6th March 2009 Printer Friendly Version

 

Hi John,

 

The GLOBAL VIEW I sent you on the 1st of February was titled “The Times they have Changed”.

 

My commentary covered interest rates, why it’s good to be in New Zealand, and how the world has changed in the last six months. To read this – it’s been my most read newsletter -  click here.

 

Well now it’s time to send you my other newsletter, GLOBAL UPDATE, which discusses the developments since then and how I might be able to assist with your finance requirements.

 

The first surprising news was the Reserve Bank of Australia’s decision to hold its cash rate at 3.25%. This is the first time there has been no rate cut since August last year. Their decision included the statement “In Australia, demand has not weakened as much as in other countries and, on the basis of currently available information, the Australian economy has not experienced the sort of large contraction seen elsewhere. The Australian financial system remains strong and the monetary policy transmission process is working to deliver large reductions in interest rates to end borrowers. Nonetheless, economic conditions are clearly weak, and given the speed and scale of the global economic deterioration and its effect on confidence, weak conditions are likely to continue in the near term. Inflation is likely to decline over time.”

 

This is an optimistic view at a time all the news we are getting from offshore seems bad. The New Zealand Herald’s article this morning sums it up quite well. To read if click here.

 

So what will our Reserve Bank do when it’s due to announce the Official Cash Rate on 11th March? Right now we’re 3.5% and I wouldn’t be surprised to see the RBNZ follow the RBA’s decision to leave the OCR as it is, or make a far smaller reduction than most commentators have predicted. In other words I’d be surprised to see the OCR under 3.0%.

 

Some other optimistic news about the financial system concerns the rating of the banks domiciled or represented in Australasia. A press release naming the World’s 50 Safest Banks 2009, issued by Global Finance out of New York, places all of the offshore banks represented here on their list. To see this click here.

 

Another piece of interesting news is rather technical and concerns the rest of the world’s view about Australia and New Zealand. It concerns Credit Default Swaps, and in particular the cost of protecting Australian and New Zealand government debt against default. To see the article click here. This could be taken to mean the cost to banks here of borrowing offshore will rise.

 

My reading from these events is we cannot expect interest rates here to drop to the extent the market has been anticipating.

 

So – coming to the commercial - I’d like to remind you if you’re looking for funds for property or business there are investors and lenders out there.  To obtain money it’s back to basics. Knowing where to go, the criteria they’re looking for, and a proper presentation are all essential.

 

I do have a view on borrowing at the moment – so if you’re interested reply to this email or give me a call.