Financial analysts reflect on the impact of the global money markets crisis here in New Zealand.
KEY POINTS:
Mark Weldon, NZX chief executive, on One News
On the possibility of a share market plunge on the NZX:
"Our market doesn't have direct exposure to the US financial system.
"Obviously global confidence is hurt a little bit, emotion plays through, but our companies are pretty transparent,
simple and easy to understand so on a relative basis we're doing OK."
Bernard Hickey, Financial Commentator, on One News Extra
On what the banks are likely to do:
"As borrowing get more expensive a $200,000 fixed interest mortgage could cost you $20 - $30 more per week.
"We don't know exactly what's going to happen to interest rates in the next week or two, but given the amount of turmoil on the markets right now and what we've seen in the past, that's likely to be the net effect on people who have got a mortgage.
Tony Alexander, BNZ chief economist, on Radio Live
On the local housing market:
"When ever you get bad news offshore it may discourage a few people from making purchases, but it's hard to daw a direct parallel. The biggest impact on our housing market was last week's surprise 0.5 per cent cut in the reserve bank OCR. It has actually dragged a few buyers out of the woodwork I've been told."
On mortgages:
"What this is all about is banks aren't willing lend to each other overseas and investors are wary of banks generally. New Zealand banks have to borrow one-third of the money we lend in New Zealand from offshore. The premium we pay to buy that money has gone up from almost 0 per cent over a year ago to almost 2 per cent now; one can't help but think that risk premium will go higher in the near future. While a part of me thinks I should be warning people we could actually see interest rates go back up in the near future, the Reserve Bank made it clear last week that they will cut the OCR the amount they need to - to insure retail interest rates will go down.
"If these things we are seeing over night are still in play in six weeks when the Reserve Bank next reviews the cash rate, they'll probably cut it half a per cent rather than a quarter in order to make sure the fixed rate keeps falling in New Zealand. The Reserve Bank can offset rising interest rates quite substantially."
For exporters and the provinces:
"It's a double-edged sword for the exporters. The negative is that it isn't looking too flash as far as the world economy goes. Before these events of the last 48 hours, growth outlooks were deteriorating quite badly for Japan, UK and Europe, and now you'd have to be further cautious. It's certainly going to affect tourism, I think. We going to get fairly cautious there, but we've also got this extra downward pressure on the Kiwi dollar.
Here we are with the dollar down at 0.65 to 0.66 cents or so with down side risk. This is where New Zealand has a high degree of insulation against these things from overseas.
I think the export outlook is acceptable. We should just keep an eye on what that means for US growth in particular."
On insurance premiums:
"One would expect that it may cause some of the insurance rates to go up. There have been a lot of things pushing up insurance premiums in the most recent times. Unfortunately, we economists are still making the same comment now as we did when the whole thing blew up at the same thing as we did last year. The risk remains on the down side with no sign of international crisis yet ending."