The sovereign debt crises in the US and Europe will likely push up the cost of New Zealand banks' funding, although the banking system here is well placed to handle the fallout from last week's global market rout, BNZ CEO Andrew Thorburn says.
Speaking on TV3's The Nation programme on Saturday, Thorburn joined ASB chief economist Nick Tuffley and NZIER's Shamubeel Eaqub in saying the latest global economic problems were not on the same scale as those following the collapse of Lehmans Brothers in 2008, which froze credit markets for a number of months, putting huge pressure on NZ banks' funding lines.
All three expressed concern about New Zealand's low savings rates, with Thorburn indicating he would welcome a move toward forcing people to save a certain amount of their income - an idea doing the policy rounds in Parliament at the moment.
Friday night's downgrade of the United States' credit rating, and turmoil in Europe as market attention moved to Italy, wouldn't be a 'Lehman's II' moment, although it was likely the cost of funds for NZ banks would rise, Thorburn said.
"There is still uncertainty, they want a higher risk premium because they're not sure what's going to happen. So it'll cost us a bit more, but not significantly more at this point," Thorburn said.
"For many years New Zealand's been running a current account deficit and that means we've had to fund that, and we funded it through mainly borrowing from overseas. Now, since the GFC that has improved significantly, because New Zealanders and businesses have been saving. The government moving its own fiscal position to be stronger has also required less funds, so that’s good and we are borrowing, banks in New Zealand are borrowing now less from overseas, point 1, and point 2, longer term funds," he said.
"I think we're absolutely in a better position to day than what we were three years ago. Now, what I'm suggesting is the next couple of years high levels of uncertainty and flux. Let's not panic, let's just get the basics right, and we're in a good position as an economy, but we need to do more to generate more savings in New Zealand than what we're doing today, otherwise we won’t be able to fund the growth of the economy."
More soon.
13 Comments
Well hopefully you will be savings more....the basic pension is very basic....
Right now I see a compulsory saving as a way for the Govn of the day to pillage your bank account and kick the problem down the road, spend your savings today on what they want....and well if you dont have any tomorrow it wont be their problem. So I expect that NZ pension funds will be "encouraged" or forced to buy Council, Govn and NZ private debt as a "priority" In which case you will probably find that your savings will be less than you expect or worthless.....I also think we will see huge alternative fuel projects kicked off within 5 years that will need huge / massive financing, this is where I expect the bulk of our future disposable income to be commited....
Simple really you/we enjoyed 40 years of indulgence in over energy and resource use and the next 40 has been committed as debt.....even though it wont be there.....Think of it as the Great Austerity....we deserve it.....our kids dont....but they will wear it.
regards
I looked at that and I'd need a small fortune I dont have....funny thing but my calcs say I wont be too badly off....not great, but I just dont earn enough to save much.
Seeded, you missed GE criops which suicide, so you might as well eat them.....of course if that suicide gene ever gets out there wont be anything to eat.
That with a depression, decades of debt, no jobs, too few workers, peak oil and AGW will just be the icing on the cake.
regards
So as every day passes we are being even more screwed over you mean....
Extortion, not just credit rating agencies, banks, big corps, foreign investors....vested interests...all fighting to retain or grow their share of the shrinking pie.....what they will do of course is shrink it further and faster than needbe.
regards
I have $10K left on my mortgage (gone in 6 weeks) and our household earns $8-9K per month after tax. Why should I need to join a compulsory savings scheme, I will automatically save $4K per month anyway.
My biggest delima is where should I put this money. I do not want so called 'experts' having a bean of this to invest on my behalf. Maybe initially interest rates for savers may increase as money harder to get from overseas.
Maybe invest in NZ assets when they come available since they are infrastructure? Looking at buying 2-4 oz of gold as well as a hedge.
I will still grow my veges (GST free:)) and not spend like a drunken sailor. I will need to invest $25K in my house in the next year to tidy it up as well.
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