Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search


Timing right to borrow our way to a stronger economy

Timing right to borrow our way to a stronger economy in 2020

The Government’s announcement of its intent to invest significantly in the county’s infrastructure could turbo charge an economic recovery that was already showing positive signs for 2020, says Nikko AM NZ’s Head of Bonds and Currency, Fergus McDonald.

“While New Zealand has it’s share of global debt – recently estimated at equivalent to around US$32,500 for every man, woman and child on earth – we may be one of the lucky countries that can increase our debt levels to invest in our future,” says McDonald.

“With interest rates close to all-time lows and Government net debt to GDP around 20%, the country can afford to borrow and invest. This should provide a growth dividend that will ultimately pay off the increased debt burden.”

The likelihood of continued low interest rates holds good and bad news for investors.

“The bad news is that having possibly reached the low point for the OCR at 1%, we’re not going to see lower rates drive additional gains for risk-oriented assets. The good news, though, is that the stimulus provided by low interest rates is not going to be withdrawn anytime soon and the cost of financing will continue to be affordable to most, especially organisations that can access debt capital markets and issue bonds to hungry investors.”

McDonald believes mortgage lending will remain attractive through 2020, while sounding a note of caution for SMEs and highly indebted pockets of rural NZ who rely on bank lending.

“These customers may face paying higher lending margins as the banks progressively move into more selectively pricing their loan books.”

Fergus McDonald’s picks for 2020 and beyond include:

• Short term interest rates will stay low and stable.
• Longer term rates will be more volatile - however any increases will be modest as global economies will struggle under the burden of higher rates.
• The NZ economy will have a strong finish to 2020 as monetary and fiscal stimulus combine with strong commodity and export prices to give incomes and confidence levels a boost.
• Auckland residential property prices will join the regions in growing strongly, which should add to confidence levels and stronger retail spending.
• Financial market volatility around the US Presidential election, but not around the NZ election.
• A more diverse range of NZ organisations will issue corporate bonds as bank debt becomes more expensive.
• Equity and property prices will remain at elevated levels and move higher as more investors look for alternatives to low interest rate returns.
• The NZ dollar will stabilise and move higher as the economy improves later in 2020 and 2021.


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Virtues (and Fluffed Opportunities) Of The Operation Burnham Report

One unspoken rule of thumb in any official public inquiry is : whatever you do, don’t conclude you were made to listen to “a litany of lies” even if the evidence of a deliberate cover-up is right there under your nose. In that respect, the report into the 2010 Operation Burnham military raid in Afghanistan has been a model of decorum. Bad stuff did happen and has been duly noted and lamented - but only as a lapse and departure from usual professional standards. Normal service can be trusted to resume shortly... More>>


Environment: Govt Progress On Climate Change Essential, Risk Assessment Shows

The release of the National Climate Change Risk Assessment shows that the progress this Government has made to solve the climate crisis is essential to creating cleaner and safer communities across New Zealand. “Because of this report, we can see clearer ... More>>

Economy: Investing In The Tourism Sector’s Recovery

More than $300 million in funding has been approved to protect strategic tourism businesses, drive domestic tourism through regional events and lift digital capability in the tourism industry, Tourism Minister Kelvin Davis announced today. A $400 million ... More>>


National On MP Bill: Waka-Jumping Repeal Bill Passes First Reading

The Electoral (Integrity Repeal) Amendment Bill has passed its first reading, marking one step closer to Parliament getting rid of NZ First’s ‘waka-jumping’ legislation, National List MP David Carter says. “I’d like to thank the Greens for voting ... More>>


Covid-19:Legislation For Managed Isolation Payments Introduced

Hon Dr Megan Woods Minister of Housing Legislation to allow the Government to recover some of the costs for managed isolation and quarantine will be introduced to Parliament today, said Minister of Housing Megan Woods. “The Bill will allow the government ... More>>


General Election 2020: Newshub-Reid Research Poll Shows Labour Stratospheric And National In Freefall

The latest Newshub-Reid research poll* shows the National party’s leadership crises have catapulted Labour to its highest heights in this poll’s history. It has climbed to 60.9% - an increase of 4.4 percentage points. And National has been punished, ... More>>


Economy: 30% Believe Households Worse Off, 298,000 Expect To Lose Jobs

64% of New Zealanders feel the economic position of their households is the same or better than a year ago – and 30% think it is worse or much worse, while 298,000 think they will lose their jobs in the next 12 months. Households’ perceptions ... More>>

State Services Commission: Findings Of Investigation Into COVID-19 Active Cases Privacy Breach

Deputy State Services Commissioner Helene Quilter has today announced the findings of an investigation into a breach of privacy regarding sensitive personal information. The investigation looked into who or what caused the disclosure of the information, ... More>>

International Security: New Zealand Suspends Extradition Treaty With Hong Kong

The New Zealand Government has suspended its extradition treaty with Hong Kong and made a number of other changes in light of China’s decision to pass a national security law for Hong Kong, Foreign Affairs Minister Winston Peters says. More>>


Energy: 100% Renewable Electricity Grid Explored With Pumped Storage ‘battery’

The Government is taking a significant step toward its goal for 100% renewable electricity generation in a move that could be a game changer for consumers and the creation of a low-emissions economy, Energy & Resources Minister Megan Woods said. ... More>>


Election 2020: Campaign Launches

The Green Party has launched its policy platform. Think Ahead, Act Now: Our Green Vision for Aotearoa was unveiled by Co-leaders Marama Davidson and James Shaw at the party’s Annual General Meeting this morning. Marama Davidson said today: “In ... More>>






InfoPages News Channels