NZ Economy —if you’re not Treasury

Either an interest rate hike or rising unemployment, together with falling migration, would spell “the end of the party”….
Due to the Reserve Bank putting restrictions on lending and other measures, the underlying economy was in good shape to withstand “a shock”. –Dominick Stephens, Westpac Chief Economist

### radionz.co.nz Fri, 10 June 2016
Nine to Noon with Kathryn Ryan
The risks of rising household debt
9:08 AM. NZ household debt has reached half a trillion dollars. That’s $100,000 of housing and personal debt for every man, woman and child. Nine to Noon speaks to Westpac Chief Economist, Dominick Stephens and Massey University’s Dr Jeff Stangl about the risks that poses to the economy. Link
Audio | Download: Ogg MP3 (30′19″)

****

### radionz.co.nz Sat, 11 Jun 2016 at 12:15 pm
RNZ News
Tough times coming as debt soars, warns economist
Record high household debt levels are not sustainable, warns a leading bank economist. At half a trillion dollars, housing and personal debt has hit 162 percent of the average household’s annual disposable income – higher than levels before the global financial crisis.
Westpac Chief Economist Dominick Stephens told Nine to Noon the decline in dairy prices was hurting the regions, but the downturn following the end of the Canterbury rebuild would be more severe than most people were prepared for. The rebuild played a huge role in the “rock star economy” between 2012 and 2014, with the international reinsurance industry dropping $20 billion on New Zealand and the government pumping in another $10b. As that money dried up, some business owners could find their businesses were not as robust as they thought, Mr Stephens said. What was less certain was when the “borrow and spend” dynamic – fed by skyrocketing houseprices – would come to an end.
Read more

harrys_view 19 Jan 2016 Harry Harrison at South China Morning Post [scmp.com] 1Harry’s View 19 Jan 2016 [scmp.com]

Posted by Elizabeth Kerr

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16 Comments

Filed under Business, Democracy, Economics, Finance, Housing, Media, Name, New Zealand, People, Politics, Property, Public interest

16 responses to “NZ Economy —if you’re not Treasury

  1. Calvin Oaten

    Looks like the pigeons are getting nearer to the roosting houses. When you start to hear a major bank economist speaking of perhaps the end of the ‘golden weather’ you have to sit up and take notice. They traditionally talk up the business as if they were in control of the situation. Ask yourself, when did any economist see a major glitch on the road? 1987, 2001, 2007/08, and now? Nope, not a one. They are basically historians with all the answers as to the whys of the events, but none of the prescience to see them beforehand. Meantime they preside over and like Gods, condone all that leads up to the meltdowns. So watch out seems to be the advice of the day.

  2. Ray

    What does anyone like many of us do about it? Especially with low interest rates on our savings if we have any?

    • Elizabeth

      Ray. Start digging for the diamond mine.

      I went to school with someone whose parents lived at Stewart Island and who owned a working diamond mine in South Africa. Seemed a useful, comfortable and simple life.

      Sadly, there’s not the comparative luck or access for ‘the many’. Nothing or little changes when people spiral down irretrievably.

    • Gurglars

      Ray, Sell your house, rent and buy back into the new regime. Don’t spend the capital in the interim. There is one problem to this strategy. We appear to be in a very low interest rate spiral. Interest rates may not go up for decades in which case house prices may just stutter without falling.

  3. Elizabeth

    Sat, 11 Jun 2016
    ODT Editorial: Reserve Bank in difficult situation
    OPINION House price rises and subsequent financial stability concerns continue to worry the Reserve Bank which kept its official cash rate unchanged at 2.25% on Thursday. […] The Reserve Bank is in a very difficult position of having to maintain neutrality while at the same time trying to solve a problem of immense proportions.

  4. Elizabeth

    Link received from Mick Field
    Sun, 12 Jun 2016 4:47 p.m.

    parallels

    ### telegraph.co.uk 11 Jun 2016 • 12:44pm
    No amount of EU hysteria can bury our housing crisis
    By Liam Halligan
    There could be a World War,” says David Cameron. “Or even worse, house prices might fall”, George Osborne replies. This imaginary conversation, shown in speech bubbles and under the headline “Project Fear Brexit goes Nuclear”, appeared on the front of Private Eye last month.
    The cover worked, as good satire always does, because it contained a strong element of truth. A high proportion of voters do believe, after all, that the Government has taken “Project Fear” to absurd “nuclear” levels.
    Those of us who want to leave the European Union, having been dubbed “economically illiterate” by the Chancellor, have since been told by our Prime Minister that we’re “quitters” who are making Islamic extremists “happy” and “threatening peace and stability across Europe”.
    As if that wasn’t enough, were the UK to quit EU, house prices might even come down, the Government says. And for our property-obsessed nation – or, at least, the vast swathe of Middle England home-owners who generally back the Tories – lower house prices would be unthinkable. As in, “even worse” than “World War”. Boom! Boom!
    Read more

  5. Elizabeth

    Three links from Brian Miller this afternoon
    The global market problem

    World Housing Bubble – China, Australia, Vancouver Real Estate News
    A collection of articles and quick commentary on residential real estate. “It’s different this time, really . . . ” Ha ha ha. No, it’s not. When China goes down, so does Australia and Canada.
    http://worldhousingbubble.blogspot.co.nz/

    The Huffington Post
    Vancouver Housing Bubble (story links)
    http://www.huffingtonpost.ca/news/vancouver-housing-bubble/

    CBC News | Business
    Analysis : Governments terrified of popping foreign-buyer housing bubble : Don Pittis
    Unrelenting rise in house prices leaves governments bewildered over how to respond. There’s a bidding war for government action on Canada’s soaring housing market, but as fingers point to foreign buyers as a reason for escalating prices, governments at all three levels are not yet motivated to cool the market down. Young Canadians complain home ownership is increasingly beyond their reach. Governments fear rules to put a lid on stratospheric prices —
    http://www.cbc.ca/news/business/crea-home-prices-foreign-buyer-economy-1.3580780

  6. Gurglars

    Banks, Banks and more Banks, controlled worldwide by the Rothschild family and other big players have gradually edged loans from business to housing markets over the past twenty years. Small businesses are a problem for tax collectors. See the difference between auditing Mitre 10, or New World, vis a vis one hundred ethnic restaurants or 100 dairies often taking only cash and in Interview speaking little or no English. An audit of a big Box company could be done from the office by use of the internet. To audit an ethnic takeaway, takes an interpreter and a couple of unspecified gofers and results are not necessarily quantifiable!

    So housing loans enforced by the need of mortgagees to remain solvent to keep a roof over their heads is a comparatively easy business.

    Thus the banking quadrilateral have had no need to take any risks with small business. However, if the interest rates rise and mortgagees get into trouble investors had better exit the banks, they will die in droves, just as they did in the US housing crisis.

  7. Elizabeth

    ### msn.com 15 hrs ago
    Govt tackles housing supply with $1b fund
    By Peter Wilson and Cleo Fraser – NZ Newswire
    The government is tackling the housing shortage, its most pressing problem, with a $1 billion fund that will be used to build roads, water supplies and other infrastructure in areas where more homes are most needed. And it’s considering establishing independent Urban Development Authorities for specific areas, with powers to override barriers to large-scale development.
    Prime Minister John Key announced the initiatives at the National Party’s annual conference in Christchurch on Sunday, saying increased supply was the answer to the shortage. The fund will be open to councils in areas with high population growth – Auckland, Christchurch, Queenstown, Tauranga and Hamilton. The government will borrow the $1b, and Mr Key says it isn’t going to be a handout to councils.
    “The fund will directly finance or own the infrastructure until councils receive revenue from the new houses, when people move in and start paying rates,” he said. “Councils will then have to repay the capital or buy back the assets – so this is not a grant or an ongoing subsidy.”
    Read more

    • Hype O'Thermia

      Let me get this right. Instead of State houses, which the government is selling, the housing needs of the poor (the largest growing group in NZ, see latest stats on percentages of rich v poor in NZ)) are to be met by councils. Out of the rates of the low to middle income NZers, in the main – yet another “core business” shuffled off onto an entity with less ability to pay.

      Just as Councils shift (call it user pays) growing share of rubbish disposal cost onto individuals, for example.

      While we as individuals pay tax and rates, this method leaves central government, councils and regional councils with more money for luxuries, and less responsibilities for their real reason for existence.

      What’s not to love about this pass-the-parcel method of tackling responsibilities, if you’re central government, councils and regional councils? Not so good for individuals, the music always seems to stop while we’re holding the parcel, funny that.

  8. Gurglars

    The more bureaucrats you employ, the more ideas that they will come up with to rob you.

    See Lawrence Yule, setting up of Delta outside the DCC, splitting into Aurora, selling off state owned assets etc etc.

    The Brexit result tells you two things, that people worldwide have become totally disenchanted with legitimised theft and secondly that governments will now crack down on dissidents. Don’t expect the dissidents (ratepayers and taxpayers) to win. Democracy was set up to transfer the wealth generated by workers and businessmen to the otherwise unemployable bureaucracies.

  9. Calvin Oaten

    It’s the result of the ‘Neo Liberalism’ of Thatcher, Reagan and our little Labour turncoat Roger Douglas that proclaimed that unfettered markets with minimum regulation was the way to utopia. This led to the corruption of those same markets by the ‘clever manipulators’ busily transferring as many assets in as short a time to themselves. At the same time grafting into power to manipulate systems to their benefit.

    Hence the disbanding of what was the servants of the people colloquially know as the ‘Public Service’, on the pretence that it was inefficient and didn’t deliver the ‘best bang for our buck’.

    We now have the replacement with their astounding grabbing of treasure beyond their dreams from the public purse, both in central and local government. Just look here in Dunedin at the plethora of ‘ants, team leaders, junior managers, senior managers, heads of departments, general managers, group managers and at the top, the Chief Executive Officer. All beavering away on nebulous trivia, producing short and long term plans, consent hurdles and constant proposals to put before our ‘elected representatives’ with barely a skill between themselves except an overwhelming need to be ‘do gooders’ and ‘improvers’.

    We need only look around at the devastation and mayhem that has been created in the last two or three decades. The ‘Brexit’ in UK and the ‘Trump’ abberation in the USA tells us that there is a form of revolution afoot with the dispossessed middle classes finally saying ‘enough is enough’. I suspect that this movement will take hold here in New Zealand soon enough and changes will be demanded. The likely trigger here will be the abject failure of our current Mayor and his Green Cabal to have any rational sense of governance. The wider scene I believe will crumble once the ridiculous housing costs and accessibility culminates in a ‘straw that breaks the ratepayers’ backs’ scenario, starting in Auckland and spreading through the country.

    As an example of what is the illness was on show last Thursday as I was driving south along the one-way between St Andrew and Stuart Sts, outside Cadbury’s factory. There were six police officers (three per side) and two patrol cars casually stopping motorists for no other reason than to check they displayed current registration and warrant of fitness stickers. Then we read of domestic burglaries and violence that are not able to be actioned for days – if at all – after being reported. Ask anyone today what respect they felt for the police service?

  10. Elizabeth

    Garrick Tremain – 27 Jun 2016

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