Tony Alexander

Economic Commentaries

Weekly Overview 30 June 2016

Thursday June 30th 2016

Like everyone else this week we take a look at the Brexit vote and offer some thoughts as an outsider looking in as a disgruntled bunch of Remain losers debate ditching democracy, taking votes away from old people, and portray Leave voters as racist Neanderthals.

A lengthy period of societal distrust in the UK, on top of leadership changes for the two major parties, and the uncertainties of how Brexit will proceed and who will be most affected, risks producing a recession there which will keep the NZD elevated against the Pound. Kiwi strength against the USD may also persist in spite of fair value models showing the NZD to be over-valued now that further US monetary policy tightening this year looks very unlikely.

Mildly greater pressure now exists for the Reserve Bank here to cut the official cash rate. But they will be wary of the wage and price forecast implications of our unemployment rate being revised down from 5.7% to 5.2%. And there is extra housing strength to come from lower borrowing costs and perhaps net migration flows sitting a tad higher than would otherwise have been the case.