Reserve Bank of New Zealand - Financial Stability Report

HenryTo

Which country has the greatest current account deficit (as a % of GDP) in the developed world? It is not the US, not the UK, and nor Australia. It is none other than New Zealand, with a current account deficit of 8% of its GDP. Moreover, it has no "21st century" export industry to speak of, and international money flows in and out of the country are basically subject to the whims of the Federal Reserve, the European Central Bank, the Bank of Japan, and to a lesser extent, the Reserve Bank of Australia. i.e. I would not want to be the central banker for this country.

Following is the latest semi-annual issue (released a couple of weeks ago) of the "Financial Stability Report" from the Reserve Bank of New Zealand (its Central Bank). A must-read IMHO:

http://www.rbnz.govt.nz/finstab/fsreport/fsr_nov2005.pdf

henry dribble · Posted: Sat Dec 03, 2005 12:11 pm Post subject: re shephards

that is why the roads are so narrow. the sheep run the country.
and the sheep are making a comeback in the market place. they now have wool that is washable, do not need to dry clean as it does not shrink. I bought sweaters on the Internet from England and they are great. that was fun to do, buy on the Internet from a foreign country. I think that is gong to be huge.
that will help the transports even more?
I ignore the discussion of lamb chops as I try to ignore the consequences of my diet.
supposedly NZ is like returning to the 50's, which for some of us is a new trip.
but for the time being I am thinking Chile. much warmer. waiting for the copper market to crash then going there to see what places go for. wish I spoke Spanish. need to help re-balance the values in real estate Raoch is always fussing about.
supposedly you can get an estate in the wine country with 500 acres in Chile for $850,000, the cost of a studio in Manhattan?
but keep it mum tho?
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henry dribble

HenryTo · Posted: Fri Dec 02, 2005 10:13 pm Post subject:

Hello Henry,

Nice to see you there - that is a very good observation re: money inflows to the New Zealand real estate market. It is very difficult to get reliable stats on this. In the short to intermediate run, all that matters is capital flows. For a country like New Zealand, it basically subjected to the whims of foreign central banks and international speculators.

On a lighter note, I just checked and the sheep to person ratio in New Zealand is slightly more than 10-1 (43 million to slightly over 4 million)!

Best,

Henry

henry dribble · Posted: Fri Dec 02, 2005 2:48 pm Post subject: re life with the Hobbitts

on the lighter side, NZ is a wonderful place to live. I would love to live there part of the year. there is no road outside the urban centers with more than two lanes. there are more sheep than people, way more. the north has a very temperate climate and everything grows.
so I hope the currency plunges as I would love to buy a little spread by the sea. actually I am not the only one and I think the real estate market has helped the currency. perhaps that does not show up in the trade numbers?
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henry dribble

HenryTo · Posted: Fri Dec 02, 2005 12:49 pm Post subject:

Victor,

If you're really interested, you may want to contact the folks at Man Financial (the ones that took over Refco). Do they do business in Spain?

Best,
Henry

victor · Posted: Tue Nov 29, 2005 12:20 pm Post subject:

forgot one...

fact 6: Reading the report, one feels that their Central bank is more than afraid about a NZD sudden drop.

victor · Posted: Tue Nov 29, 2005 12:16 pm Post subject:

I've been reading the report and...

In my opinion, to good to be true.

Facts:

1. Current account deficit of 8%

2. Net foreign liabilities > 80% GDP

3. Most of the deficit is financed through Eurokiwis and Uridashi (who chose this names?), this is, bonds issued in NZD by offshore institutions for foreign investors. The maturity of this bonds ranges from 2-3 years. Issuance has grown exponentially during 2005. Therefore maturities will grow exponentially from now to 2008. The roll-over (renewal) of those maturities is uncertain.

4. The past: when facing similar numbers in 1997 and 1999. The kiwi went from 0.70 to 0.50 and from 0.55 to 0.42 (aprox.). Now it's standing about 0.7x NZD/USD. The case in 1999 coincided with one substantial maturity deadline of eurokiwis and uridgkfggkxhtls. 1997 was due to the asian crisis.

5. Credit spreads have been widening, but most of this widening is due to a fall from government bonds rates (its supply has been falling due to fiscal surpluses, so scarcity is the word) rather than an increase in perceived risk.

Still have to read about their banking system.

Does anyone know a good forex broker? Wink

victor