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for our next hour. This is a Weekend Collective and now it's time for smart money and of course what we're going to discuss this before introduce our guest is well, the Reserve Bank cut the oc arbor another fifty basis points and the week that's just gone, homeowners and buyers like being eagerly watching for the announcement to a lot of predictions. Most people actually guessed it was going to
be fifty points. I guess twenty five, just to be contrary, because I thought that the inflationary pressures that were happening as the result of the Trump presidency might actually temper predictions. Although the Reserve Bank Governor Adrian Or has sort of tried to quell expectations of any major cuts following this anyway, So what's behind it? But we want your calls as well on O E one hundred and eighty ten to eighty. And the simple question is, when it comes to the
ocr what does it actually mean for you? Is it something you've been waiting for? And if it does, if it is significant, what action do you end up taking on the back of that prediction, on that sorry, the back of that cut in addition to that, do you reckon that's it? Or do you actually think, well, I'm asking for your predictions basically, do you think it'll go much further? And I don't think it will go down much further at all, because they'll probably be worried about
Actually I don't know. But that's the whole point of this hour. We have a chat about the Reserve Bank rate cut and implications for it. And joining me he is director and fixed income and currency strategist at Harbor Asset Management, is Hamish Pepper. Good afternoon, Hi, Tim, How are you not too bad? That is quite now? Just explain again because I know I've asked this before, because
you've got a lengthy business card discriver occupation director. That means you're a director at Harbor Asset Management, fixed income and currency strategist.
That's right. Yeah, yeah, our interest rates going up or down? Is the currency going to strengthen all weekend? That's the kind of stuff I'm into.
And did you bet correctly that fifty basis points cut from the Reserve Bank was what was going to happen? Or were you more conservative or optimistic?
Yeah?
No, we were with the large group that thought fifty basis points was the most likely thing. I mean, Adrian did Adria and all this is the Reserve Bank of New Zealand governor did an unusual thing in November when we last heard from them prior to this meeting, and said in the press conference, look, my base case is another fifty in February. So unless there's anything, you know,
really meaningful, that's what we're doing. And so with that, the market, as well as most economists just sort of move to that view.
He actually had a comment didn't ever crack at the banks, saying I expect you to this to be reflected. But I wondered if that was a bit unreasonable given that he had signaled the cut the banks had sort of predicted the cut, and so some of them sort of had based maybe some of their interest rates on this anticipated announcement, wouldn't they.
Yeah, that's dead right. I think the market has for some time now pretty well anticipated this, this easing cycle, this succession of interest rate cuts, and of course that's why perhaps you haven't seen mortgage rates move as frequently lower or by as much, because of exactly your point to the market had anticipated this a fair few months ago, and that was when we really started to see, you know, some of the larger reductions and mortgage rates was pre Christmas.
I actually noticed I bank with the A and Z. But I noticed when I went to because you can on interest stock cut at in Z has a summary of all the different interest mortgage rates, and I did notice the rate that stuck out to me was that A and Z was offering four point nine to nine percent for two years, which which does signal, doesn't it that they think that there might be a little bit more cutting going on and they've priced that into their two year rate. What do you think?
Yeah, I think that's reflective also of what the sort of financial markets have in terms of their anticipation, which is roughly three more twenty five basis point rate cuts this year, So I think I think then that two year rate is broadly reflective of that.
Soy, did you say you're anticipating three twenty five point cuts this year? Three more so point seventy five.
Yeah, that's that's the market. It's it's a touch less than that. But you know, if we deal with round numbers, that's that's what they're saying. They're pretty convinced about. And again with the help of Adrian at this most recent press conference, they're pretty pretty convinced about April and May, so a twenty five at each of those and then the third one probably in August, the muneted policy statement.
We get then, but then that is it in terms of from the financial markets point of view, that that's the end of the using cycle, which then means by the time we get to that point, you know, that's the bottom and interest rates when it comes to things like turn deposits and mortgages.
I know we've talked about this, but I do want to back the back the truck up a little bit on what we expect. So you've talked about the markets and the anticipations, but three more twenty five point cuts, but it was only it was less than a year ago that Adrian or also said that we're not they weren't going to be cutting points until sometime this year, and before then we what have we seen pruned off since he spoke about it more than one and a half percent or something, or.
In terms of the easing.
Cycle, he said, we're not going to be easing things until next year, and then all of a sudden he was cut, cut, cut.
And then we've had one hundred and seventy five basis points. Yeah, seven five percentage points. Yeah, I mean, I think if I mean probably you know, with the benefit of hindsight, and you know there'll be differing views among the economist
community in the media. But that may monetary policy statement in the middle of last year, where they were contemplating perhaps the need to lift interest rates even higher, just does now when we look back on it, look really quite strange, because what we know now is that was actually a point where the economy had taken a really really sort of bad turn. We stepped into that quarter Q two of last year, we dropped i think a
full percentage point in terms of output. Then we followed that by another one, which was actually a little more so that that middle part of last year was a real, real, sort of hurtful moment for many businesses. And to think that the Central Bank at that point was contemplating even more restrictive interest rates, yeah, it looks it does look strange now.
No, there was a reason to asking that was because we have the point is a year ago, the predictions were totally wrong, right, okay, And I think actually, to be honest, a lot of people in the financial markets were like, he's going to be cutting before the end. They saw that he was probably wrong he was saying. But the reason I asked that was because now people will if we're talking about this general certainty that they're going to be three more cuts of twenty five percent.
Obviously you're not giving financial advice, But the vibe I get is these predictions are safer to rely on than ones we might have seen a year ago.
I mean, I think what's going on is you probably have a more normal set of circumstances for the Reserve Bank of New Zealand to be dealing with, for forecasters to be dealing with. And don't get me wrong, you know there's still going to be eras and people are still going to get it wrong, but the margin of those errors when you're in a more normal environment. And what I mean by that is, you know, we're not dealing with a big COVID supply shock for example. No,
that's doing stuff the global supply chains. Right, this is just really an economy here in New Zealand that is now feeling the effects very much of those higher interest rates. And it's then now a matter of okay, how quickly can the Central Bank normalize those and perhaps maybe even needs to put them at a level which is helpful, you know, provides some stimulus to the economy. And I
think that's where the debate is. Are less about, you know, the seventy five basis points, the three twenty five basis point cuts, but perhaps more more about is that going to be enough given? And there'll be many people listening who will be saying wow, you know, like I know people or I've experienced myself, you know, ongoing job losses or business closures. So you know, it does beg that question whether interest rates will get low enough to actually provide that help.
Okay, just one other, because we've got a lot to talk about on this What about for people who follow international news and we have a we have a change of government in the States obviously, and Trump Trump is unpredictable. I don't think anyone who can argue with that. We've got this uncertainty around what's going to happen with the peace process in Ukraine. We've got Chinese frigates, you know, behaving in this mischievous way off the coast of Australia.
How much. What are the sorts of things that would throw a spanner in the works. Maybe the most obvious thing is the question of tariffs and trade. When it comes to interest rates here, cashwits.
Yeah, I mean that's I think where while we might characterize our situation here as being you know, more normal, in one that we have perhaps more confidence in predicting, we're dealing with this really uncertain global picture for all
those reasons you mentioned. If we think about just tariffs, the main impact for US will be through the way that could lower global growth, you know, lower the prospects of our trading partners, particularly if it's something where you'll see retaliation to the US tariff, so perhaps from China, you know, from Europe. All that will do, from our point of view, is lower that global growth picture and make things a tougher environment for our exporters to go
and sell their products into. So I think that's the headline, which is it's not a particularly positive development on that front for US, but I guess.
But as a currency strategist, I can ask you this as well, how does it? What are the events you would be looking for when you as informing your view on currencies.
Yeah, I think that one is one where so in a more orderly version of events there which is where we have largely this bang about the US wanting to impose tariffs and maybe others less so, but that is then introducing inflation into their economy and lowering their growth because you know the cost of those imported goods is going up. You know, that's something which you would say, well,
we're going to look better. You know, our economy is going to look a bit better than one like the US where they're doing that, and that would normally be something I mean, you could say, well, our currency should perhaps appreciate slightly even to the US dollar. Now there's a butt coming. You're probably sensing that the butt is if it develops into all our trade war, you know, a global trade war that is not an environment that our currency does well. Then you know, we we need
the world to be feeling good. We need global investors to to feel good about funding us. You know, we need the rest of the world's the world's money, and if they start to feel uncertain, then that's usually an environment we're the key we weaken. So that's that's the kind of caveat to that.
Okay, I got one last question. Then we're going to move on, and because we do have a lot to cover. But when it comes to the cash rate, what is the This is a really this will sound like a sort of dumb over a simplified question, but I'm going to do it anyway. What generally, so if the cash rate now is three point seventy five, what sort of what's the difference between a cash rate and what we can expect the banks to be offering sort of between
six months and two or three years. What's their type of how do they how many points do we usually see as a markup? If I can put it crudely, Yeah, it's a good question.
So what you would want is you say, you say someone's thinking about a six month term deposit rate, you know, what should I expect you know, that to be for a given cash rate setting. The big thing is about, obviously what we've just been saying, right, what is the expectation for the cash rate moves over that period of time. And so at the moment you've got this situation where embedded in a six month rate is these three or
are these three twenty five basis point rate cuts? So it's it's not an easy thing to sort of get get a measure of. But you know, I think if we're talking rough numbers, somewhere in the region of you know, one hundred basis points or for deposits a percentage point to Yeah, that's right to wear term deposit rates are.
I don't think that's what about for mortgages?
Mortgages it's usually a bit more. Yeah, So you're kind of with your reference to the four ninety nine. But if I look at, say, like that's a two year rate for an Z that the one that you mentioned, and so if I look at where wholesale rates are in the market right now, they're about three sixty. Yeah, So you know, you call that one hundred and forty basis points one point four percentage points above.
So if the cash rate with three percent, would would people be expecting that they might be able to see even better interest rates like four point twenty five four point five percent sort of thing.
I think it depends. I think it depends on It's that forward pricing, right, So the market I think has got itself to a point of pricing the using cycle well in terms of what the vindt is communicated, I think you know, what we're seeing from the mortgage rates
side is broadly reflective of that. Where I think there is more room and many many commentators have talked about this is that term deposit rate have really lagged in terms of the pace with which they've fallen through this easing cycle FES.
So probably why Adrian told every went off.
Yeah, I mean it's an interesting thing because you know, this is banks actually being kind. This is this is then giving you a return on your savings which is slightly out of line with these other rates we've been talking about in terms of wholesale rates and what mortgage rates have done. So this I think more is banks wanting to make sure they keep these deposits and keep
these depositors. You know, the people that sit behind them because you know, that's a very very important source of funding four banks.
Yeah, I keep forgetting I for kept forgetting that. On the other side of the scale, there are the savers who who we all remember when interest rates were through the floor, people were like, I'm not getting anything from the money. Basically you're lucky for you get points seventy five percent. So I forget that. There's that side of it, isn't it. And so that's the banks encouraging them to keep their money with them.
Yeah, that's right. And you know for those savers, you know, they've just started to now experience sub five percent term deposit rates. I think that's probably been the latest development for them. And so I think with that, we for example, are experiencing maybe a little bit more inquiry. You know, what, what can you do in the case that you're not happy with turn deposit rates? And which is what we
saw obviously in COVID. It was very fast that that fall and those those deposit rates, and the real change in kind of behavior from from savers was when they went through one percent time. I don't know if you remember that, but you know, six month term deposit rates went through one percent and that was for so many people, that was the final straw and they said, look, I've just got to find something different.
Then get into the shares or something. Yeah, hey, well just hold the Hamish will be back in this moment. We're with Hamish pepperes as a director and fixed income currency strategists at Harbor Asset Management, and we're going to actually discuss what this means for whether, in fact, where the money where the cash rate's gone, is that stimulatory for the economy or do we need to cut further
before we really see something some significant difference there. And if you've got any questions for Hamish, give us a call. I wait, one hundred eighty ten to eighty. We'd love to hear from you. We'll back in just a moment.
Not taking Marvel singing Sweeden Home Alabama.
Sum let's right back. We can collective this is smart money. My guest is Hamish Pepper. He's fixed income and currency strategists strategist at Harbor Asset Management. Just before we got to our calls, Hamish, the question that the a lot of people would consider is that cut in the ocr is it something that is viewed as being of a stimulation to the economy of we or is we not there?
No, we're not yet. So the way we talk about it is that there's less sort of restriction being imposed on the economy now, but there still is some. So that that's part of the reason why the rbn DID themselves are communicating in their forecast that they're going to keep going, they're going to keep cutting down towards three percent later this year.
So why is three percent seen as being if we get there, which we're assuming we hopefully will by the end of the year. Why is that scene as being stimulatory as opposed to not at the moment?
Well, it's interesting, actually, in their view, it's not necessarily a stimulatory once they get to three. There's a there's a big range of what they call neutral, so a neutral cash rate or a neutral interest rate. We're basically the entrant rate is not doing anything. It's not adding to activity, it's not detracting from it's not adding to inflation, it's not detracting from it. And there's sort of this you know, sort of magical, you know, happy place, but
really there's huge uncertainty around exactly where that is. And so I think what they're doing is saying we're going to step reasonably quickly towards that and look at what the economy is doing, because that's one of the best ways to know, you know, what your policy settings are
actually are doing. You know, are they you know, becoming stimilitary And it might be the case that they get to three and they start to see a real turnaround an activity and there you know, it answers a question for them, But it also could be that they need to.
Do more, Yeah, because I guess you know, they get the number of what you can borrow and the cash rate, and then you look at other factors that of course set the stimulat trees, such as attracting overseas investment. And I mean it's interesting the balance, isn't it as to what the magic sort of the sweet spot is.
Yeah, totally. And I think the thing that's holding them back. A question we often get and maybe there's some people listening who have this this question in their head, is if they know that three percent is where they're heading, why not just get there today? You know? And Adrian has been that kind of governor in the past to you know, basically if his economics department or the Manata Police committee are telling him something, then he'll just do it.
But the niggly bit is that inflation from the domestic standpoint, you know, that sort of non tradeable stuff is still a little high.
Is there anything in once but and twice shy because he has been sort of a bit more gung home with things and he kept it too high. And so does do you think it's affected him? Just wanting to be easy as she goes with you know, let's just turn the turn the tiller slowly.
I mean it's possible. I mean, it is possible. I think there's a committee which is.
Sounds like you think it's not really realistic though possible.
But yeah, I think it's more the committee speaking honestly. I think you've got a range of voices there and it's working well because it's highlighting, you know, the risks that you run if you do just you know, cut one hundred and fifty bass toward get to three percent.
Yeah, get a bit of emotionalist area and everyone suddenly cashing into the getting into the property market or something and pushing it, pushing it in the way we don't want to see it going.
Well, it's a scenario exactly.
It's take some calls.
Shane, Hello, oh hi there, I just had a question for Hamish, you know, to do with the investors. You know, we talked about, you know, the interest rates for the investors, for the savers you know, to benefit and it's important for the banks to retain them. My question was more to do with the banks boring from overseas.
I mean, I believe the New Zealand banks are in pretty good good shape health wise and you know, for profitability wise. So they must be getting some sort of a discount because of the credit worthiness when they bought from overseas, and so the cost of money or from overseas would be cheaper. And would there be any truth to that?
Thank you, thanks Shan.
Yeah, I mean, yeah, it's a good question. So it's important to note broadly that while deposits usually from retail and households, is the majority of the way that banks fund themselves here in New Zealand, the residual which is called it, roughly a third comes from wholesale markets. And yeah, as you point out, those wholesale markets that banks can access are here in New Zealand. And so you know,
the funds that we manage, the fixed income funds. We will buy bank bonds that are issued here in this market, but of course, yeah, they can issue overseas as well, and they have good support from those overseas investors and the likes of the US and in Europe, and that is something that does keep their overall cost of funding down because also, as the caller mentioned, our banks are in really really good shape, well capitalized, and there's yeah,
the default risk is relatively low. So yeah, it's an important mix, that mix of funding which then allows them to yeah, obviously ex end loans to us here in New Zealand.
I get this question a bit about does I must just as a sort of non sequity question really, but it's around currencies and uncertainty of cash rates and dollars and all that sort of thing. How does the gold Does gold reserves around the word world play any role in currencies because the gold standard was abandoned decades ago, wasn't it?
Yes? And I would say no is the short answer. The interesting thing with gold more recently has been perhaps a re emergence of concern about inflation, particularly in the US. You've probably followed that that story, and maybe many people
listening have as well. That we were at a point where we just felt that inflation was very much solved in the US and that the US Federal Reserve would be able to keep cutting similar to what we've done here, but probably just prior to Christmas that all started to look a little shaky at the inflation progress back towards two percent, they had the same target as we do stalled, and we had the Trump obviously the Trump presidency confirmed with the election, and so there you saw some of
these alternative assets, I suppose you can think of them. Bitcoin is another one where people were looking for things that can store value. They don't give you an income, but they can store value being being sought after. So I think gold is more in that camp of an alternative asset. It doesn't give me any income, but it might give me the ability at times to protect my capital.
Yeah, I mean, Gold's not your bag, is it in terms of tracking the value of that. But people often go on about our gold's the best place to put your money in things, And I think what I understand is that actually it is one of the slowest growth sort of assets. Long too, are you better to be in the share market or have someone managing your money and choosing the right funds rather than stick it in gold.
Yeah, I find I find two things with gold difficult. One, I don't have a good framework for thinking about how to determine its price, so that that's a tough thing. And part of that. The second thing is part of it relates to that, the fact it doesn't provide an income. You know, for most of the assets that we deal with and think about, you've got an income stream that you can think of when it comes to valuing the ownership of the asset, and so gold gold doesn't have that.
So I often just put it in the too hard basket in my head and am thankful that I'm not a gold analyst.
Yeah. Just on the inflation, where are we at with inflation now?
Oh, we're all at a headline level. We're pretty much at target. We're two point two percent in headline, which of course is what the RBNZ target.
So what does that mean in headline?
Oh, headline is includes everything. And the reason I'm saying that is just going back to that discussion we were having a few moments ago that within this overall you know, consumer price basket, the basket of goods that's supposed to represent what everybody you know buys. Of course that's an
impossible thing to do. But if within that basket you've got things that will be imported for which we've seen, you know, actually outright deflation, the prices of those things overall have been falling after that huge impact from COVID, you know what, which.
Means that we must be domestically generating a bit I guess are we?
Exactly four and a half percent on an annual basis was the last reading for that domestically driven inflation. And so while you bring all of that together and you get two point two percent, which might as well be you know, two, and therefore job done. The RBNZ look a little deeper as they should and say, well, hold on, the stuff that we can control and policy has an influence on doesn't look to be quite back to where
we like it. And that's the reason why I think the biggest reason why we are seeing this gradual approach towards that neutral three percent level rather than anything quicker.
I've got one more question before we get the break on that, would we always be aiming to get out domestically, you know, the inflation that we've got control over the domestically generated inflation, would that number or that goal always be the same regardless of what inflation we're actually importing.
Really good question. Yeah, it's a really good question. I think. I think instead of there being too much of a focus on where that the tradeable inflation may or may not be, I think because they know that that can move quickly, right, you know, the exchange rate has a huge influence on it, and the exchange rate can move a lot, you know, in a day, a week, a month, you know, So I think what the focus is naturally going to be is more on the domestically driven inflation.
But the wrinkle there now which hasn't been there so much in the past, is that within this part of the basket you've got a whole bunch of stuff that monetary policy and interest rates just can't have much impact on. And that's the stuff we've talked about before. You know, local authority rates, council rates, insurance for example, which are
quite big weights in the basket. But you know, moneture policy at the moment is that that's not having an impact on those Those are going up for these big structural reasons, you know, global reinsurance costs as we have all these natural disasters and so on, and then this huge infrastructure need that counsels have which is forcing rates up by you know, double digits each year. So that
that's an interesting, I think question going forward. Will the RBNZ look through some of those things and be happy to continue the using cycle knowing that they can't control that stuff or not? You know's kind an ongoing.
Question, right Look, we're going to take a moment. We're going to come back and see and explore what does this actually mean for mortgage rates? And I guess on everyone's mind if you're someone who's thinking about buying, you're thinking about investing in the property market, what does that actually mean for the property market? And with these falling interest rates? Are we going to explore that a little bit more with Hamish Pepper in just a moment. This
is smart Money. We'd love your cause you've got any questions for Hamish, then jump on the blower eight hundred eighty eighty. It's twenty one to six. Yes's welcome back to smart Money on the Weekend Collective. My guest is Hamish Pepper is a fixed income and currency strategist at Harbor asset management. I finally meant to get that out because the's quite a few syllables on that job description there. But Hamish, I actually I did. I did make it.
Let's say I misspoke when I was talking about gold not being that flash. I was comparing it to if you just what had happened with us stop with the stock market, basically, because of course, if you did buy gold twenty years ago and sat on it, you'd still be better than having it in the bank, isn't that right?
Yes, I mean, well, I suppose it depends exactly what you were being paid by your bank to have your money there. But you know that sounds about right.
Yeah, yeah, Now, I just got picked up on a few texts as somebody saying it was too gold was seven hundred and eighty and two thousand and six and now it's twenty eight hundred, which is still not a bad rate. I think that if you'd stuck your shares and there, I think there was various funds that massively outperformed that. Though haven't there been over the last decade or so.
It's a good question. Yeah, I'm just pulling up the chart in front of me now, yeah, so yeah, what are we We Yeah, we're pretty much more than doubled and in ten years. Yeah, let me get back to your PEPs.
I can't remember. I just remembered in a conversation somebody saying, well, okay, gold is all very well, but if you've stuck it in this fund over the same period of time, you'd be about you'd be two, two or three times better off. I can't I think it was something like that. Anyway, Look, let's take some calls. Jim, Hello, Hi there, hire you go.
Did you give my question?
No?
I said, what proportion of New Zealand banks is owned by overseas interests?
Oh?
Okay, if you mean if you count Australia as being an overseas interest, it would be indeed, most of them. Yeah, that's the big four taken out as they're all Australian banks, and then you're left with the likes of obviously Qui Bank, Cadani, Savon's Bank.
Is that because you're concerned, Jim with the profits going overseas?
Yeah, And the second part of the question was what portion of the profits goes overseas well?
Based on the ownership, it would be I would say, without without knowing before, but I'd say it would be the majority.
Yeah, there's something really wrong with their banking system, isn't there.
Well, I guess the problem is why we don't have more New Zealand banks Hamish. I guess I don't know that that's the thing. We've got plenty of competition, one would argue, because we've got quite a few banks. It's not like we've just got two. What do you what do you? What's your response Hamus to that?
Yeah, I mean, I think this has been a kind of feature of the discussion for some time now. I think I think when Kiwibank came along, there were hopes there that perhaps with more capital provided from the government, that Kiwi Bank could be a real competitor to the Aussie banks, and unfortunately that just hasn't quite played out.
So yeah, I mean, I think we're left probably with a situation where, you know, the profits that are being earned are commonly under scrutiny and for many, you know, commentators, they feel that they are too high because of a lack of competition. But from a system point of view, the banking system here works very very well in terms of the way it can provide lending to those that needed and then obviously take deposits from those that have saving. So yeah, I think, you know, we should be not
grateful is probably for the right word. But you know, there are countries in the world where banking systems don't operate so well, and for example, countries where you are for to borrow in foreign currency, which is not something that we have to consider. And so what that can mean is that you can have, say, for example, a mortgage which is denominated in a different currency, and therefore if your currency weakends against that one, then all of
a sudden, your mortgage becomes a whole lot larger. And so yeah, there, Yes, there are some perhaps issues in terms of a lack of local ownership of banks here in New Zealand, but there are some real benefits to the current structure that we have, and that's it. That is a really big one.
Yeah, I mean, that's probably something we can spend a whole hour on just talking about the nature of ownership of our banks. I did a quick Google set. You can tell me how wrong I was on this. By the way, Hamish that back in nineteen ninety the price of God was four hundred bucks basically, and now it's three thousand bucks, I think, whereas if you'd stuck your money in the Dow Jones industrial average in nineteen ninety to thousand, six hundred dollars turned into today around forty
three thousand. So that's that's you know, that's right.
A similar answer. Yeah, yeah, so you're almost something like twenty times your money, yeah, in those global equities.
Or twenty times in money versus eight or nine times in money. Yeah. Okay, good. I'm glad I wasn't completely wrong on that, because I don't like saying things and then people call him out and going, Tim, you don't know what you're talking about, which possibly is true. But anyway, I kind.
Of like that we did that all real time.
That was Oh yeah, look I've got the got the old fact checking Google search. It serves me well in the we small hours on talkback. Hey, look, we've sort of don't have a lot of time to explore this. In fact, I'll tell you what, We'll take a break and we'll come back Hamish and we'll just have a chat about you know, the impact on mortgage rates continuing to fall and while we think is going to happen to the housing market. So we'll talk about that in
just a moment with Hamish Pepper. He's a current see and fixed income strategist at Harborrastic Management. This is news talk, said b. It's just gone twelve minutes to say, let's welcome back to the weekend collective. Smart man. And I wonder how many people listening to that what that song would realize. It's actually from an old musical called Fiddler on the Roof, but it's been you put a funky beat to it and the way you go anyway, Hamish
Pepper from Harbor Rasset Management. Actually, just because I'll just get your quick reaction to this text and then we'll see if we can squeeze something about the housing market. It says high time. I get a bit tired of the bleating about overseas ownership with the banks. We sold them to the foreign banks. It's our own fault. People chose not to invest themselves and just need to stop going on about it. From Anthony, there is something about
that text that kind of appeals to me. You know, we complain all the time, but what are we doing about it? Nothing?
Yeah, I think there's probably a broader point that comes out of that too. Where what we're dealing with here in New Zealand is, you know, there's decades of obsession with housing has been you know, the number one asset
you know, to invest in. Has meant that we've we've got pretty shallow capital markets, you know, so our share market and our bomb market's getting deeper, but generally that's the price we've paid for that obsession has meant that, Yeah, there's there's just not a lot of capital out there for businesses to fund themselves with.
Well, let's touch quickly. I know we've left it quite late our run on this one. But the housing market, because look at that does feel it just intuitively that you know, we're not going to see any sort of rushing to sort of people buy multiple properties with these these cuts, that we've got other issues at play when it comes to the market, haven't we.
Yeah, it's been really interesting how perhaps disappointing the reaction from the housing market has been to these cuts and mortga trade. Not disappointing of course, if you're a new home buyer thinking of getting into the market, you know, this has been probably quite a pleasant surprise. It appears what's going on is that this massive drop in our population growth is generally it's been people leaving, which has
driven it more than the lower arrivals. But you know, that's having quite a big impact on housing, and it happens with quite a lag, so it will continue to have that downward force on the property market. And of course we mentioned earlier about the fact that we are still seeing job losses in the economy and so unemployment in the unemployment rate is something which matters a lot
for the housing market. So interest rates are fighting against those downward forces and will probably continue to do so for another couple of quarters at least.
And of course when people think them traits are getting lower and they think, well good, there might be small bars in the market. Then of course more people put their properties on the market, I hoping it's going to move, and then there's more supply. So the old kensy and economics kicks in, doesn't it supplies matching the demand.
Well, and that's been the most interesting thing. We probably all got, maybe initially a bit excited about what this meant that sales were picking up, But then we started to look at what the prices were for those sales, and you know, they weren't particularly impressive. So this is the housing market that feels quite static. It's got those opposing forces and probably we'll feel that way for for a little while while longer.
Yeah, Hey, ho, much time, fliers, mate, We've got we've got to wrap it up there, just quickly. We've got about a minute to go. What's so, what's what are you focusing on in your in your role at the moment. What are the sort of things when you hit the desk tomorrow, what are you going to be looking for in terms of what's what's driving your week?
Well, I think number one is this US economy term. I mean, we we touched on the Trump factor, but there's also another bit going on there, which is it finally might be slowing down to being this unbelievable sort of exception. You know, this ongoing resilience that we're seeing out of the US. It looks like maybe there's a few cracks appearing, and that has huge implications for global markets. We touched on equities, their share prices, but also for bombs.
You know, they've got a heap of room there for interest rates to fall, and if that starts to be something that markets anticipate, we will inherit some of that, so there'll be number one job excellent tomorrow morning.
Good no rest for the wicked. Hey, great to have you on the show, Homush really appreciate it. And if people want to check out the work you guys do harbor asset dot coutter at inn z.
Right, that's the one. Thanks very much, Tim.
Okay, and thanks for your company everyone. Thanks a great show. Thanks my producer, Tyra Roberts. We'll look forward to your company again, same time next weekend and Sunday It's six is next to Following the News, It's three minutes to Sex News Talk sed B.
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