Tony Alexander

Economic Commentaries

The full pdf version of the Weekly Overview is contained here.

Weekly Overview March 17 2016

Thursday March 17th 2016

In this week’s Overview I start by taking a look at reasons why not all banks have passed on all the 0.25% cut in the Reserve Bank’s official cash rate. It comes down to changes in the OCR not being the best measure of changes in overall bank funding costs since the global financial crisis – something well known by the Reserve Bank and a message delivered by all of us since 2008. If the Reserve Bank wants all floating rates to drop at least 0.25% given that the credit spread for us borrowing funds offshore has increased sharply recently, all they have to do is cut the cash rate again. Simple.


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Weekly Overview March 10 2016

Thursday March 10th 2016

The Reserve Bank cut it’s official cash rate another 0.25% this morning so it now sits at a record low of 2.25%, even lower than right after the depths of the global financial crisis. So why cut when the economy is growing near a 3% pace? They are worried about inflation settling uncomfortably low having missed their inflation target range of 1% – 3% for a year and a bit now. Current inflation is only 0.1%. The cash rate cut will lead to some retail lending rates going down, but with bank funding costs offshore rising because of investor concerns about European banks the feed-through in many instances probably won’t amount to the full 0.25%.

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Weekly Overview March 3 2016

Thursday March 3rd 2016

This week I discuss the recent reduction in business confidence but how the spread between winners and losers across sectors in NZ at the moment is amazingly wide. If tourists could be encouraged to spend a day frolicking with cows that would be great. Exchange rates have moved little while some retail interest rates have been lifted in response to bank funding costs rising offshore as the world gets concerned about offshore bank exposure to the likes of the energy sector and we Australasian banks get caught in the backwash.

The Overview isn’t a must read this time around in my opinion.

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Weekly Overview 25 February 2016

Thursday February 25th 2016

This week’s Overview is on the short side and I don’t think there is anything in it to set the world alight so if you are pressed for time go back to whatever you were watching on Netflix.


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Weekly Overview February 18 2016

Thursday February 18th 2016

Last week I wrote about the weakness in world sharemarkets in terms of specific factors. These included losses for energy sector businesses because of the structural decline in oil prices, slowing growth in China and worries about debt and capital outflows, weakness in the Japanese economy, and worries about the impact of tightening US monetary policy. But there are wider issues in play which also lie behind the growing disquiet.


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Weekly Overview February 11 2016

Thursday February 11th 2016

Sharemarkets have fallen again this past week as investors find themselves with plenty of reasons for backing away from riskier assets. For some it is the fall in oil prices and resulting poor profit outlooks for businesses involved in the energy sector, expectations that sovereign funds of oil exporting countries will sell assets to offset revenue losses, and losses to be taken by banks which have lent to energy companies.


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Weekly Overview February 4 2016

Thursday February 4th 2016

Two weeks ago I listed reasons why despite the dairying downturn growth in the NZ economy would remain good especially compared with other countries and this would limit scope for lower interest rates, support jobs growth, and keep the NZD from falling much.


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Weekly Overview January 28 2016

Thursday January 28th 2016

The Reserve Bank left the cash rate at 2.5% this morning which surprised no-one. But they did open the door a bit more to cutting further, so although our view remains that they won’t move again, one cannot rule out a 0.25% reduction in March. A lot depends on what happens overseas as domestically our economy has a lot of strength.


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Weekly Overview January 21 2016

Thursday January 21st 2016

Welcome to the first Weekly Overview for 2016. The year has started fairly dismally for sharemarket investors and businesses exposed to minerals commodity prices. There has been record early-year weakness in some share indexes, and oil prices are almost in freefall as supply booms, dragging down other energy-related prices by association.


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Weekly Overview December 17 2015

Thursday December 17th 2015

This is the last Weekly Overview for 2015. The next one will appear on January 21. I hope everyone has a merry Christmas and a good summer break.


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