or putter along to raise taxes for ever and a day as a must have, for life to work.

Will electricity cater for all e-commerce, or just for charging stations for your next cheap Tesla.

Will Amazon dry up, ship out, or continue to flow down to remove the need for clearing the old Amazon to maintain trees, so we do not have to keep planting them...for ever and a day.......God Willing.

Will rain forests dry up consequently in 2019...I doubt it.

As a wise man once said, answers on a piece of plastic, in the shape of a 50$ note and posted to your truly...before 2019 comes to an end. (Or electronically....if that is your fetish).
Alter Ego.
C/O Cayman Islands Laundromat.
2019 NeverNeverland.
010101

I forgot to add my most important prediction (although it may slip into jan 2020). With our PM's stardust finally faded and the polls beginning to seriously shift, JA will announce a second baby, with the due date almost exactly before the next election. This announcement will be heralded with raptorous applaud, Women's Weekly will have their next 52 issues already planned out and Labour will surge into the polls by at least 10%. The NZ Herald person of the year in 2019 will be "mothers" and having easily secured the female vote a Labour / Green coalition will sweep into power in 2020. James Shaw will take the reigns as the next PM, with our PM bowing out for sometime (perhaps permanently).

Women's Weekly will probably be there when the next baby is conceived.

This time last year I predicted Auckland house prices will drop 3-5% in 2018. I predict the same for 2019. With the usual caveat that with a global economic crisis (kind of due) it could be a bigger decline. Happy new year.

I’m predicting the NZ economy will continue to outperform most others due to our sensible governments (both left and right wing). NZ will continue to look so much better than other nutter countries that we may get good growth and investment even during a world recession.

4.48% current average 2 year fixed rate? Aren’t all the big banks doing 4.05%?

Growth will turn negative in the first quarter.
Property prices heading south led by AK
One of Ozzie banks will seek government assistance.

Value of housing stock to be lower at end 2019.
Sales to stock will continue decline towards annualised 4 percent , led by fewer home sales ex Auckland.
Sadly home ownership rates will continue to fall
CPI will print two negative quarters for Q4 2018, led by a 4 percent fall in fuel prices and Q1 2019, led by a larger fall in transport costs.
GDP growth will be flat , due initially for need to reduce accumulated stock .
RBNZ will cut OCR Q3, .RBA will follow in 2019
Currencies short NZD/AUD and EUR/JPY
Fletchers will again warn re cost overruns and growth . Share price into the 3s. Will be on the block.
Milk payout will trend down
Jacinda will resign as PM
Outlier prediction,Toothypoint will become new REINZ spokesperson and give updates only on West Coast market.

Analysts have been warning of more of this pending, with June a critical month. Could 2019 be the start of a cascade of corporate failures?

Bendon's Nasdaq-listed owner Naked Brand Group's former route to a bail-out - former Bendon owner Eric Watson - is closed as it seeks to raise another $26 million by July.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=121...

Yvil and Agent TTP, why no specific predictions for 2019? Being this is an anonymous forum, even you two can brave this :-)

By Dec 2019, what percentage do you believe Auckland house prices fall by?
Cash rate?
Unemployment rate?
Share Market indices?

My map ...
I think global economy is slowing and may enter a mild recession..
Central Banks and Govts will react in a classic way... ( more deficit spending and lower interest rates ).
Long term rates are in the process of finding their "market level", since QE has been unwinding.
After this current flight to safety, I suspect they will climb back over 3% ( US 10 yr treasuries )
Unwinding QE and Huge USA Govt borrowing , and also prolonged bull mkts in assets has/is creating liquidity issues in the private sector. ie.. cashflow issues where bid/ask spreads can widen quickly.
https://www.investopedia.com/terms/l/liquidity-crisis.asp

Minsky famously said that long periods of apparent stability lead to instability.. ( the current fashion of passive investing is symptomatic of this https://static1.squarespace.com/static/5581f17ee4b01f59c2b1513a/t/5ba146... )

After a short period of slowing growth ( mild recession .?? ) , we will have another period of growth into , say, 2026, when we "hit the wall"... and then we will have the crash in real estate etc... that many have been expecting for the last few yrs..

The current paradigm is still king... and I suspect it will take a loss of public confidence in the Global monetary system to knock it on the head..??

Interesting call, I give chances of another round no better than 50/50. But yes there is still a chance. I don't know if oil supplies will hold up long enough mind you. Have you seen that Dalio link of mine above? I know you are a fan of his.

I'll check out the Dalio link... many thks
I always enjoy reading your comments scarfie.. all the best for the new yr.

Last year I predicted decreased interest rates (fulfilled in NZ), & that Trump would survive 2018 (fulfilled).
For 2019: USA attacks Iran for regime change destabilising global economic activity. Australia & NZ increasingly realise the political/social cost to them of being so economically dependant on China.
Flat interest rates in NZ, Australian economic/property slump.

This is all I've got for 2019:
NZ gdp 2.1%
FED hikes 3 times
RBNZ stays flat
UST 2-10 inverts in March 2019 (I have gotten this wrong 3 times before)

I find it hard to measure and evaluate elaborate and sentimental predictions, so I'm just sticking with a few easily memorised numbers.

Happy 2019 everyone!

WOW WEE! I wish I had predicted this:
https://www.radionz.co.nz/news/world/379298/elizabeth-warren-announces-c...

If she makes it to the White House, I predict it'll be great for the US economy.

Couldn't agree more - like the look of her Accountable Capitalism Act;

https://www.washingtonpost.com/business/2018/12/31/warrens-agenda-break-...

"Students all over the world are increasingly questioning if the kind of economics they are taught — mainstream economics — really is of any value. Some have even started to question if economics is a science."

"..started to question if economics is a science.." ?! There's the problem right there. (Economics is not a science. 'Starting to question it' presumes that it is!)

https://larspsyll.wordpress.com/2018/12/31/how-to-re-establish%E2%80%8B%...

Economics is a "soft" science at best....and pure charlatanism at worst.

I must say I find it interesting looking at last year's predictions. Especially property, with numerous commentators convinced (and still convinced?) of a 15-20% fall during 2018

Long time reader, but first prediction.

2019

Inflation won't throw any suprises and will trend the same to slightly falling. (Barring the 2018 Q4 result).

Unemployment will be slightly higher by year end.

OCR won't rise, possibility of a 0.25% cut in the second half of the year.

Oil prices, god only knows. A wild guess, continued volatility, maybe around $65/bbl by year end.

NZD/USD in low 0.60s by year end.

Migration dropping to around 55k.

Hillary Clinton will throw her name in again for Dem candidate or endorse Joe Biden. Maybe an early 2020 prediction. One of those two will be the "chosen" canditate to run against Trump who will still be President in 12 months.

Simon Bridges will still be "leader" of the National Party.

I predict that more people will think Mike Hosking is little more than a jumped-up windbag, but his core fanbase will stand by him through thick and thin.

Gold "could" have a stellar year but still there will only be a handful of people who realize how cheap silver is and how precious metals have been manipulated beyond recognition by the likes of JP Morgan.

I predict consumer spending "could" fall off a cliff in Australia (all the signs are there) and possibly NZ too. If this happens, that will be devastating for both economies, but without higher incomes and / or greater debt, the writing seems to be on the wall.

precious metals have been manipulated beyond recognition by the likes of JP Morgan

JC, Interesting - care to expand on that?

agree Silver could have a new silver lining .. but compared to gold it still will lag.

Jumping into the Game Of Predictions puts one into the same basket of astrologers,soothsayers,palmists,fortune-tellers,clairvoyants etc.

They all claim to be able predict just about everything.EXCEPT to be able to predict when the next sucker will come along to pay for their meal ticket

I'm gonna stick to Gubmint Budget domain for my predictions. Here goes:

The 2019 Budget will, I predict, be pitched as, and generally agreed to as such by the commentariat, relatively conservative. Five factors to consider, as there are a number of 2018 Budget promises which will eat up more of the 2019 cake:

  1. Tertiary 'free' education will haveta fund two years' worth of student study, rather than a fraction of one in the December 2017 mini-budget. The benefit being derived from this handout is, of course, debatable.
  2. There are still a lotta wage-rise pressures for public servants to be mediated, agreed, and paid for. Doctors, teachers, and the inevitable spill-overs into wider Tertiary, the Services, and general wage relativities within Departments, will all have to be paid for somehow. The strikes will continue...but there will be Votes to purchase if handles gracefully.
  3. The minimum wage will rise and may affect SME profitability and hence tax revenues. More costs = less profits, all else being equal.
  4. The Tax The Rich Pricks Working Group will deliver its report just pre-Budget and depending on which species of CGT is wheeled out, even with a well-future date, will have biz confidence repercussions, and a plethora of tax schemes, already in the embryonic stage nation-wide, hatched and fledged, ready to fly if and when the legislation goes through. Few of these will be reported in the MSM....
  5. As this Budget is the mid-term version, it will be relatively conservative, so as to placate the masses, but, and more importantly, the fiscal conservatism will keep a warehouse-full of powder dry for full-on Vote Purchase Schemes in the 2020 election-year budget. Or, if the perma-bears hopes and fears come true, ammunition with which to weather the storm.

For what it's worth...

1. Rich will continue to get richer.
2. Inequality will increase
3. Companies will go bust due to dodgy leadership. No one will be held accountable.
4. Stockmarkets will continue to fall. Those retiring this year will see their Super/Kiwi Ponzi for what it really is.
5. Costs will continue to increase, wages won't.
6. The "Crash" wont happen, rather it will be a slow decline that will continue to worsen until we all realize too late.
7. National will get a new leader. But they will likely be worse.
8. Jacinda will get engaged with the intent to wed, in 2020 (depending on their polling figures of course)
9. Kiwis will be shocked about something, but be completely apathetic in their actions.
10. I will still come to this site to read the articles and comments.

My six humble, but hopefully data driven, predictions.

1. Poverty and deprivation in NZ will keep skyrocketing upwards. This will be driven by the increase in tobacco excise (of 10% + CPI), and the government failing to acknowledge the EY report showing that an enormous 53% of the smoking population have zero price elasticity!!, ie they do not reduce their consumption in response to price increases, but rather smoke themselves into abject poverty. Maori, Pacific Islanders and the mentally ill, who studies have shown smoke at higher rates than the general population, will be among the most detrimentally affected.
2.The low sale volumes observed in upper quartile Auckland will translate into tangible declines in sale price for upper quartile Auckland. This will be driven by domestic unaffordability, a dearth of foreign buyers, phase 2 AML on 1/1/2019, and banks taking a close look at their revalued risk weighted assets resulting in tighter credit for that sector of the market.
3. The rest of the real estate market will tick along with healthy gains in the provinces and lower quartile Auckland. This will be driven by monetary policy driving housing loan acceleration (which is now positive), and retiring baby boomers cashing in their equity to buy up in nice places in NZ.
4. NZD will drop against the euro and USD in a mean reversion to historical norms.
5. NZX will continue to outperform other equity markets, albeit with possible negative y/y returns.
6. GDP numbers will continue to disappoint as total credit acceleration remains negative. Although housing credit is positive the sum of credit aggregates (business, consumer and housing) remains negative. The negative credit acceleration subtracts from aggregate demand and will negatively contribute to GDP.

Timing of markets is of course very difficult, especially with property market bubbles. Bubbles do burst however, and there are never "soft landings" anywhere (point to one if you think so). NZ is still in a bubble, and Australia's has been bursting for over a year now, and is accelerating. I don't know if NZ's will start bursting in 2019 or 2020, or even later, but I hope it's 2019. Let's get it over with, and the more excess building that goes on in the building boom, the more pain there will be during the bust. There is no housing shortage in Auckland, only an affordability and inequality crisis. We are now building too much (check the crane count in Auckland central right now).
Global sharemarkets will continue to trend down. We may even have another 50% bear market when said and done (when it bottoms). The NZ sharemarket has been defying gravity, mainly because of the inflated housing market, but will trend down with others. This will all lead to recessions in Australia, the US, and NZ in 2020.
Gold will trend up, as it has started to, and may make historical highs in 2019 or 2020.
It all sounds quite dire, but I'm actually a realist and optimistic by nature! We are coming to the end of the economic cycle, and there is a property bubble here, and quite inflated sharemarket in the US and NZ, driven by 10 years of cheap credit, so the consequences are going to hurt. I've taken financial steps to take account of all this. I hope you do too.

You sound familiar

Sorry I'd rather keep it anon on here, that way I feel I can speak more freely about this stuff - even though I'm not a person of significant power or influence.

National's fan base will support a turd wrapped in sparkly paper not realizing it's actually a turd due to political blindness caused by generationally entrenched bias. Simon Bridges will bow out to that turd.

The bus loads of Chinese money launderers will continue to stay away, causing the high end boomer homes to plummet 15% in price while Hosking & Key remind everyone they should've got out while the going was good.

Inflation will ramp up to 3% plus, in doing so tightening the bunghole of Graeme Wheeler to the point of a rate rise or at least a wordy but more direct wordy indication of an impending one.

Wage growth only happens as a result of strike action & min wage raise, which puts pressure on margins, taxes and solves nothing as inflation gets going.

Immigration continues at unsustainable levels, 50k plus, primarily from India and China. This continues the binge on imported capital and a low wage labour force for the service industry and fuels the housing and infrastructure debate with little tangible progress.

The RB indicates they are indicating of a deposit guarentee scheme to replace our third world OBR scheme., However given the real risk of an Aussie bank failure sees the timing of this decision as risky and sides with the view that depositors should understand the risk/reward of bank deposits vs a hole in a mattress.

Higher oil prices in 2019 and even higher in 2020. Geopolitical issues to continue and reduce confidence in markets. China to have a more significant slow down due to correction in its property market and also slower demand for its goods. Manufacturing moving to Bangladesh and other emerging Asia from China. Israel to have a bigger impact in Syria in 2019. NZ property market in Auckland supply and demand to more neutral by August 2019, and risk of consumer spending in retail to drop.

"NZ property market in Auckland supply and demand to more neutral by August 2019, and risk of consumer spending in retail to drop

Doesn't make sense , where is the supply coming from? Kiwi build- you must be joking ..Facts and stats please

https://www.stuff.co.nz/business/107454876/building-consent-numbers-hit-...

And less demand, immigration numbers dropping, and AML rules kicking in.

Once upon a time there was a brave man who used to post comments by the dozen and endless links to his God, Martin North. That brave man predicted house prices to crash in NZ, interest rates to reach 3.5% by X-mas and Trademe listings to exceed 15'000 for Auckland. None of it eventuated and he has since gone very quiet. He also predicted NZ would be in recession by Q2 2019... We shall see

I manage my share portfolio and it provides me with over 50% of my income,so I have more than a passing interest in its performance. It would not surprise me if our own market was to fall over the year,but that would not worry me. As Warren Buffett has observed,a correction or even a crash is not a bad thing for long-term investors,provided that you have cash to take advantage of it. I have gradually been increasing my cash and it now accounts for over 15% of my total portfolio.
Of course,I may be wrong and I also bear in mind the ever wise Yogi Berra; Predictions are always difficult,especially the future. My one prediction for 2019 is that it will be interesting.

Brexit will be hard and nasty.
Smuggling over the Irish border will be a new gold mine.
Trump vs China continues to escalate (hopefully not to open war).
Taiwan will continue to purchase/develop advanced anti ship missile systems.
All of the above will continue to panic global markets.
Immigration to drop otherwise NZ First is dead.
Fletcher's losses will be much larger than forecast.
Auckland housing will decline, how much hard to say (GFC was 10% there about's)
and lead a route in regional specuvestor land.
I will challenge my rating valuation and have it lowered.