12 Reasons Why New Zealand’s Economic Bubble will End In Disaster.

I thought I’d repost Jesse Colombo’s excellent expose why our “rockstar” economy so predictably is doomed to fail. It seems appropriate that with the collapse of the dairy sector and the fact that this will drag other sectors with it we should read it again as a lot of Kiwi’s owe this man an apology!

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New Zealand’s economy has been hailed as one of world’s top safe-haven economies in recent years after it emerged from Global Financial Crisis relatively unscathed. Unfortunately, my research has found that many of today’s so-called safe-havens (such as Singapore) are experiencing economic bubbles that are strikingly similar to those that led to the financial crisis in the first place.

Though I will be writing a lengthy report about New Zealand’s economic bubble in the near future, I wanted to use this column to outline key points that are helpful for those who are looking for a concise explanation of this bubble.

Here are the reasons why I believe that New Zealand’s economy is heading for a crisis:

1) Interest rates have been at all-time lows for almost a half-decade

Ultra-low interest rate environments are notorious for fueling credit and housing bubbles, which is how the U.S. housing and credit bubble inflated last decade. New Zealand’s interest rates have been at record lows for nearly five years, which is more than enough time for economic bubbles and related imbalances to form.

New Zealand’s three-month interbank rate, base lending rate, and 10 year government bond yield are also at or near all-time lows. Like many countries that are experiencing bubbles in recent years, New Zealand’s low interest rates are a byproduct of global “hot money” flows from the United States and Japan, which have both had zero interest rates and quantitative easing programs to boost their economies after the Global Financial Crisis.

Low interest rates in the U.S. and Japan encouraged capital to flow into higher yielding investments in countries such as New Zealand, which led to reduced bond yields and an 85 percent increase in the value of the New Zealand dollar against the U.S. dollar since 2009. To combat the export-harming currency appreciation and bolster the economy during the financial crisis, New Zealand’s central bank reduced its short-term interest rates to all-time lows.

2) Property prices have doubled since 2004

Following the pattern of many nations outside of the hard-hit U.S., peripheral Europe, and Japan, New Zealand’s housing prices have doubled in the past decade, forming a property bubble.

3) New Zealand has the world’s third most overvalued property market

The doubling of New Zealand’s housing prices in the past decade far surpassed household income and rent growth, making the country’s property market the third most overvalued in the world. New Zealand’s home price-to-rent ratio is 77 percent above its historic average and its home price-to-income ratio is 26 percent above its historic average.

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3 thoughts on “12 Reasons Why New Zealand’s Economic Bubble will End In Disaster.

  1. Once you get into ‘stock prices’ that can be artificially manipulated by a certain monopoly sector……that also control the interest rates.

    This is how the farming community is going to be ‘shorn’ off their land. They got lulled with good returns initially and the usual gobbly gook by political forces, then they have the rug slowly pulled out from under them.

    Inpart they have themselves to blame, their prospertity cannot be totally removed and independent of the society in which they operate. A traditional National party position of safe guarding their financial interests in tandem with creation of a strong local market being able to help prop this up, was the trad. backbone essence of a real economy with adaptability.

    Certified raw milk dairy products would go along way to helping alleviate the multiple effects of poverty that all the unaccountable politcal corruption is having on the shape of NZ society & associated bottlenecking of shared life quality.

    http://www.stuff.co.nz/national/health/70615339/sugary-drinks-and-junk-food-blamed-as-kids-have-rotten-baby-teeth-pulled-out

    wat that old saying about he/she who leads into captivity, shall be lead, so goes the patience of the saints?

    • Maybe some NZ dairy farmers can be blamed for polluting rivers and the govt blamed for not asking them to clean the rivers. But the farmers can’t be blamed for the market rigging, derivatives market,or the price fixing in the dairy market or the current manipulations to take the land . Nor can they be blamed for the foreign buy ups of NZ dairy.
      Nik you said Fonterra’s “certified raw milk” is going to alleviate the unaccountable political corruption and multiple effects of poverty in NZ ? Really? How the heck can you possibly even believe that? The Crown is flush- it doesn’t need extra income from “certified raw milk” in order to end poverty or the political corruption (corruption which appears to be a mandatory character trait for Crown office holders).
      If the Crown wanted to end poverty today it could, but it doesn’t want that as it would lose control its power system and part with some of its tremendous wealth. In case you failed to notice the society set up by the Crown does not share .
      And that is the problem. In a money creating, price fixed economy and rigged market we see prosperity for the banking cabal and they turn around and inflict “austerity” .
      There never has been shared prosperity for the majority in the bankster’s pyramid ponzi scheme, it is set up to transfer the wealth to the top.
      http://www.batr.org/totalitariancollectivism/092610.html
      The Crown’s partner the Vatican also talks a lot about ending poverty while soaking in wealth, land and investments in warfare.

      What did the Buddha say “Three things cannot be long hidden: the sun, the moon and the truth”

  2. The economy is fantasy .The drivers are not understood by most economists and they ignore that the private banking cabal self regulates, set interest rates, creates money from nothing and dictates our political policy.
    The economy is as fictitious as is the idea of a “free market” when the oligarchy controls both. If the fictitious economy crashes (that is in their control) it is because they want it to use the chaos to usher in a totalitarian nwo.
    I believe it is important to understand the economy and money, that the Oligarchy are responsible for the bubbles, interest rates and the whole national economy- inflicting austerity on us for no reason but to try to usher in the totalitarian changes. Many people in the know say the NZ dairy industry is being set up from the inside to be taken over the markets (markets are not run on supply and demand principles) but price fixing by those that control resources and the market at the top.

    “The upper spheres of Wall Street overshadow the real economy. The accumulation of large amounts of money wealth by a handful of Wall Street conglomerates and their associated hedge funds is reinvested in the acquisition of real assets. Paper wealth is transformed into the ownership and control of real productive assets, including industry, services, natural resources and infrastructure.”
    Andrew Gavin Marshall, Global Research

    “I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people.”
    Reginald McKenna, as Chairman of the Midland Bank, addressing stockholders in 1924

    The disaster has already happened. It happens every moment we live in fear and believe the lies of the oligarchy’s economic system. The real battle is for mind control and if people believe the economic stories told to them they switch to a lower ‘survival” fear state of mind and into ignorance which does not serve them.The potential for prosperity for all is there -without the status quo =a fresh start from the heart.
    So the only problems in the NZ economy have been created & allowed to thrive by the Oligarchy supported by its nz govt ( which is nothing but a small group of greedy power hungry minions -a control tool for the Oligarchy):)

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