The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist
description
Transcript of The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist
![Page 1: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/1.jpg)
The New Zealand Economy:
Fork in the RoadAugust 2013
Dominick StephensChief Economist
![Page 2: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/2.jpg)
New Zealand GDP growth
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017-3
-2
-1
0
1
2
3
4
5
6
7
-3
-2
-1
0
1
2
3
4
5
6
7
Quarterly % change Series2
% %
Source: Statistics NZ, Westpac
Westpac forecast
![Page 3: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/3.jpg)
Electronic card transactions
![Page 4: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/4.jpg)
Residential building consents, by value
![Page 5: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/5.jpg)
Net migration
![Page 6: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/6.jpg)
House prices
![Page 7: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/7.jpg)
REINZ house price index by region (seasonally adjusted)
Page 7
![Page 8: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/8.jpg)
‘How would you spend a $10,000 windfall?’
1999 2001 2003 2005 2007 2009 2011 201320
25
30
35
40
40
45
50
55
60
Spend it (left axis)
Bank it/pay down debt (right axis)
% %
Source: Westpac McDermott Miller
![Page 9: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/9.jpg)
Household debt and servicing costs
Page 9
![Page 10: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/10.jpg)
Inflation – opposing forces
2001 2003 2005 2007 2009 2011 2013 2015-4
-2
0
2
4
6
8
-4
-2
0
2
4
6
8CPI inflation Tradables Non-tradables
% %
Source: Stats NZ, Westpac
![Page 11: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/11.jpg)
NZD/USD and NZD/AUD
![Page 12: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/12.jpg)
Low Global Inflation Global
QE
Higher NZD
Low NZ Inflation
Low NZ Interest Rates
Rising NZ House Prices
Stronger Consumer Spending
GDP Growth
Imbalances
Chain reaction from Abenomics to NZ
Global QE is generating “bubbly” asset prices in NZ
![Page 13: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/13.jpg)
Fonterra milk production, daily
![Page 14: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/14.jpg)
Whole milk powder price
![Page 15: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/15.jpg)
China New Zealand EU US Argentina Brazil China Australia-400
-200
0
200
400
600
800metric tons (000s)
Consumption Source: USDA, WestpacProduction
Growth in milk production / consumption since 2007
![Page 16: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/16.jpg)
Regional economic confidence, June quarter
![Page 17: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/17.jpg)
Quake-related construction forecasts
![Page 18: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/18.jpg)
People per house in Auckland
Jun-96 Jun-99 Jun-02 Jun-05 Jun-08 Jun-112.75
2.80
2.85
2.90
2.95
3.00
3.05
3.10
3.15
2.20
2.25
2.30
2.35
2.40
2.45
2.50
2.55
2.60
AucklandNZ ex Auckland and Can-terbury
Source: Stats NZ, Westpac
![Page 19: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/19.jpg)
House building as share of GDP
![Page 20: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/20.jpg)
NZ domestic inflation in construction booms
![Page 21: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/21.jpg)
Average of 2 & 5-year mortgage
rate
Quarterly house price
inflation
Page 21
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%Source: RBNZ, Westpac
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Mar-01 Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13
Source: QVNZ
Quarterly house price inflation
Average of 2 & 5 yr mortgage rates
?
![Page 22: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/22.jpg)
Investment value of houses
2000 2002 2004 2006 2008 2010 20120
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Actual House PriceInvestment Value
Index Index
Source: QV, Westpac
![Page 23: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/23.jpg)
House price inflation and consumer spending
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017-6
-4
-2
0
2
4
6
8
10
12
-30
-20
-10
0
10
20
30
40Private consumption (left axis)
House prices (right axis)
ann % ann %
Source: QV, Statistics NZ, Westpac
Westpac forecast
![Page 24: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/24.jpg)
Impact of fiscal policy on GDP growth
![Page 25: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/25.jpg)
NZ inflation forecasts, tradables versus non-tradables
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017-4
-2
0
2
4
6
8
-4
-2
0
2
4
6
8
CPI inflation Tradables Non-tradables
% %
Source: Statistics NZ, Westpac
Westpac forecast
![Page 26: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/26.jpg)
OCR forecast
1999 2001 2003 2005 2007 2009 2011 2013 2015 20170
1
2
3
4
5
6
7
8
9%
Source: Stats NZ, Westpac
Westpac forecast
![Page 27: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/27.jpg)
90 days bank bills, 2 year swap and 5 year swap rates
1999 2001 2003 2005 2007 2009 2011 2013 2015 20172
3
4
5
6
7
8
9
10
11
2
3
4
5
6
7
8
9
10
11
90 day bank bill rate
2 year swap rate
% %
Source: RBNZ, Bloomberg, Westpac
Westpac forecast
![Page 28: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/28.jpg)
NZD/USD, NZD/AUD and TWI
1999 2001 2003 2005 2007 2009 2011 2013 2015 20170.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
45
50
55
60
65
70
75
80
85
NZD/USD (left axis)NZD/AUD (left axis)TWI (right axis)
Source: RBNZ, WestpacWestpac forecast
![Page 29: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/29.jpg)
New Zealand employment and unemployment
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017-3
-2
-1
0
1
2
3
4
5
6
2
3
4
5
6
7
8
9
Employment growth (left axis)Series2
ann % %
Source: Statistics NZ, Westpac
Westpac forecast
![Page 30: The New Zealand Economy: Fork in the Road August 2013 Dominick Stephens Chief Economist](https://reader035.fdocuments.us/reader035/viewer/2022082207/56815ede550346895dcd7f62/html5/thumbnails/30.jpg)
DisclaimerWestpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. All disclaimers set out with respect to Westpac apply equally to WCM.Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments. The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.For the purposes of Regulation AC Certification only: Each analyst whose name appears in this report certifies that (1) the views expressed in this report accurately reflect the personal views of the analyst about any and all of the subject companies and their securities and (2) no part of the compensation of the analyst was, is, or will be, directly or indirectly related to the specific views or recommendations in this report.