Tony Alexander

Economic Commentaries

Tony Alexander

Welcome to the online library we have created for placing reports and specialised commentaries too large or detailed to go into our flagship publication the BNZ Weekly Overview.

What’s New

Sporadic 16 July 30 2015

Thursday July 30th 2015

The sharp fall in dairy prices happening at the same time as falls in business and consumer confidence readings has led some people to predict recession and further large falls in interest rates and the exchange rate. However ahead of our last two recessions in New Zealand both interest rates and the exchange rate rose sharply to high levels. This time both are falling. In additionall, when the dairy payout fell by 32% in 2003 the economy kept growing over 4%. The over 50% payout decline from the peak two season’s ago is bigger this time around, but it is associated with recent farm debt growth of 6% and not the 25% peak back then. Thus while dairying regions are going to feel pain this coming year, there are many mitigating factors and recession for NZ remains a low probability outcome – though not an impossibility.

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Sporadic 15 July 23 2015

Thursday July 23rd 2015

In this issue of Sporadic I take a look at
• the easing of monetary policy this morning,
• how dairying is suffering but the woe is good for many other sectors and this means NZ growth is likely to continue,
• review some of the recent data releases,
• look at why legislation banning foreign house buying could be useful,
• look at why Chinese are buying property off their mainland,
• and reproduce part of the official 2002 NZ government apology to Chinese for discriminatory policies of the nineteenth and early twentieth centuries.

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Sporadic 14 July 12 2015

Sunday July 12th 2015

Chinese House Buying
It is probable that the true proportion of Auckland houses being sold to Chinese investors located offshore lies somewhere between 5% and the 39.5% estimated this weekend based upon surname data from an unidentified real estate agency’s sales from February to April. The vacuum of accurate information means formulating policy to address rising concern about foreign buying of NZ houses is extremely difficult. But even without the data it still seems sensible to at least adopt Australia’s rules restricting foreign buying of existing housing stock. We take a look at this issue in Sporadic 14 and also note that even Aussie rules aren’t in a true sense working.

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Sporadic 13 July 8 2015

Wednesday July 8th 2015

Failure’s Lessons
Listening to visiting ex-PM Helen Clark speak in Auckland last week I was struck at how her final comments regarding factors holding NZ back matched those summarised in my “What we Lack” series of papers put together back in early-2011. Fear of failure is one factor holding us back, but a new policy initiative from China shows we are not alone in that space. I take a look at issues surrounding this plus summarise developments since Sporadic 12 relevant to the likely SME operating environment – the upshot being things are getting worse but that can actually help many companies because it means lower interest rates, a lower exchange rate, and continued high migration flows. See the housing implications from that? Greece is mainly relevant to Europe and the stance of talks may now be shifting from negotiating a bailout to making sure Greece pays as high a price as possible for abandoning the Europe project, thus discouraging other recalcitrants. China’s slowing growth is more relevant to us so keep an eye on that.

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Sporadic 12 July 2 2015

Thursday July 2nd 2015

Implications of Unforecastability
In this issue of Sporadic I take a look at the many factors which are causing economic forecasts to be wrong and repeat earlier warnings that businesses need to explicitly allow for unpredictable operating environment changes. Plus from this issue on I’m adding back in the section “If I Were A Borrower What Would I Do?” in which I also explicitly allow for unpredictability of interest rates. Additionally, for over a month I’ve been noting the deterioration in NZ economic conditions and we can see the manifestation of this deterioration in the lower NZD and altered interest rates outlook. I’ll start having a quick run-through of recent developments – the rather important ones this week being the crystallisation of the Greek default risk, the further deterioration in China’s economic outlook prompting more interest rate cuts there, and of course the extra 5.9% fall in dairy prices back to 2009 levels. It never rains…. – which reminds one of the building risk of a repeat of the 1997/98 El Nino weather pattern.

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