New Zealand is set to go into overdrive – read between the lines!

New Zealand is set to fly over the next 18 months. Brace yourself as all the indicators are there.
Here is my thinking around why ...

  • Auckland and Christchurch house prices have lead the way as they have in past recoveries.
  • The Reserve Bank is smartly adjusting LVR (deposit %) on housing rather than pushing up interest rates which would take the growth out of the economy.
  • Interest rates will rise, but they will be held down as long as possible. In fact I think they just keep threatening a rise to keep us in check.
  • Fonterra's increase in payout will see an additional $4 billion hit the economy.
But wait, there is more ...

  • With a multiplier of 6 (that is a calculation to show how the money goes round and round) – that balloons out to a $24 billion boost!
  • Sheep and Beef, kiwifruit and avocados are also looking strong
  • Banks are back competing and actively looking for business and taking on more risk and doing deals.
  • We have Bill English with his hand firmly on the country's chequebook with stand out results. He and we (NZ) are recognised worldwide as one of the fastest economies to recover from the recession.
  • We have got good growth in the economy
  • On a worldwide scale we are politically very stable.
  • We have vast reserves and resources of minerals and particularly petroleum products. Did I hear somewhere that we could be the next Saudi Arabia of this world??
  • Our main export income is based on a renewable resource – grass! Don't laugh, it is true. Every year we grow grass, convert it to food and other products, and sell them - only to do the same again next year.
So, there you have it. Look out because our economy is going to move up a gear and yes farm prices will increase and yes inflation is arriving faster than we realise. Watch out for cost increases and try and hold the profit in your business and avoid consumption spending. Enjoy the ride and ensure you make good logical decisions.


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