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Weekly Overview 27 April 2017
Thursday April 27th 2017
With the week again interrupted by a public holiday the Overview is once more a tad on the light side. All we do is discuss the migration numbers and take a look at the recent small decline in the NZD to just below US69 cents.
We learnt this morning that the inflation rate has risen to 2.2%. But one key measure of core inflation still sits at just 1.6%. And with the absence of any sign of accelerating growth in wages outside the construction sector, while inflation near to above 2% beckons for a couple of years, the Reserve Bank are likely still to feel they have time on their side. The first official cash rate rise is still more likely toward the middle of next year than this year sometime.
The next Overview after this one will appear on April 20. This week we take a fairly simple look at a couple of recent business sentiment surveys, and look at data reaffirming what we already know about the Auckland housing real estate market slowing down. Nothing much really. Enjoy Easter.
This week’s Overview is a bit of a mish mash with commentary on household debt, cows, and US fiscal policy. If you’ve got something better to do go do it as there isn’t much new really. That is sort of the story for our economy overall at the moment – well underpinned by tourism, construction, migration, etc. and none of the recent new things we have learnt seem to be big enough to alter what lies ahead to any large degree.
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%.
This week we comment on the February housing data from REINZ, undertake our once a year printing of regional house price graphs, and include a special graph of Auckland house price changes from 1962. Good luck if you think it tells you when the next trough or peak will occur. We also examine the role of FOMO in the housing market, page 3.
Many thanks for the messages of support received this past week. But not everyone got the main points of last week’s Overview so we go over them again. In summary….
-It has become harder to buy a house not because of one generation’s buying but numerous factors we have discussed hundreds of times in this publication since 2009 whilst warning about the upward house price implications.
-Young buyers these days need to make deep sacrifices in spending on other things if they want to purchase a house and if such sacrifices cannot be made home ownership could well remain out of reach.
-Getting credit from banks has become harder and further rationing of an increasingly limited supply of funds is coming.
We start this week’s Overview with a very quick overview of the state of the NZ economy. We then answer the question of how much the economy suffered as a result of the collapse in dairy prices from the start of 2014. After that we address the misplaced argument that Baby Boomers are to blame for high house prices. Those calling this group greedy fail to grasp the long-term factors driving house prices higher which we have highlighted here in fits and starts since 2008. On page five we offer a list of suggestions for living as they did if you want to save a deposit.
Statistics New Zealand this week released updated projections of population growth for NZ regions and local authority areas out to 2043. Almost all areas have seen improvements on the back of higher net immigration flows, but still there are 17 areas where population decline is projected. We republish their tables so people looking at the regions and perhaps investing outside the main centres can have realistic views on how much future demand for housing there may be. We also republish tables showing net internal migration flows for each region between the census from 1981 to 2013, noting that although for the past three censuses Auckland has shown net losses, the loss was a lot less between 2006 and 2013 than between 2001 and 2006. Enjoy.
This week we remind people about the demographic factors which are a key driving force behind the growth in Auckland including things such as Auckland having the youngest population of all NZ regions, and the median age falling half a year between 2014 and 2016. Aging population? Not yet in our biggest city. We also do a recap of the factors which allowed New Zealand to undertake vital reforms from 1984-92 in fits and starts but which don’t exist elsewhere.