sign uplog in
Want to go ad-free? Find out how, here.

David Hargreaves cunningly avoids making any predictions as he outlines some of the economic-related issues he's looking out for in the year ahead

David Hargreaves cunningly avoids making any predictions as he outlines some of the economic-related issues he's looking out for in the year ahead

I much liked the description this week by BNZ head of research Stephen Toplis of the New Zealand economy for now looking "uncannily stable and boring"

Hey, you know, I would settle for that this year. An 'uncannily stable and boring' New Zealand economy would mean we would still be doing a heck of a lot better than many of our global counterparts.

Past experience tells us though that stable and boring can in a heartbeat turn to unstable and hair-raising.

And the trouble with these sudden upsets is that they tend to come from causes that the vast majority of people didn't see coming. 

As ever, you have to feel that if our economy is to be seriously blown off course this year then the causes will likely be from outside of New Zealand.

Sad to say of course the chances of some major global event or events that upset applecarts all over the place are high - higher than they've been for many years I would say.

So, if we've got something to cross our fingers over this year it will be that we don't get knocked by external events. Because things are still looking pretty steady here.

That's not to say that we aren't capable of causing a little mischief for ourselves though.

After all, this is an election year. If the results on election night 2017 were fairly predictable then certainly the final outcome, with a a negotiated change of Government to the uneasy coalition we have, was not.

So, who knows what this election might bring. The only thing we can say with certainty is that it will bring uncertainty. And markets, as we know, hate uncertainty. 

Aside from the vagaries of the election process itself though an interesting subtext to this year is how much the coalition has to still try and prove itself in terms of being able to execute plans.

As we know the government ambitiously (and with the benefit of hindsight, foolishly) pronounced 2019 as its year of delivery. And then it demonstrated a palpable inability to deliver.

In reaction to this failure to launch we saw the government in the second half of last year announce a lot of proposed legislative and other initiatives with promises of these being progressed this year - IE 2020.

The Government has a lot on its plate

Refreshing my memory on these announcements this week I was quite stunned to see just how much stuff the government is (supposedly) going to advance this year in the areas of property and infrastructure. And let's not forget also we are now awaiting details (no doubt to be carefully drip-fed) of the proposed infrastructure spend-up that Finance Minister Grant Robertson signalled late last year.

These various measures from the Government that are supposedly going to be at least moved towards fruition this year (and remember there's a working group looking at the hugely problematic Resource Management Act too)  are significant enough in their own right that they deserve looking at separately.

So, I shall do another article that specifically examines the things that I'm really interested in among measures the Government plans to advance this year - and whether it will be able to. My quick comment here though in advance of that is that you would have to doubt that the Government will be able to deliver on the multitude of things, particularly those involving legislation, that it has promised for 'early this year'. Don't they know? There's an election on. 

Okay, so leaving for now the potentially big impact on the economy this year of both the election and the policy/legislative programme the current Government has, the other biggie for me this year is the housing market.

I always reckon that in this country the housing market has a much bigger impact on the economy than can be directly measured. And I think that simply because of the effect on the psyche of the country of particularly rising house prices. There's a feelgood factor generated that spreads into all spending decisions but can't be directly measured - not accurately anyway.

Whither the housing market?

All of which leads to the question of where are we with the housing market at the moment? What is it that we saw in the closing months of 2019? Was this a blip or the start of something big again? 

Obviously we will start to find out as the early months of 2020 (and peak buying season) unfold.

In my view there's always a chance that the housing market really will take off again, even though as we know and are constantly told that house prices are already at still pretty unaffordable levels relative to incomes.

Since the times of the Global Financial Crisis in 2008 we've seen the population in this country rise by something like 17.5%, largely spurred by large-scale immigration. Home building took ages to respond after troughing in the wake of the GFC. It is now finally running at historically high levels, but in Auckland in particular there's still seen as a substantial shortfall. 

The Government's failed in two key areas on this one: Firstly, KiwiBuild (100,000 houses in 10 years, lest we forget) exploded on the launchpad. And then the "breather" on immigration turned out to be barely an intake of breath. To be honest I'm now as confused as hell about where we actually stand on immigration and the numbers involved because since the ending of airport departure cards the new system of data collection and presentation from Stats NZ is baffling. Now you might argue that the validity of the information obtained though departure cards was questionable anyway, but it was information you could follow.

Economists have now all but given up trying to track the immigration information provided through Stats NZ. Personally I would hope that a new method of data collection and presentation could be found because I think it's desperately important we have TIMELY population data in order to assess the need for er, infrastructure and housing.

Taking off again?

All of which is a slightly long way around of saying that in Auckland in particular the supply of housing and whether we can keep up with demand remains questionable. And while it remains questionable, then there remains the possibility of house prices taking off again.

Some things have changed. This Government did put a clamp on foreign buyers. That's obviously significant, though I would argue exactly HOW significant still remains something of a mystery because we never collected proper accurate data on offshore buyers during the last housing boom anyway.

But anyway, we can take it as a given that offshore buying interest has been crimped and that must have an impact. And there is the aforementioned fact that house prices remain at historically unaffordable levels versus incomes.

However, against that there is the fact that low interest rates do make breath-takingly large loans 'affordable'. And there's been a big change in that regard over the past year after the Reserve Bank cut the Official Cash Rate. If we look, for example at the average two-year fixed mortgage rate this month compared with the same month last year, according to's figures this now stands at 3.5% versus 4.25%. 

A quick trip to the mortgage calculator shows that on a, say, $400,000 mortgage, a borrower would now be paying $172 a month less than they were a year ago.  Okay, when we talk about still needing to pay about $1800 a month now, I suppose a $172 a month saving is not enormous, but, as they say, every little helps.

The point is mortgages have become more manageable and that makes the idea of owning a house more feasible and manageable.

And the important flipside is that with bank term deposit rates having moved down, those who might have been depending on income from deposits would be having second thoughts. 

Diminishing returns

Looking at figures again we can see that the average two-year TD rate has slipped to 2.55% from 3.5% a year ago. For anybody with say $100,000 invested that would make a difference of around $1000 a year, or about $80 a month in income. Again it's not astronomical, but it would get you thinking. And surely at least some people with money to spend might think about an investment property - particularly since the Government last year abandoned all notions of a capital gains tax.

The other more recent development favourable for the housing market has been the Reserve Bank's relaxation of the rules around high loan to value ratio (LVR) lending. Banks can now advance 20% of their new mortgage lending in loans over 80% of the value of the house, whereas two years ago they could only advance 10% of their new lending for these loans.

But perhaps more significantly, investors now have to find just 30% deposits for house purchases against a fairly tough 40% as of two years ago. 

The upshot of all this is that there are definitely factors in play at the moment that would encourage folk to go out and buy a house. The big imponderable is how far all that might go. And it is worth considering, as ANZ's economists have suggested, that if things do start going a bit "silly" again and people are really starting to gear themselves up with borrowing again, then the RBNZ could actually always consider a u-turn and actually raise the LVR limits again. 

I'm certainly going to be looking closely at where things take us with the summer housing market this year. As said earlier, a rising house market has a big impact on the NZ psyche and if some strong upward momentum occurs that will buoy our economy this year, to a degree not factored in by economists and their projections.

...But it might go flat

The same thing of course could happen in reverse. If the recent upswing we've seen blows itself out quickly then the mood may flatten.

Which brings me to one of the other things I'll be watching this year, which is the business confidence surveys. These as we know have tended to be pretty grim since the Coalition took the reins in late 2017, but there's been a more recent upswing. I'm still not sure the extent to which these surveys have been matching with what's really going on in the economy. Recent revisions to Stats NZ's GDP data suggested that the economy did turn down earlier than had previously been thought, so, its possible that the very dark business confidence results we got earlier had been a genuine reaction to what companies were seeing happening in their businesses. Time will tell.

And I could go on...but I will leave it there for now, although I am going to come back as stated earlier and have a look specifically at the Government's plans for this year.

For me really those are the two key things this year - how much of what the Government plans is implemented and the reaction to it, and how the housing market performs.

Again, that's all assuming we don't get completely knocked out of bed by something happening offshore, which of course, we might be.

Here's to a good year for you and yours anyway. Strap yourself in. It's going to be interesting.

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

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



'Stable and boring' requires commitment to a purpose, some dedication to getting things done. Less time in the limelight, more time in night-lights. Hard to imagine while we have an instagram post for a prime minister. Self-absorption dressed up as engagement. Virtue-signalling as cover for political cowardice. Reliance on generating emotion over delivering meaningful action. But National - seemingly a bunch of finger-puppets for the Chinese authorities - are even more out of touch, even more repellent.

You balanced that out well in the last sentence.

Nice comment! and remember while National was in government there policy was to do nothing.


Dont forget NZF getting alzheimers on immigration, Greens being shown to be red, Top being a no event and Act all but disintegrating. Yeah...we are spoiled for quality choice...

Could be worse, imagine the largest economy and military having to pick fro Donald or Hillary. Oh crap that was reality.

Well summed up the last wordings, got to pick something that willing to move even at artificial level than the one that not moving at all, denying yet benefited the most personal pocket wise, Nat co. is never for NZ long term well being. We're being duped by them.. but NEVER again ;-)

Stable and boring will likely lead to another Labour dominated govt.
An anti immigration party may spring up and throw a spanner.

Yip borrowing from those voted for NZF.. potential new party there, discontent NZF, Maori, and obviously dislike the new Nat co baby.. 'sustainable..'NZ? phuuih, NZ will never be sustainable by 'unplanned importing migrants' just for the purpose of boosting party votes.

As ever, you have to feel that if our economy is to be seriously blown off course this year then the causes will likely be from outside of New Zealand.

This is quite a typical attitude in NZ. We like to think that everything is 'steady as she goes' and our approach to economic management is pragmatic and sensible. If anything goes wrong, it's likely to be factors beyond our control.

As a NZer on the outside looking in, I think there is good reason to believe that NZ has a "false sense of security"and perhaps to spend more time on self assessment. Because of the hegemony of Anglo-Saxon monetarism, yes, we have it better than most (alongside Australia) and in many ways we are the poster child for a neoliberal framework. But the stresses seem to be greater than ever and I don't see NZ as being immune to both external and internal economic shocks.

We are a very complacent country and this is often borne out in articles and editorial views.

Yes, crystal ball gazing is a common pastime, especially in the New Year. And we all like to think we know what's going to happen, don't we? Fact is, we're all still up to our necks in debt, of every description, and all we can do to pay off that debt is to take our more debt, which is a concern for me. What ever happened to working hard & creating wealth (of real value) through synergistic & creative endeavours?
Or is that asking too much?
As for our student government, well, may God help us to get through this year. There'll be so much bullshit to read & listen to that I'm thinking of starting up a political bullshit recycling programme so all the lies can be reconsidered in hindsight. A bit like the Herald+1 - a year on.

What ever happened to working hard & creating wealth (of real value) through synergistic & creative endeavours?

People were given adequate supply of housing that made ownership affordable, followed by inadequate governance that made it unaffordable. It was easier to simply buy another house than build a business with enterprise and creativity.


The crooked RBNZ shoulder plenty of blame for the housing nightmare. Don't hold your breath expecting them to do anything about it.

It seems like the usual suspects are trying to manufacture a narrative around housing at the moment. Lets hope nobody is stupid enough to believe the garbage that OneRoof and Norwell push.

They easily being swayed by Banks, look at the LVR, DTI tool request, Deposit guarantee & that Banks CAR.. from 5 to 7yrs.. the amount? ha ha


"Since the times of the Global Financial Crisis in 2008 we've seen the population in this country rise by something like 17.5%"


Indeed. Who voted for that to happen...? Its not that NZ is changing, it the speed that it's happening.

No one voted for it. Our dear leaders decided it was good for us. They really, really, really dislike the people actually voting on anything of substance. "They know best", at least that is what they believe. Us peasants "can't possibly understand the issues and if we were allowed to vote we would only make the wrong decisions. I mean, look what happened with the flag, and don't even mention Brexit". When did they cease to represent us and take it upon themselves to tell us what to think?

Tony Blair ignored the largest march in British history against invading Iraq. Yet, he still thinks it was the right thing to do. These people are insufferable.

Switzerland solves this problem by having referenda. It is about controlling the politicians.

Government is supposed to serve the people, not the other way around.

I would like to hear any politician explain how this avalanche of immigration has been 'good for us'. I don't mean good for low-paying, low-value, low-principled businesses, good for GDP headlines, good for 'diversity', good for house prices, but good for the nation. This and previous governments have created a treadmill for the country that we don't know how to stop without tipping thousands of construction workers and others onto their faces and into unemployment. It's a hell of a strategy we're now apparently locked into - one that has no acceptable justification, and no acceptable end in sight.

I think it was never meant to be "good for us", rather it's a necessity. Someone has to cover the cost of superannuation.

Cheap, exploitable workers? ✓
Higher rents and house prices? ✓
Avoid taxing windfall income? ✓
Wealthy donors seeking List seats? ✓
Nominal GDP increases one can pretend equates to sound economic management? ✓

You're on the money.

In most other western economics, population growth is hardly reaching replacement rates. Japans population is actual on the decline. With people living longer, who's going to pay for the future liability of government super?

Most people don't recognise the drain government super payments have on the economy.

While I accept immigration could solve the funding of future government super, eligibility for this should be at least 15 years as a tax paying resident if not 20 years, and immigration numbers should be lower so there's less pressure on public infrastructure, to enable better planning for future growth.

And a citizen militia with an MSSA in every house.....

and the direction of change - downward. They should rename the beehive the sty as its more akin to pigs at a trough. Even if we by some miracle got a government that was capable, served the public and free of vested interests, there's too much damage done to be repaired. Short term democracy at its finest

Many of the wealthy and smug fail to see or fail to empathize with the shitty downhill trajectory of this country.
Simon Wilson wrote an excellent article in the Herald a week or so back on the profound problems this country faces.

Remind me of that Ol' movie, Speed 2 - loosing cruise control? - speeding too much without considering other things, correct tires, road condition etc. we all knew what is going to happen next.

17.5% is about 1 in six.
Insane = barmy, bats, batty, bedlam, bonkers, brainsick, certifiable, crackbrained, cracked, crackers, crackpot, cranky, crazed, crazy, cuckoo, daffy, daft, demented, deranged - and thats just from 'b' to 'd'.
Immigrants (including myself) are like alcoholic drinks - usually but not always delightful, frequently stimulating, they make life more fun - but just like alcoholic drinks too many are bad for you and far too many is a disaster. We have a quota, we have a point count system, why not reduce the quota while trying to keep the very best immigrants.

If you call the current socioeconomic state of NZ "fun", you've either fled North Korea or you are insane plus all the other synonyms you listed

Don't know much about you Lapun, but like you we too immigrants thought to be one of those few on top echelon for this country Cancer healthcare professionals. We're duped, can't even afford to compete for housing for the imported 'car groomer' from mainland China. So it's OZ where our aim this year or 2021 (after contract of handling more of terminally ill/dead bodies here).

My argument was numbers. There is a quality issue too. Despite all comments to the contrary by politicians most immigrants are less skilled than average Kiwis. I'm a retired computer professional (programmer/analyst) and it was realising that my contribution to NZ when I was a worker, was fairly insignificant that started my skepticism about immigration as a benefit to NZ. My wife was treated for cancer - a marvellous service - you have my thanks and deep appreciation. A sensible immigration system would encourage you to live in NZ; be cautious about late middle-aged programmers and deeply skeptical of Uber drivers, checkout operators, tourist guides, etc.

Nope sorry I don't see 2020 as being boring, its the turning point in history. Too many world events coming to a head and now past the point of being able to just ignore. Yes we are lucky in NZ, the isolation is shielding us to a large degree but when the smoke from the Aussie fires passed over it made you realize the shit that is coming is inescapable.

Precisely Carlos67, NZ easily forgot albeit for wrong reasoning.. history that makes this country already happening world away from us (WWI, WWII), several world economic shocks etc, that smokes you mentioned is a good timely reminder.. that we are all in the same planet fluid.

Where are we at with Housing .......................ASK THE IMMIGRATION MINISTER !!!!

With an all-time record inward immigration , we can only expect the housing deficit issue to worsen , along with all the other infrastructure deficit issues .

And its 100% immigration thats pushed prices to where they are

Indeed. And that's the immigration that NO ONE VOTED FOR. Thanks NZF...for nothing.

To a large degree you can blame academics and journalists for immigration. When people like Paul brown stick their necks out they are treated with derision by the likes of John Campbell and Marcus Lush. People are individuals but people also have competing group identities and while this is denied (not a problem) by "left-modernists" there is convincing evidence of a social engineering project aimed at unseating the ethnic majority.

Singapore appears to have solved it's housing problems by eminent domain. The state owns 95% of the land. and 85% of the housing stock [?]. They do timely redevelopments (so no flag housing etc) and are strict over tenant agreements (no mamby pamby). I presume all the capital gains go to the state who (I presume) represent the public. The free market is a political construct.

The Auckland market will continue it's growing strength with the usual wobbles around election time.
If one believe's/has followed the cycle of property/business this upturn is spot on Q.
Inflation is under control so interest rates around this level are here to stay.
Even this COL lot have worked out that shuting off the immigration tap is not that easy.
Min wage increasing in steps to something acceptable is positive for many people.
From a outside perpective NZ is still seen as a very attractive remote place, that is stable and a desirable place to get into.
NZ will never return to the cheap back water we were in the 70's/80's/90'/00's we have been discovered and de-regulated.
The current situation in Australia with the extreme heatwaves, uncontrollable bushfires and looming low water reserves particularly for Sydney will no doubt effect the numbers coming and going between both countries to our favour. I have just been in SA for 2 weeks and people are unsettled even in the big cities as to what the future might hold. It would only take a main centre/city to suffer from these fires to shake the country.
It was suggested to me years ago that NZ will develop into the Switzerland of the Pacific - maybe we are ?
We have boom times happening, and yes they are about the country expanding to meet a growing population, just the same as the US did for several hundred years and I don't see any political party changing our direction.
This is the new norm whether we accept it or not.
2020 will be a positive year for NZ - my opinion !

All the towns and cities with populations of 25,000 or more across NZ are likely to see a significant increase in median house prices throughout 2020 - expect most will be in the 15% to 20% region with some around 25%, while Auckland region perhaps lower at 10% to 12%. The first 3 or 4 months of 2020 could see strong competition for fresh listings due to one of the lowest stock levels at the start of this year compared with other recent years and the strong possibility that stock levels will stay low - investors under no pressure to sell with interest rates in the 3.4% area available for 18 months or two years fixed. Interest cost down and rents up. The risk averse can lock in 4.25% for 5 years fixed - historically ultra cheap for investors. In typical towns where first home buyers can purchase a home for around $400,000 with an $80,000 deposit (that may also include Kiwi Saver) the interest on the $320,000 mortgage is only just above $200 per week compared with approx $500 per week when interest rates were 8%. Those first home buyers in cities like Tauranga, Napier, Hastings, Gisborne, Palmerston North, Whangarei, Nelson, Dunedin, Christchurch, Invercargill are having to compete hard with investors. Smaller rural service towns like Pukekohe, Cambridge, Fielding, Levin, Masterton etc will also see strong demand. Things could slow down a little in the run up to the election as that's what usually happens. Certainly going to be an interesting year and if the swap rate trend turns back down we may see mortgage rates below 3%.