Tony Alexander

Economic Commentaries

October 24 issue

Thursday October 24th 2013

One issue for older people growing their pre-retirement wealth is securing new employment above the age of 50. We offer some thoughts. Page 1.

Interest Rates

Two weeks ago worries about US debt default were pushing US and therefore NZ fixed borrowing costs higher. Now weak US job numbers have done the opposite. Predictability of interest rates remains very poor and borrowers should take that into account when thinking about a mix of floating and fixed rates. Diversify your risk. We take a look at capacity tightness which threatens inflation popping up in NZ down the track. Page 1-2.

 

NZD

Many factors tell us that risks for the NZD lie on the upside – meaning it is more likely to go up than down against all our major currencies of interest except maybe the Aussie dollar. This week the NZD is down from a week ago following a big bout of profit-taking yesterday. Page 3-4.

 

China Update

This week we include three pages looking at some aspects of China’s economic performance and engagement with the rest of the world. Page 5-8

 

US Default Avoided For Now

Although things have calmed now for now in the US the fiscal problems remain and the game of brinksmanship is likely to continue. The world is reassessing risks attached to US assets and that means a structurally lower USD and eventually slightly higher interest rates than would otherwise be the case. Page 8

 

Mortgage Lending Eases

The Reserve Bank’s home loan approvals data shows new loans down 18% from a year earlier following introduction of the LVR rules. Page 9

 

NZ Population Growth Accelerates

Migration is booming and adds to a long list of factors which will act to keep house prices rising, even if lending growth slows further. Page 9

 

Transformation of NZ Young House Buyers

Feeling the desperate need to “get a foot on the ladder” young house buyers seem to be switching from buying for their own occupancy to buying for investment, maybe later using the expected capital gain as a deposit. In this way LVR rules are changing how young people view property, shifting buyers toward lower priced properties, and setting the scene for surging demand for Auckland inner city apartments. Page 11