Tony Alexander

Economic Commentaries

Mixed Data – Same For The NZD

Thursday February 16th 2012

The Kiwi dollar has eased (probably temporarily) against the greenback this week following the Minister of Finance’s warning today that the government’s accounts may not return to surplus in 2014/15. That is hardly earth-shattering news given global growth risks, but it provided an excuse for NZD selling after buying on the back of yesterday’s much better than expected retail trade numbers, and buying against the British Pound and Euro following ratings changes and warnings from Moodys.

The monthly Online jobs report compiled by the Department of Labour improved a tad in January but for the past three months seasonally adjusted ad numbers have fallen 0.7% suggesting that the very weak jobs growth of the last three quarters of 2011 is set to continue early this year. That calls into question the sustainability of the retailing splurge late last year.

In contrast, although all three measures we follow in the REINZ housing statistics report eased in January – prices, sales, and days to sell versus average – the underlying trends are for improvements in all three. The rising real estate market will eventually lead to rising consents and dwelling construction with assistance from recent cuts in bank fixed housing mortgage rates.

Speaking of which, with the cost of jumping from floating to three years fixed declining to only 0.41% from 1.4% just 13 weeks, if I were a borrower I would choose to fix three years currently. Most people won’t however with the majority of shifters likely to prefer the only 0.05% extra cost involved in shifting from floating to fixing two years. Downside risks to fixed rates now seem slim. That is, from here rises are looking more probable than falls though no sharp moves seem likely in the near future.