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 The good news, though, is that the stimulus provided by low interest rates is not going to be withdrawn anytime soon and the cost of financing will continue to be affordable to most, especially organisations that can access debt capital markets and issue bonds to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 Labour’s Fudging On Child Poverty, And America’s Diplomatic Dance With Iran

If you want a good insight into what the limits of tiny, barely discernible steps to reduce poverty actually look like, delve into the latest Statistics Department figures on poverty in New Zealand Most of the nine measures utilised reveal little or no progress in combatting poverty over the 21 months to March 2020... More>>


Government: Reserve Bank To Take Account Of Housing In Decision Making

The Reserve Bank is now required to consider the impact on housing when making monetary and financial policy decisions, Grant Robertson announced today. Changes have been made to the Bank’s Monetary Policy Committee’s remit requiring it to take into ... More>>


RNZ: Alert Levels Remain

There are no new community cases of Covid-19 today, the Ministry of Health has confirmed.
Covid-19 Response Minister Chris Hipkins says at least half of the Papatoetoe High School community have been tested and the results that have come through so far have all been negative... More>>


Stats NZ: Latest Release Of Child Poverty Statistics

All measures of child poverty were trending downwards, prior to the COVID-19 lockdown, across the two years since year ended June 2018, Stats NZ said today. The COVID-19 lockdown in late March 2020 affected Stats NZ’s ability to collect data from households ... More>>


NZ Initiative: New Report Highlights How Our Housing Crisis Could Worsen If We Don’t Act Now

If New Zealand politicians thought the housing crisis in 2020 was bad, the worst is yet to come, warns a new report by The New Zealand Initiative. In The Need to Build: The demographic drivers of housing demand , Research Assistant Leonard Hong ... More>>

Parliament: Kiwi MPs Among The “Most Educated In The World”

New analysis of MP qualifications reveals New Zealand’s Parliament is one of the most educated and highest qualified in the world, and significantly more educated than Australia’s. The research, by Mark Blackham of BlacklandPR and Geoffrey Miller ... More>>

The Dig: An Illogical Ideological Struggle

Dig beneath all the trade wars and the arguments to the effect that the USA should not permit China to achieve economic and technological superiority, or even parity, and you find the real reason behind the conflict... More>>

Travel: Government Eases Visa Restrictions For Visitors In New Zealand

Visitor visa holders will be able to stay in New Zealand a little longer as the Government eases restrictions for those still here, the Minister of Immigration has announced. More>>




InfoPages News Channels