Market Update - September 2017
Spring is here as the election departs, which is a double positive for activity levels. After sales of 48, 58 and 68 for the last three months we are anticipating increased sales for the coming months.
The building boom is cracking on with over 50% of our clients electing to build and we expect this to continue to grow over the next few years as further developments are in consideration.
The rates announcement from the Reserve Bank saw no movement, with the official cash rate remaining at 1.75%. It was the first statement from former Deputy Governor Grant Spencer, who is temporarily stepping into the role of Acting Governor following the recent departure of Graeme Wheeler.
In his speech ‘Reflections on the Stewardship of the Reserve Bank’, Wheeler noted that the country’s economy had performed well in the last five years. GDP growth had averaged 2.8% he said, and employment growth was at 2.5%. He credited the Reserve Bank’s monetary policy for being a key part of this above trend growth.
Wheeler mentioned New Zealand’s migration boom (the strongest surge since the 1800s) and annual national house price inflation which reached 21%. He said, however that the future looked promising for economic growth. “If growth in the global economy slows, we have some scope to buffer our economy,” Wheeler said in his speech. “We have greater room for monetary policy manoeuvre than central banks in many advanced economies.”
Several other internal positions have been shuffled at the Reserve Bank as a result of Wheeler’s departure. A new Assistant Governor and Head of Operations has been appointed—Sean Mills, who is currently the Chief Information Officer at the Department of Corrections, will be taking up this role at the end of November. Geoff Bascand will move into the position of Head of Financial Stability.
In other news, the Reserve Bank released a revised outsourcing policy for large banks last week. Originally released in 2006, the policy has now undergone revision to ensure there is greater clarity and consistency of application by banks in times of stress. Spencer said in the statement, “An ongoing ability by banks to provide liquidity and basic services to customers, even in times of stress, is an important part of maintaining a sound and efficient financial system.”
Should bank failure occur, banks must have a range of resolution options, including open bank resolution (where a distressed bank is kept open through support from its shareholders and creditors) according to the revised policy.
While this policy will be effective from 1st October, banks impacted will have five years to come into compliance, with the Reserve Bank working with them to achieve this.