Tony Alexander

Economic Commentaries

Weekly Overview, Jan. 30

Thursday January 30th 2014

The Reserve Bank met expectations this morning by leaving the cash rate at 2.5%, but basically said they will be raising it soon. We expect 3.75% by the end of this year and near 4.5% next with upside risk. Were I borrowing currently I would fix three years at 6.39% given that by mid-year the floating rate will probably be higher than that.

The NZD has edged lower against most currencies this week hit mildly by a big bout of the heeby geebies sweeping the planet associated with US tapering causing capital to leave emerging markets, some worries about China’s growth slowing, and structural problems which emerging economies have not addressed these past five years.

Our BNZ-Nine Rewards Consumer Trends Survey has shown rising expectations of house prices going up this year and improving ability of people to find jobs and extra hours of work.

On page 2 we run through some reminders that while the economy may boom for the next couple of years our long-term average growth rate will be less than the 3.5% experienced between 1992 and 2007.

On page 7 we look at why the Aussie dollar has fallen almost 20 cents against the greenback in the past year while the NZD has eased just 1-2 cents.