Tony Alexander

Economic Commentaries

Weekly Overview 23 March 2017

Thursday March 23rd 2017

This week we note the record net migration gain this past year of 71,333 people and examine the numbers behind the change from -4,000 five years ago. A big influence on flows is the relative state of the NZ and Australian labour markets with one indicator being that since 2009 88% of net new jobs in New Zealand have been full-time, but in Australia this proportion is only 54%.

We also spend a couple of pages looking at interest rates and how predicting changes in retail interest rates has become near impossible. For instance, pre-GFC the fall since September 2015 in 90-day bank bill yields from 2.9% to 1.96% now and in the official cash rate from 2.75% to the current 1.75% would have produced a 1% fall in floating mortgage rates. In actuality the rate now is 5.90% and back then was 5.89%. Thus there are two huge changes borrowers need to be aware of – changes in bank funding costs rendering old equations for predicting retail rates unusable, and deteriorating credit availability. The latter change comes courtesy of LVRs initially but increasingly the low growth in domestic term deposits and need to boost capital and further cut dependence upon offshore funding of NZ lending.