24 May 2008

The market had suddenly gone into a very flat phase and there is likely to be a serious recession emerging over the first quarter of 2008 and possibily through to 2009. Predictions are high for a very quick lowering of interest rates earlier than later, perhaops by the third quarter 2008 and certainly by the end of the year. Yields have come up quite significantly and the marklet now offers good buying opportunities at yields 1% - 1.5% higher than just a few months ago.

14 March 2005

The economy continues to show real strength with record unemployment and high export prices despite the high dollar. The level of growth can not continue. Expressing concern about potential inflationery pressures the Reserve Bank have again increased interest rates by a quarter of one percent. Given a General Election at the end of this year economic growth is expected to remain strong and in the range of 3.25% to 4.25%.

30 November 2004

Immigration numbers for the 2003/2004 period reached record levels with 55,000 new immigrants arriving in the year end of 31 March 2004. Coupled with historically low interest rates NZ enjoyed very high growth with the GDP figure for the 30 June 2004 reaching 5.3%. As a result property yields dropped dramatically with the consequent one off but unsustainable lift in commercial property values. Over the last 9 months yields in the 6% and 7% range have been frequently quoted in the last 4 sales of central Takapuna property have been at sub 7% yields. One sold at 4.53%. This is a market in which Viranda does not like to compete and in which it is counter productive for investors to negotiate the purchase of commercial property. It's all very well saying "let's just buy so that we know we are on the train" but why if we are going to go backwards? As a result we have been very slow making purchases over the August 2003 – September 2004 period but we think for good reason and for long term benefit. From June 2004 however there was clear evidence that the immigration numbers were declining and the expectation for the 2004/2005 year will be 25,000. In addition the requirement for economic stimulus in the wake of the Iraq war abated and with clear evidence of considerable economic growth the historically low interest rates started to correct themselves. They are now in a position at or slightly above pre Iraq war levels. The combination of these two trends have resulted in the ignorant commercial property buying market almost disappearing and in a more reasoned market numerous opportunities are being made available. Indeed we have completed more commercial property purchase in the last 3 months than we have in the last 18 and numbers are increasing. We expect that the substantial number of commercial property purchasers will continue throughout 2005 and into 2006 and buying waiting times will reduce substantially as a result without loss of quality. The higher interest rates will constrain economic growth but only down from the unsustainable 5.3% to a predicted level now of 3% – 3.5%. Trading fundamentals remain strong and the business economic optimism outlook remains extremely positive. 2005 also brings us the New Zealand General Election - a good time for investment? You decide.

12 December 2003

GDP growth for the balance of the 2003 calendar year has been higher than expected and although there was a lowering of the expectation around the time of the Iraq war and the SARS epidemic, it seems to some degree that the counter-cyclical nature of those events has in fact played into NZ's hands. The GDP growth has continued at a fast rate in the course of the year (perhaps 3.5% - 4.5%) and overseas investment confidence in the economy has led to a dramatic firming of the currency to where it sits at something in order of 0.645USD today. It must be getting towards the top of the cycle but currencies are difficult to predict accurately and some say we have reached the peak while others say we can reach 70c USD as was the case in only May 1997. Nevertheless, all signs are positive and there are no substantial changes to report, with a busy property market in both residential and commercial, very low unemployment figures and record building consents being issued. The positive effect of New Zealand's indirect taxation GST, has resulted in very significant annual government surpluses quite contrary to the days in the 1970s and 1980s where spending deficits were funded out of debt. The biggest concern lies in the export sector suffering from such a high exchange rate. Most opinion suggests that our currency should sit around the 55c level but the exact route to get to that point is unclear.

01 May 2003

All sailing ahead as predicted. GDP Growth will continue at this somewhat slower rate for a year or two at least. Tenant activity good. Political stability. Currency stablised if not on slight firming trend (BNZ predict 60c cross with USD by year end). NB We think this in conservative ans that the rate will hit mid .60 - .70 by Christmas.

24 January 2003

As predicted the kiwi dollar has continued to firm and if anything the trend will be to lower base interest rates. Exporters are hurting but from extremely attractive highs during 2000 and 2001. Production, employment and major government surpluses still very good and GDP growth of 2.5% - 3.5% predicted this year. An excellent place to invest wisely.

06 September 2002

During the period from late 2001 through to 2002 New Zealand enjoyed good levels of economic growth in the order of 3% - 4.5% depending on which quarter you apply. During the same period the New Zealand dollar appreciated by more than 20% before settling back to a 12% gain over the period at roughly .46 cents USD. Before the currency settled back there was some expectation that interest rates may need to rise to stem the inflationary pressure arising from that growth. However due to the currency readjustment and to negative concerns about commodity prices and overseas markets, particularly the US and Japan, inflationary expectation has been constrained without the need to resort to use interest rate management in this way. Consequently the prediction now is for a period of sustainable economic growth with interest rates remaining at the current levels, possibly even slightly lower, and inflation remaining within the 0 to 3% band imposed upon by the Reserve Bank. Due to these factors it is highly likely that the NZ dollar will continue to appreciate and we predict (along with many other sources) a rate of .52c USD - 55c USD for the NZD during first half 2003, along with 90c - 95c AUD. If currency appreciation continues, far from increasing interest rates, they are likely in fact to be adjusted downwards for our exporters, so as to lower the investment attractiveness of the kiwi $ to overseas investors at the higher levels. Another uncertainty in the political landscape was to have been the NZ General Election due (usually) for November this year. Due largely to squabbling and dysfunction between minor party members the General Election was called for July 29th. It resulted in the return of the same centre-left labour-led coalition this time with two new and informal coalition partners. So on the political front it seems that we will follow a very similar path aimed principally at economic growth with the provision of social equity in education, health and justice. Finally the former long standing Governor of the Reserve Bank stood down from his position to contest the general election and has become elected and become the opposition finance spokesman in Parliament. He was a strong monetarist who, some would argue, went too far in constraining growth in order to dampen inflationary expectations with the result that interest rates always tended to be set at the upper end. The new Governor of the Reserve Bank is Allan Bollard who has come over directly from the NZ Treasury. It is we think generally hoped that he will adopt a more even-handed approach to interest rate management encouraging economic growth in a lower interest rate environment for as long as this remains possible without sparking an unacceptably high round of inflation. There is considerable economic activity and excellent leasing and capital growth indicators.

30 November 2001

Much of the predicted last two months has come to be a reality and some stability will follow. 4% NZ GDP growth predicted for 2002/2003 and there are also predictions that the US economy itself will be able to experience a come back in first half 2002 although this is yet to be seen. The Afghan conflict has been more contained that at first thought likely and the fortitude of the American people under fire will shorten the length of the inevitable flatness in the US. The developing situation in Iraq is of concern but New Zealand looks well poised to resist some negative sentiment. Interest rates in NZ can not go much lower and when the inevitable growth statistics come out as they will, the Reserve Bank of NZ will move quickly to contain inflation through the medium of interest rate rises.

20 September 2001

With the tragic events of Sept 11 reinforcing an already downward US economy and Asian ecomomy set, uncertainty will be the order of the day for a few months yet. Interest rates will be lowered by various regulatory authorities worldwide (Reserves Banks and the like) in a bid to sustain faltering economies and consumer demand particular in travel and related products and services will marked down heavily. Continuing problems with Air New Zealand are likely to result in a government re-capitalisation and smaller but stronger might be an appropriate summary. Notwithstanding the world problems NZ's economy appears particularly resilient after excellent rural perfomance and a large buffer still to be felt, a low pro export currency, excellent employment levels and sound coporate planning.

6 September 2001

Interest rates holding at present levels. Opinion split as to whether the next move may be slightly upwards to contain the imflationery pressure of the current growth phase, or slightly downwards to sustain growth phase in the wake of oversreas downturn. In any event, movemenets unlikely to be major and the overall interest platform is stable. GDP growth to continue between 2.5% and 4.5%. Retail sales, tourism receipts and export values all high. Unemployment low.

29 May 2001

Interest rates continue to fall. New government cash rate of 5.75% still 1.75% above USD govt rate. NZD predicted to firm to 45c USA within six months - currently 41c. Economic growth still on track for 3% - 4%. Downturn in overseas economies perhaps not now seen as having as great a negative impact as first thought. Unemployment at 13 year low of 5.4%. Combination of low currency and high commodity prices cause record Dairy payout of $4.6 kg dairy solids delivering additonal $2b into already bubbling economy.

21 April 2001

Interest rates reducing in line with major trading partners and expected to fall again in May. NZ GDP growth continues in the 3% - 4% range. Confidence high with the only caveat being the effect of the slowing of Aust and US economies.

4 April 2001

Currency weakens as forecast due to USD and Australian Dollar influence. We regard this phase a temporary change to a longward firming towards 50c USD. NZ GDP growth for the 2000 calendar year announced last week at 3.4% in line with earlier predictions. Economic indicators good and economy has some in built resilience to overseas difficulties.

15 March 2001

With the NZ dollar having reached the low point of .3985 USD and well on its way back (.433 USD), world wide commodity prices at a high and an excellent growing season, business confidence has peaked at a high over the first quarter of 2001. GDP growth is forecast to be twice that of Australia and the United States over the next two years. The NZ dollar has firmed substantially since November (although with slight falling off over the last month) and exports receipts are now hitting the domestic ecomony. The New Zealand dollar will come under pressure now due to USD strength and weakness in the Australian currency. The resulting NZD weakness will correct after a few months. Unemployment dropped to 5.6%. The government cash rate was cut .25% on Wednesday 14 March as a response to concerns about the negative impact of the badly faltering Australian and US economies and medium term, the effect of the Japanese downturn. Generally, however, the economy is performing nicely and seems set to enjoy good levels of growth over the next three years after the uncertainty of the late 1990's. A good time to buy well analysed long term cashflows.

3 November 2000

After a few months of very low business confidence and lowering currency values, we now seem to have reached the bottom of an economic cycle and growth can be clearly forecast over the coming two years. Whereas economic growth was expected to be in the vicinity of 4% in the current calendar year, this figure has been revised down to 2.75% with expectations exceeding 3.5% over the next two years. The predictions made earlier with regard to growth now apply and with the growth cycle expected a year later than we had felt would be the case in 1999. Goldman Sachs have predicted a firming of the currency (as have many other financial commentators) and estimate that the correct positioning of the NZ dollar is .53USD. We should also correct to .85AUD and .33GBP. Export receipts and tourism numbers are dramatically up and the flow-on effect will be significant throughout 2001 and 2002. Unemployment levels at 6.1% are still reducing and our interest rates are sitting with stability at 6.55% wholesale.

30 August 2000

The last four or five months in New Zealand have seen some volatility as the political situation settles down following the election of the Labour government at the end of 1998 and the currency reaches historical low points at the commencement of a now clearly seen export lead recovery. The financial reports from most June 30 balance date companies show very healthy profit increases of between 15% and 30%; unemployment has dropped to 6.1%; interest rates have started to fall and projected GDP growth remains 2.5 - 4% for each of the next three years. There is a massive increase in export receipts in most sectors and subject only to political interference aimed at controlling and inflationary pressure a period of sustained growth should emerge from the winter flatness and lack of confidence.

3 April 2000

Growth for the month of December was 2.2% making an annual figure of 3.5% for the 1999 calendar year. Growth is forecast to be between 3.5% - 4.5% for each of the next three calendar years. The only thing to slow this growth rate will be the determination of the Reserve Bank not to let inflation take hold. The new government's expanded inflationary target of 0% - 3% shall allow for some accommodation of more sustainable high growth rates. The property market is very active and we have completed more leasing in the last two months than the last two years. New building starts are taking place in Manukau, East Auckland and North Shore and the company has been very active. The political environment is stable and the currency is showing a predicted continuing firming due to increased foreign interest in the emerging New Zealand economy.

1 March 2000

Although interest rates are expected to rise by 1%-1.5% over the next year or two, economic growth is currently at 4% per annum and expected to continue at this rate for the next 2-3 years. The new government has provided $1m for regional economic development and there is very strong business sentiment here. Given a 6-8 year economic cycle and the last period of high growth in New Zealand being 1993-1995, all factors seem to point towards a sustained period of economic growth between 1990 and 1993. The implementation of GST in Australia from 1 July 2000 is likely to present internal economic problems there and the very great improvement in exports and the balance of trade will result in a firming currency in the course of the next 2-3 years. Virtually all negative factors represented in the period from 1996-1999 are becoming positives very quickly.

20 December 1999

As the year, century and millennium draw to a close, New Zealand's economic environment enters a very exciting and potentially gainful phase.

With the election held two weeks ago and the swearing in of a new Labour lead coalition, all signs are that the economy itself is heading into a prolonged period of confidence and bouyancy and that the following characteristics will represent the next three years.

1. The GDP is expected to grow at 4.5%, 3.8% and 4.2% over each of the next three years respectively.

2. The growth in the GDP will result in a substantial government windfall through GST income.

3. Unemployment is likely to drop further over the next two years

4. The government will be receptive to a slightly increased inflation banned target of 0% - 4%

5. The government will maintain strong fiscal control but will allow additional social spending funded from a dramatically growing economy and a slight increase (6 cents in the dollar above $60,000 pa) in personal income tax.

Many financial markets in the world have slowed down dramatically with end of year trading and Y2K concerns. Our dollar has consequently reached a low point against the USE and cross currencies, however currency is expected to firm consistently with the economic growth we experience over the next two or three years and the aberrations of December 1999 and January 2000 should not be given too much weight.

Slight inflationary pressure will cause interest rates to move up from their 30 year lows of 1999 to perhaps their 20 year lows. The point is that the swing upwards will not be the significant pendulum swings that have been experienced over the last 15 years and a slightly firming interest rate mark in the light of substantial economic growth will in itself not be any major disincentive to investment.

We estimate that growth in 2000-2002 will exceed the growth of 1993-1995 with the political and economic problems of 1997 - 1999 now being well behind us.

18 November 1999

The general election is held at the end of this month. After a period of 12-18 months following the financial crisis in Asia, the economy has been stimulated all year by significantly lower interest rates and a lower currency level and is starting to see real signs of sustainable economic growth. The sentiment here is that people will be pleased when the election is over and stability is restored to the political front irrespective of whether the government is slightly left or slightly right. Economic growth is forecast between 2.75% and 4% GDP per annum for each of the next three years and this is likely to result in slightly higher interest rates, slight inflationary pressure and a firming currency. Wild pendulum swings of the past however are not expected due to the tight monetary conditions and the economic environment in New Zealand is clearly set for a period by controlled economic growth in a regulated economy.

28 April 1999

The New Zealand economy has been stable and flat during most of the year so far. Surveys show the business confidence building to a is at a 5 and 1/2 year high. GDP growth for this year and next year is predicted to be 2.5% or so building to 3.5% next year. Politicians are being very cautious in the lead-up to the October General Election. In March the government introduced a Cash Rate which has largely overtaken the 90 day bill rate as an indicator of the wholesale markets. The current Government Cash Rate is 4.5% and the traded 90 day bil is expected to stay within .2% of this figure. Any change to the Government Cash Rate will, as in the United States, reflect the government's forward view of growth and inflation with the rate being pushed up to suppress undue growth and inflation, and the rate being pushed downwards to encourage growth and inflation where the signs are weak. This rate will be a great indicator. We expect a further 18 months to two years of very stable growth orientated activity.