Matt Nolan

Real estate data and interpretation (2)

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The latest(August) Barefoot sales statistics are now available.  In the news release we are told that sales have fallen sharply since July while prices have risen.  However, if we take into consideration what we discussed last time, we will remember that the sale of an apartment block both biased down prices and increased sales in July.  If anything – the current figures tell us that Auckland remains flat, but they don’t give us much of a read on the rest of the country.

Other discussions of general real estate statistics are on the Rates Blog, and the Real estate site.

Mike Pero also indicate that they believe house sales are going to begin rising.  If this does happen I would also recommend that we keep two other things in mind:

  1. House sales are at a incredibly low base – so any lift does not imply to us that the market is truly “back to normal”.
  2. With rents currently falling, the yield on property is terrible – so any significant increase in sales will HAVE to come from further substantial easing in prices.  In real quality adjusted terms we are starting to see this happen.
Matt Nolan

The great August/September consumer confidence rebound?

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Following the improvement in business confidence, New Zealand has now experienced a rebound in consumer confidence:

Source (Roy Morgan)

Now consumer confidence is still at low levels compared to recent history – however, it is now in net “optimistic” territory, a sure sign that consumers are becoming more willing to open their wallets.

Furthermore, the magnitude of the decline in consumer confidence over the June quarter was what first pointed to the sharp decline in household economic activity over this period. The rebound in confidence since the end of July (the early August survey) has been similarly impressive – indicating that there could well have been a sharp increase in household economic activity over the September quarter, relative to June.

However, there is one provision that we have to place on this improving outlook:

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Matt Nolan

8% weekly interest rates: What’s going on

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Following the “revelation” that a loan shark in Porirua was charging 8% interest per week on loans, the government has offered to do nothing. Blogs on the left hand side of the spectrum were irritated by this, as they feel that people are being taken advantage of (the Standard) (Tumeke) (Frontline – prior to this incident). Lets investigate the issue.

Now I am not disputing the fact that people are, in some sense, “being taken advantage of”, however I do disagree with the solution that the other blogs follow – setting a cap on interest rates. In this sense I am in agreement with government policy. Read more

Matt Nolan

Australian June GDP and interest rates: What does it mean for NZ?

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The RBA lowered the official cash rate to 7% yesterday, while GDP growth was a measly 0.3% over the June quarter. It appears likely that the RBA will cut rates again in October and further cuts following that cannot be ruled out.

Given that this is the case I am not going to comment on the fact that the majority of economists in Australia appear to be painfully dovish (excluding the insightful commentary from Dr Stephen Kirchner of course). I am instead interested in how falling Australian interest rates, and weakening Australian growth (assuming that it says weak over the coming couple of quarters) impacts on the NZ economy.

Lower interest rates in Australia will directly lower demand for Aus dollars, as our dollar likes to hang out with the Aussie dollar, this is likely to dampen demand for NZ dollars as well – weakening our currency. Think of it this way: We are a small economy that people don’t know much about, however people assume that as we are next to Aussie we must be moving in a similar way – as a result, changes in the Aussie economy and interest rates give people (perceived) information about the NZ economy (specifically given that both currencies are strongly related to movements in commodity prices).

On the straight economic growth terms, a slowing domestic Australian economy is no good for us. Looking at the latest merchandise trade figures (July) we are told that over the last 12 months, exports to Australia accounted for 23% of total exports – much larger than the second biggest destination (USA at 10%). Although this figure has become inflated with “intermediate goods” (crude oil to refineries in Australia) it still indicates that a slowdown in Aussie could hit our exports hard.

Overall, we need to keep an eye on our big neighbour to the east – big new over there will probably be big news over here as well.

Matt Nolan

Compensation and the ETS

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Although the blogs appear to be quite quiet about it, I’ve heard a number of people complaining about the government compensating people for the impact of the emissions trading scheme.

Effectively, people who are unhappy about it are telling me that such compensation appears to be pointless as it “cancels out the effect” of pricing carbon in the first place. Ultimately, we can discuss the issue in a little more detail then that. Lets try to figure out how it works – and discuss what this compensation implies, both in terms of achieving carbon/Kyoto liability funding goals, and in terms of social welfare.

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