Tony Alexander

Economic Commentaries

Weekly Overview November 5 2015

Thursday November 5th 2015

In this week’s Overview I make a quick note of the weaker than expected employment numbers released yesterday along the lines of them reflecting the collapse in business sentiment early this year. Now that sentiment is back up again employment growth will resume.

We’ve seen a variety of housing measures released which by and large show rising strength outside of Auckland and Christchurch exactly as we predicted would happen at this point in the housing cycle. Auckland is flattening but it will take a few months to truly gauge by how much as patterns have been distorted by buying (and selling) ahead of October 1 and November 1 rule changes. Plus we don’t know if the extra difficulties Chinese people have getting funds out of China will remain or fade away in coming months. In that regard the speed of growth in China’s economy seems relevant.

In the interest rates section I note that while a further cut in NZ’s official cash rate remains probable, the weak employment numbers probably won’t influence the RB hugely as they are a lagging indicator of our economy, not a leading measure of growth and inflation pressures.

The most interesting bit of this week’s WO I reckon is the last little bit on page 6. I discuss the shift in our central bank’s influencing of your experience in having a mortgage and stimulating or not the housing market away from the post-1984 emphasis on altering interest rates back toward the pre-1984 emphasis on credit availability. We are slowly shifting back more to a credit rationing period. It won’t be as bad as before 1984, but with interest rates no longer available as a weapon for the RB to use as was the case from the 1980s and with those rates likely to remain low for many years, over time the biggest challenge for borrowers will become getting funds in the first place rather than their ongoing cost.