Why the Flip Flop Orr? (Related article)

Lots of push back from the media asking this question. We agree...if you have read our market commentaries, we have been saying for several months that there was plenty of data that pointed to inflation being back in the box and other weak economic indicators. Of course it is easy to be an armchair critic.

Leon MacDonald left the ABs this week. Big news for rugby fanatics – talkback radio was buzzing about it. But the average rugby follower won’t care as long as the ABs win. Equally – the majority of the population won’t care about why the OCR didn’t drop earlier – they will just be glad it dropped and that is has further to go.

Du Val put into statutory management - (Source) 

We haven’t seen a Commerce Commission move like this since South Canterbury Finance 14 years ago. 64 companies in the Du Val portfolio were put into interim receivership three weeks ago. The Commerce Commission has now moved to statutory management due to significant liabilities and is trying to prevent further harm to Du Val’s investors and creditors. This move is based on a recommendation from the FMA who are reported to be still conducting ongoing investigations.

Government announces new infrastructure agreements for councils (source) 

 Regional deals are to be rolled out throughout the country, with Cabinet having agreed to invite councils from up to five regions to submit proposals for long-term infrastructure partnerships, with deals to be stretched out over a decade on a 30-year vision for regions. There is yet to be clarification on which regions will be involved. However, five councils have been asked to submit proposals for long-term infrastructure partnerships with the first to be rolled out next year. The partnerships are intended to allow regions to implement tolling or targeted rates to fund infrastructure for roads, new land for housing, and economic growth. 

Here's where the economic downturn has hit hardest. (source) 

According to Infometrics quarterly economic monitor, in the June quarter economic activity was 0.2% lower than a year ago, resulting in end-of-year activity being -0.2%. It is no secret that times have been tough, and the economy is weaker. Infometrics reports that mid-lower North Island is in decline, mid-upper North Island is fairly solid, and the upper-North Island is constrained. The lower interest rates we are now starting to see will eventually turn the tide on any economic declines. Job growth has been seen in the cities, with rural areas yet to see an increase.

I don’t see any new news here. It makes sense that the cities will outperform smaller or rural areas simply due to the volume of people and increased productivity. The country has turned a corner. It will take a bit of time to hit the whole country, but we are already seeing positivity and reports of busy auction rooms.

NZers reluctant despite significant economic and environmental benefits from pine forestry - research. (source) 

Four research projects concluded that New Zealand would see more pine trees in the future. Planting pine is a way in which they believe rivers and lakes could be cleaned up, the negative economics of sheep and beef removed, and provide a means to generate more carbon credits. One catchment in Hawke’s Bay which was reviewed showed that the benefits of pine instead of sheep and beef would improve water quality and increase land profits to landowners in the area. However, the negatives of pine were not examined such as lower biodiversity, sediment runoff, and storm damage from debris.

Interest rate fight: Which bank is the king of cuts? (source) 

It’s such a nice change to be reading about cuts with interest rates in the same sentence. Long-term rates can now be found at below 6% and short-term rates are next on the chopping block. The competition with banks is now heating up as they fight for custom. Best cut so far – ANZ 18-month rate from 7.15% at the start of the year and is now 5.99%.

Have a great weekend everyone!
From the team at Erskine Owen.