Comments on: Rod Oram waves the danger flag

By: jc2

jc2 — Thu, 26 Apr 2007 01:24:04 +0000

So the exchange rate is going to need more controlling in future.

Here’s a plan for lowering it now:
- there’s a tax called the Approved Issuer Levy
- if you’re overseas and you invest in an Approved Issuer (a bank or Telecom) in NZ, then you pay 2% tax in NZ
- if you’re in the UK and domiciled in NZ, then you pay no more tax on that interest

- give the Reserve Bank an exchange-rate target, and control over the Approved Issuer Levy tax rate

- have them manage down the exchange rate, for now, so they can stop managing it down if it tries to tank

- expect them to raise the tax rate, to discourage the wall of overseas money that’s currently flowing into our housing market

I don’t know:

- how to set the target
- it does have to be public and explicitly set, like the inflation target

- what you have to do to avoid creating a distortion between debt investments and equity investments

How do people like this proposal? who know how this part of the system works.

By: eredwen

eredwen — Tue, 21 Nov 2006 11:59:08 +0000

boot: Definitely not Fendalton! which, although a pleasant suburb, has always had its areas of noticeable “pretention”.

We live on the lower NW facing slopes of Clifton (traditionally part of Sumner) with panoramic views of estuary/sea, and across the Plains to the Southern Alps. This area used to be regarded as “too far” from central Christchurch. Our “Metro” system has buses every 10-15 minutes, and, with modern bicycles and cycle lanes, it is within easy biking distance of the City Centre. Unfortunately these alternatives dent only slightly the daily one-person-per-car comute.

By: boot

boot — Mon, 20 Nov 2006 04:15:52 +0000

eredwen, Fendalton by any chance? (in some parts of town, otherwise known as “the f word”….)
There is a scary amount of leverage in the system, and I suspect many of your neighbours are leveraged to the hill. When the poo hits the fan, burnt fingers galore, and the banks will be forced at last to review lending criteria.

By: eredwen

eredwen — Sun, 19 Nov 2006 02:28:54 +0000

Interesting times ahead!

I live in what has become “a very desirable area” and the lifesyles of an increasing proportion of the newcomers around me include … HUGE new houses, one expensive car per family member, all mod cons, private school fees, trips away (often “overseas”) for holidays, an SUV/boat/batch/ for weekends, professional gardeners, housecleaners, dog washers(!) etc etc … must be financed from somewhere.

Those of us who “have lived here for ever” (many on low incomes such as NZ Super) will watch with interest!

By: phil u

phil u — Sat, 18 Nov 2006 22:08:36 +0000

perhaps the clearest indication of the upcoming pressures on the american dollar is the fact that the chinese govt…

which has two thirds of its’ trillion dollar o/s currency investments in american dollars..

has just ordered the dis-investment in those dollars…moving them to the yen/euro etc…

and when that american dollar drops..it will drop like a stone…

with worrying implications for us all..

phil(whoar.co.nz)

By: bjchip

bjchip — Sat, 18 Nov 2006 12:23:40 +0000

boot

The problem for investors is going to be where else they can find to put their money. Damned few places offer the sort of interest rates that NZ does, and when the US dollar tanks…. (and it will), the resulting flight to anything else will be difficult to predict.

This bit of future is hard to predict, but the next few months should tell the tale. At worst the Kiwi would be in a “race to the bottom” with the USD. I’d expect the USD to win (the race) as it seems far more overbought, but during the race, any horse can lead.

ciao
BJ

By: boot

boot — Sat, 18 Nov 2006 08:09:49 +0000

Well done Rod, who, as far as I can tell, is respected amongst big business circles, and isn’t viewed to have any obvious green political agenda. This will have a few of the big boys thinking… 100% pure, yeah right. (Tui, I dare you!) NZ tourism will have to come up with a new catchphrase. Agreed, the NZD is an accident waiting to happen, way over valued particulary with such a high current a/c deficit as a % of our GDP. Japanese retail investors (Mrs Watanabe who controls the family purse) have been attracted to buy NZD “Uridashi” bonds in such large volumes due to the relatively high yields on offer, but any sign of a weaker ccy or interest rates having peaked, will result in these billions looking for an alternative home come bond redemption time, resulting in NZD under huge pressure, particulary vs JPY. Oh well, at least that will please NZ exporters doing business with Japan…

By: bjchip

bjchip — Fri, 17 Nov 2006 07:10:32 +0000

In the first four months of next year the US economy will be falling into serious recession… it is already falling, the effects will be felt in Japan as well.

What this will mean to the Kiwi, to investors overseas, and to us remains a bit of an unknown… how the Fed treats it will have a lot to do with the result… but expecting trade and tourism from the US to decrease is a fairly certain result.

Nope, there’s nothing definitive I can say about NZ in that, but Rod Oram is right about our image. If people back in the USA get wind of how we’ve been mucking up our luck we’re in even more poo.

respectfully
BJ