Matt Nolan

No money? No problem!

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Or so says a recent spam email:

No Money? No Problem!

You’re entitled to government funding and can claim it here

Government money is readily available for many reasons including:
# Business setup / expansion
# Real estate purchase and renovation
# Rent payment assistance
# Bills
# Education
# Equipment
# And Much Much More!

All you have to do is know where and how to ask!

Get our complimentary information kit here

Now, just before I celebrate my “free money” I find that if I go to the hyperlink I end up with this.  “Sorry, we cannot service your country”.  I guess NZ isn’t as interested in taxing everyone to give me extra buyer power – a pity really 😉

Matt Nolan

Is this all a rational reaction to falling household wealth

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House prices in New Zealand have fallen 6.8% on a year earlier according toe QVNZ (for November). Given that inflation was running at somewhere around 4% during this time this implies that the real value of houses has fallen by around 11%.

Now, prior to the recent crisis, households based decisions on the (wrong) assumption that house prices would continue to appreciate. As a result, relative to what has happened, household have “over-borrowed”. The sharp pullback in consumption is their rational response to the sharp decline in households expected lifetime wealth.

This is consistent with David Rosenberg’s view of what is happening in the US economy. (here is a version of the report)

If this is the primary factor behind the sharp drop in economic activity then this implies two things:

  1. We can expect further drops in consumption as house prices moderate over 2009,
  2. This household rebalancing process has to occur (unless we expect expectations of household wealth to overshoot on the downside) and so there is nothing that the government can do to help us.

Thoughts?

Matt Nolan

Why New Zealand’s current account deficit will begin to fall

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Two releases today have made it obvious that the New Zealand current account deficit will decline over the coming quarters.

The first was Japan’s reported current account surplus – it is down 66% on a year ago. With a range of structural factors also likely to drive down Japans CA surplus over time (here) and with other Asian nations following in Japan’s footsteps, we are running out of countries that will fund our debt.

Secondly, S&P has given our currency  rating a negative outlook going forward.

As a result, isn’t it good that New Zealand consumers have been slashing back spending and cutting debt in the face of recent mayhem – rather than being forced to adjust even more sharply further down the line 😛 . A CA of deficit of below 5% of GDP may actually be a possibility by the end of 2009 – who knows 😀 .

However, if this is the case a raft of government borrowing to “stimulate” economic activity would only make things worse – something that is worth keeping in mind over the coming months methinks.

Matt Nolan

December quarter NZIER QSBO

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The NZIER December QSBO is out.  Ohhh dear …

Let’s just say that the domestic economy appears to have cooled rapidly in the December quarter – and businesses are running scared of the March quarter.

It does appear that there is more than a structural correction going on now – confidence, and as a result demand, have given way.

The labour market data will be key for determining whether the RBNZ cuts 100 basis points, or more …

Will Taylor

The elasticty of petrol demand: Boy (and Girl) Racers

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But most of the time we assume (or have evidence that? -Matt?) petrol demand is fairly inelastic (hence the proposals to vary GST on petrol). With this in mind I was quite intrigued to see this article about Nikki who switched to driving her van when petrol prices soared and has since switched back to her EVO VII now that prices have fallen.

Her demand for being able to drive everywhere is inelastic, but her derived demand for petrol appears to be quite elastic:)

Matt Nolan

Paymark and December shopping

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In an article filled with interesting facts, James Weir from the Dominion Post looks at the Paymark data.  This data gives a strong indicator of what happened to eftpos sales over a month – which is probably relatively similar to what happened to retail sales itself.

Now, I agree with them that these numbers indicate relatively flat volumes – as even with the collapse in petrol prices, total retail prices are up by at least 3% on a year earlier.

Furthermore, their point about the excessively strong appliance sales figure is very apt.  Prices are down but values are up 15% – that is some strong volume growth.  The reason for this is probably precautionary – all the statistics suggest that people believe now is a good time to buy appliances, but in a few months it won’t be.  Interestingly, this is not what we would normally expect during a recession – especially a credit driven one!

One thing I want to point out in the article though is the perceived “strength” of food and grocery sales.  Sure the value is up 10% – but so are the prices!  As a result, volumes would have been flat.

Still, these are some interesting numbers – and they are extremely timely!