Tony Alexander

Economic Commentaries

NZ Observer, February 2015

Tuesday February 17th 2015

Welcome to the first issue of the NZ Observer. This new publication is aimed squarely at SMEs contemplating their likely operating environment over the short, medium and long terms. On page 2 we outline the likely environment for the next couple of years noting strong growth support from activity in Christchurch and Auckland plus investment in dairying to a perhaps easing extent. On page 5 we take a special look at retailing noting the correlation between price changes and sales and the way that rising costs for non-retailing items have taken available cash away from the sector.

On page 9 we look at borrowing costs and how the world has changed so much in recent months from expectations of interest rates rising to strong views that current rates may prevail for a number of years. This decline in interest rate expectations may have profound implications for investor demand for housing whilst making it cheaper for people to finance purchases of durable goods and services such as joint replacements and home modifications., especially as people contemplate living longer in retirement.

On page 11 we take a look at the Kiwi dollar and how we might soon hit parity against an Aussie dollar affected by a deteriorating short term outlook for growth in the Australian economy. On page 14 we have a column warning businesses of the dangers inherent in borrowing in foreign currencies without hedging away the risks. On page 15 we take a special look at Auckland and ways in which it differs from the rest of the country.

Finally, from page 16 we look at the housing sector in terms of the construction surge in Christchurch and Auckland, then price changes in the past year and since the start of 2009.

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