News in brief: RBNZ will cut to 2% in 2016 says ASB

by NZ Adviser25 Nov 2015
RBNZ will cut to 2% in 2016: ASB  
ASB Bank has changed its view on the bottom-rate of the official cash rate, expecting the Reserve Bank to cut to as low as 2% in 2016, due to persistently weak inflation pressures. 

The bank is still calling for a cut in December, but has also put two cuts down for June and August next year as unemployment rises and the for the fall in the NZD to be less inflationary than the RBNZ expects, it stated in its Business economic report this week.

“It’s important to note, low inflation is a global problem. The RBNZ’s dilemma is not unique – everywhere central banks have been forced to cut rates to unprecedented levels,” ASB Senior Economist Jane Turner said in the report. 

“And to be stingy with rate cuts when inflation is still barely positive is a risky strategy. We don’t think the RBNZ will tolerate that risk and hence we now believe a 2% cash rate is now the most likely outcome.”

The bank says the OCR will eventually return to neutral (which it views as currently around 3.5%) and sees that process commencing from mid-2018.
CEO of Sovereign resigns
Symon Brewis-Weston has announced his resignation as head of Sovereign after more than two and half years.

“During his time at Sovereign, Symon made a significant contribution to the business, in particular turning around declining customer numbers to growth and increasing the focus on working with distribution partners, as well as addressing the complexity of legacy systems,” said Sovereign Chairperson, Gavin Walker.  

“While we are sad to see Symon go, Sovereign has a strong and experienced executive leadership team who will continue implementing the strategic plan we have in place - it is very much business as usual.” 

Brewis-Weston’s new role will see him head up FlexiGroup Limited in Australia. 

Sovereign is currently in the process of recruiting a replacement Chief Executive Officer.

Underground Chinese bank impact may have reached Auckland 
Chinese authorities recently have broken an underground Chinese bank that's alleged to have assisted people in getting $64 billion out of China.

There are now concerns that the underground bank may have contributed to Auckland's soaring house prices, according to NewstalkZB.

Andrew Kelleher from JMIS told Rachel Smalley there's a belief that these outflows have contributed to high real estate prices in a number of cities, saying that although it is yet unknown whether Auckland has been affected, it would be naïve to think that it hasn’t. 
Nelson home values on the rise

Residential property values in Nelson have increased in value by 8.7 per cent, according to the latest rateable valuations from the Nelson City Council. 

Recent revaluations of the city’s rateable properties has been undertaken by Quotable Value, on behalf of the Council.

“Nelson residential properties have increased in value by an average of 8.7 per cent, which shows how strong our housing market is,” said Mayor Rachel Reese.

“I’m not surprised more people want to live here and are purchasing property.”

“At the same time, while the new valuations are in line with national trends, which have all shown increases over the past three years, Nelson property is still much more affordable with house prices below the national average.”

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