Tony Alexander

Economic Commentaries

Underlying Same Old Thing

Thursday November 29th 2012

Over the past week there has been a marginal lessening of worries about Greece and the US fiscal deficit situation. So investors have bought risky assets and the Kiwi dollar is back above US 82 cents. In the FX section we look at why the NZD is high and is likely to stay that way.

On the interest rates front nothing important happened this week and were I to be a borrower I would at the moment either sit floating or fix one year waiting for a lender to offer a 3 – 5 fixed rate between 5.5% and 6.0% and then lock a goodly portion of my mortgage it at that rate simply to get some certainty in these continuing massively uncertain times.


In the lead article I take a look at the way some things just really aren’t changing in New Zealand – such as poor export performance and a deteriorating current account balance. But just in case exporters start to get excited about a deteriorating external balance pushing the NZD aggressively lower – think again. We have had 27 years of the NZD defying theory which says a bad external balance will push a currency lower. It may take another 27 years before investors once again feel we have outspent our economic base – as they last did in the early-1980s.