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16
FEB 17

On the Land February 2017




Fair bit has happened since my last visit, a change of Prime Minister, an election date, and we can look forward to a change in Reserve Bank Governor. A the end of all certainties with the inauguration of Donald Trump, it's a pretty heady mix for us all.

No certainties but a few guesses the we are likely to see a resurgence of bilateral trade agreements rather than more multilateral deals like the Trans Pacific Partnership or Transatlantic Trade and Investment Partnership, or even a walk back from North American Trade Agreement.  Heroic deal making is better bilateral - we will see.  

The Reserve Bank continue to look for inflation and talk of the "new" Debt to Income tool in their toolbox.  These have been around elsewhere in the past, they cropped up almost everywhere in the post war period and only started to fade with the adoption of the neo-liberal economic model.  Debt to income gearing really keeps a brake on house prices particularly if you are of the view that debt drives prices as opposed to the mainstream view the prices drive debt.  Without this gearing house prices soar to many times income with all the house shortage, housing, first time buyer problems that follow.  

For more on this aspect take a look at:

https://youtu.be/bTEBEjwKnVI   

My view is that inflation will remain subdued due to the level of private debt, something discussed in the link, and government will continue to hope things will reset without too much pain.  I think that will not happen and house prices must correct.

We seen the NZ$ increase of late, hurting exporters, we have seen trade thrown into disarray by the new American Executive, Europe is far from sable with Greece facing another set milestones: strangely at Davos China was the steading global influence - strange times.

The year has opened with firmer markets than a year ago, dairy payout in prospect has improved, the currency a little worse for exporters, trade a little shakier - policy responses will be important.

Housing, wage stagnation, automation, levels of private debt are major issues in the developed world - New Zealand has its own mix of these, they will not be addressed with more kicking the can down the road some long term strategic changes are becoming ever more pressing.

 

 

 


tags: debt, currency, housing, keen, trump, whitehouse
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