Latest / Best of Business / Shane Solly: Harbour Asset Management spokesperson on what Moody's downgrade of US Government debt ratings means

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Shane Solly: Harbour Asset Management spokesperson on what Moody's downgrade of US Government debt ratings means · Best of Business

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  Speaker 2: Shane Sally Harbor Asset Management is with us now, Hey Shane,
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  Speaker 2: good evening here, how I and well thank you. So
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  Speaker 2: what does this credit rating downgrade mean for investment markets?
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  Speaker 3: Yeah, so Moody's one of the credit agencies that talks
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  Speaker 3: about how good a lenda borrowers cut the US credit
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  Speaker 3: rating from triple A to A one. That's on concerns
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  Speaker 3: about ballooning US diton deficits. Now, they talked about successive governments,
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  Speaker 3: not the current government, but pretty much the current government's
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  Speaker 3: added to the fuel to the fire, and humers are
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  Speaker 3: trying to get extending tax cuts and they've got to
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  Speaker 3: fund those tax cuts with more funding. So we certainly
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  Speaker 3: see that trigger a bit of an increase in long
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  Speaker 3: term government bond yours. This is what governments pay to
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  Speaker 3: borrow to fund their activity. So well as you've seen
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  Speaker 3: those rates increase over the last week or so in
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  Speaker 3: advance of this funding extension for US tax cuts locally
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  Speaker 3: has had a bit of an impact, a little bit
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  Speaker 3: of impact on our market. We're seeing our new Zealand
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  Speaker 3: government bond yards go up to four point seven percent.
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  Speaker 3: It's a recent high. Our share market was down one
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  Speaker 3: point two percent. Wouldn't be surprised to see a bit
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  Speaker 3: more volatility tonight off the back of the credit rating,
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  Speaker 3: but it was coming. It was just a matter of time.
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  Speaker 2: A little bit of mixed economic data here back back
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  Speaker 2: here in New Zealand today. What's going to happen with
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  Speaker 2: the Reserve Bank cutting the official rates?
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  Speaker 3: Yeah, So we had a couple of data points today. Firstly,
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  Speaker 3: the New Zealand Services industry contracts. It talks about services
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  Speaker 3: companies how they're feeling. And it was week for third
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  Speaker 3: month in a row at forty eight point six, when
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  Speaker 3: the indexes below fifty eight, men's businesses are actually moving backwards,
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  Speaker 3: so it's telling us there's still pretty tough times the
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  Speaker 3: services set. Though. On the other hand, we had prices paid.
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  Speaker 3: This is what we had to put into buying goods
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  Speaker 3: and services. Four businesses up two point nine percent for
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  Speaker 3: the quarter, but prices we actually we were able to
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  Speaker 3: put out we're only up two point one so the
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  Speaker 3: companies had to we weren't able to pass through all
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  Speaker 3: the highers. Now's the advent. It's a bit of a
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  Speaker 3: tough setup for them. The economic data says we should
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  Speaker 3: be cutting rates, and indeed there's inflation data suggests they're
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  Speaker 3: still in the band, but maybe it's not enough for
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  Speaker 3: them to really open the taps up. On the twenty
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  Speaker 3: Act of May. They'll cut, but maybe not as much
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  Speaker 3: as we'd all like.
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  Speaker 2: All right, hey, and what we've got the budget coming
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  Speaker 2: up on Thursday? Obviously, what are investors expecting.
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  Speaker 3: Yeah, well, look, we expected to be prudent, you know,
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  Speaker 3: despite this week economic outlock, which means lower tax take.
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  Speaker 3: It means the government's going to have to work harder
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  Speaker 3: in terms of making sure they get some some spending
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  Speaker 3: cuts through. Markets are going to be focused on the
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  Speaker 3: degree of debt issuanes, how much money does the government
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  Speaker 3: have to to raise to keep the halls of government going.
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  Speaker 3: The expectations are forty to forty two b and gross.
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  Speaker 3: That's a gross number, doesn't employ some netting off. And
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  Speaker 3: if they can come in that range, that'll actually be
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  Speaker 3: a good thing. Markets might like that. They'll be able
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  Speaker 3: to scrutiny around infrastructure, housing and healthcare policy and to
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  Speaker 3: who's are laying up for the future and may be
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  Speaker 3: a little bit interesting that qusay, the change is potential
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  Speaker 3: and so the change there.
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  Speaker 2: Brilliant stuff. Shane, always good to talk to. You really
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  Speaker 2: appreciate it. Shane solely Harbor Asset Management.
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