Latest / The SME Stream / Hamish Pepper: How have financial markets responded to the OCR cut?

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Hamish Pepper: How have financial markets responded to the OCR cut? · The SME Stream

• 0:40
  Speaker 1: And welcome back to the Weekend Collective. I'm Tim Beverage
• 0:43
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• 1:37
  Speaker 1: right now it is time for smart money and joining
• 1:40
  Speaker 1: me is he is director and fixed income and currency strategist.
• 1:46
  Speaker 1: Oh god, I've got to say that again. It's tongue twister.
• 1:48
  Speaker 1: It is actually a bit of a tongue twister to
• 1:49
  Speaker 1: try and state quickly. He is director and fixed income
• 1:52
  Speaker 1: and currency strategist at Harbor Asset Management, and his name
• 1:56
  Speaker 1: is Hamish Pepper. Good afternoon, Hello Tim.
• 1:59
  Speaker 2: How are you not too bad?
• 2:00
  Speaker 1: That is quite a mouthful your job description. I think
• 2:02
  Speaker 1: it's the longest of all the chaps at Harbor Asset.
• 2:06
  Speaker 2: Oh, it's far too long. We need to change that.
• 2:11
  Speaker 2: Let's do it now.
• 2:13
  Speaker 1: Actually, what do you prefer? I no, no, I was
• 2:16
  Speaker 1: just thinking if you put it out to the text,
• 2:17
  Speaker 1: say what's a good Let's let's summarize his job and
• 2:21
  Speaker 1: he's currency strategist, director, fixed oncoming. I don't know. We'll
• 2:26
  Speaker 1: have to work, we'll have to workshop that one. I
• 2:27
  Speaker 1: think your one is probably the most accurate. But anyway,
• 2:30
  Speaker 1: I digress. Now. First things first, the Reserve Bank announced
• 2:35
  Speaker 1: that they've they're they're cutting the oec R by fifty
• 2:38
  Speaker 1: basis points. I've heard much opinion that contrary to what
• 2:45
  Speaker 1: the Reserve Bank governor said quite a few months ago,
• 2:47
  Speaker 1: and he said he wasn't anticipating a cut until next year. Well,
• 2:50
  Speaker 1: those ships have well and truly sailed that this is
• 2:54
  Speaker 1: just the beginning. What do you what do you make
• 2:56
  Speaker 1: of it? Markets responded, I.
• 2:58
  Speaker 3: Mean, you're right what we've had over the past, I
• 3:02
  Speaker 3: mean it has really only been four or five months.
• 3:05
  Speaker 3: As you say, this is a central bank now which
• 3:08
  Speaker 3: I think is increasingly aware of just how much help
• 3:12
  Speaker 3: this economy needs. And the idea of having your official
• 3:16
  Speaker 3: cash rate at probably double the rate at which you're
• 3:23
  Speaker 3: providing help to an economy is just it's just not
• 3:26
  Speaker 3: the right place to be.
• 3:27
  Speaker 2: And so I think they've woken up to that.
• 3:29
  Speaker 3: They're getting into their work, and as you say, the
• 3:31
  Speaker 3: expectation is they'll really accelerate through the summer. More fifty
• 3:36
  Speaker 3: basis point rate cuts are expected by financial markets, such
• 3:41
  Speaker 3: that we will probably get into that April May period
• 3:44
  Speaker 3: next year with an official cash rate that's much closer
• 3:47
  Speaker 3: to three percent than it is to follow.
• 3:51
  Speaker 1: Wow, so you just said more fifty percent cuts, So
• 3:56
  Speaker 1: you anticipating what we could have another whole point a
• 3:59
  Speaker 1: whole another hundred points to come off.
• 4:02
  Speaker 2: That's right.
• 4:03
  Speaker 3: Yeah, but by February, you know, financial markets are saying
• 4:06
  Speaker 3: about ninety bases points zero point nine percentage points of
• 4:10
  Speaker 3: that that one hundred or one is expected, and so yeah,
• 4:14
  Speaker 3: I mean, I wasn't exaggerating that. We get into May
• 4:18
  Speaker 3: and you'll have something around three and a half percent
• 4:21
  Speaker 3: for your official cash rate if financial markets are right.
• 4:24
  Speaker 1: Do you recall when Adriana was saying that he didn't
• 4:28
  Speaker 1: anticipate any cuts till next year. Do you remember, because
• 4:31
  Speaker 1: that wasn't in my mind, if I recall correctly, he
• 4:34
  Speaker 1: was saying that as late as maybe April or something.
• 4:36
  Speaker 1: Wasn't he or was it?
• 4:37
  Speaker 3: It was the main minetary policy statement where the actually
• 4:40
  Speaker 3: considered at that meeting whether there was a need to
• 4:44
  Speaker 3: take the official cash rate even higher than the five
• 4:48
  Speaker 3: and a half percent.
• 4:48
  Speaker 2: And what happened since then?
• 4:50
  Speaker 3: There was a big pivot in July in the review
• 4:54
  Speaker 3: that they had then, where I think some of the
• 4:56
  Speaker 3: business survey data was looking particularly weak and they thought, oh,
• 5:01
  Speaker 3: hold on a second, And then in August it began
• 5:05
  Speaker 3: with the first rate cut, as you say, you know,
• 5:09
  Speaker 3: more than a year earlier than they'd told us, and
• 5:12
  Speaker 3: planned just just sort of six or seven weeks earlier.
• 5:16
  Speaker 1: It made me wonder whether he was engaging, you know,
• 5:19
  Speaker 1: when he talked about or we still might pop it
• 5:20
  Speaker 1: up and we're looking back at May. By the way,
• 5:22
  Speaker 1: if you just tuned in, that was more a case
• 5:25
  Speaker 1: of rhetoric. So if people didn't suddenly get all excited
• 5:28
  Speaker 1: and act in a way they didn't want us to act.
• 5:31
  Speaker 3: It might have been It's always a delicate balance that
• 5:34
  Speaker 3: with central banks, how much do you want the market
• 5:37
  Speaker 3: to move ahead of you and perhaps, as you say,
• 5:41
  Speaker 3: undermine the current stance of policy, because at that time
• 5:46
  Speaker 3: it probably still was the case that you could create
• 5:49
  Speaker 3: a story that rates needed to stay higher for a
• 5:52
  Speaker 3: bit longer. There was stickiness in some of the inflation
• 5:57
  Speaker 3: we were generating domestically, which was a worry, But the
• 6:02
  Speaker 3: surveys were starting to tell you that that shouldn't be
• 6:06
  Speaker 3: sustained and that you can start to move back towards
• 6:10
  Speaker 3: a more normal setting. And that's essentially what's happened since then.
• 6:14
  Speaker 3: We're on our way back to normal.
• 6:17
  Speaker 1: So what is normal?
• 6:19
  Speaker 3: Normal somewhere around three three percent for their official cash rate?
• 6:23
  Speaker 1: Has that always been what I mean? Normal? Obviously changes,
• 6:26
  Speaker 1: you know, is the expression of the new normal. Of course,
• 6:29
  Speaker 1: what has the history in the last maybe ten or
• 6:31
  Speaker 1: twenty years of the cash raight been. What has normal
• 6:34
  Speaker 1: always been around this, or has normal been something of it?
• 6:37
  Speaker 2: It's been lower.
• 6:38
  Speaker 3: Just before we had COVID, you would remember in that time,
• 6:43
  Speaker 3: central banks all over the world were really struggling to
• 6:47
  Speaker 3: generate inflation. You know, they'd had inflation sitting either at
• 6:51
  Speaker 3: or below where they were targeting, and they were really
• 6:54
  Speaker 3: scratching their heads as to what they could do in
• 6:57
  Speaker 3: order to get that inflation back up a bit higher.
• 7:00
  Speaker 3: Since then, of course, we've had plenty of inflation, as
• 7:03
  Speaker 3: you know well and many of the listeners, But that
• 7:06
  Speaker 3: normal level of the cash rate or policy rates is
• 7:11
  Speaker 3: lifted from probably two pre COVID to something around three.
• 7:15
  Speaker 1: Now, why do we need some level of inflation? I
• 7:19
  Speaker 1: know that's not the issue now, But as you were
• 7:21
  Speaker 1: saying that banks were struggling to get central banks were
• 7:24
  Speaker 1: struggling to get in some sort of inflation, why is
• 7:28
  Speaker 1: that part of the way, part of our reality.
• 7:32
  Speaker 2: It's a great question. I mean, the best.
• 7:34
  Speaker 3: Example I think I can give, and this is one
• 7:37
  Speaker 3: of the ways in which inflation greases the wheels of
• 7:40
  Speaker 3: an economy. And it's the way in which firms are
• 7:44
  Speaker 3: able to reduce the real cost of their labor if
• 7:50
  Speaker 3: there is some inflation. So the example would be we're
• 7:52
  Speaker 3: in an inflation environment where prices a rising in a
• 7:55
  Speaker 3: general sense two percent prandom. What I can do to
• 7:59
  Speaker 3: my employees is to say, well, hey, I might give
• 8:02
  Speaker 3: you a one percent wage increase this year. Well, it
• 8:05
  Speaker 3: might give you nothing, but that for the firm is
• 8:08
  Speaker 3: a useful thing if that firm is looking to try
• 8:11
  Speaker 3: and weather a period of challenge in whatever industry therein,
• 8:17
  Speaker 3: they are reducing that real cost of their wage bill.
• 8:22
  Speaker 3: Because you've got to assume that that firm is also
• 8:25
  Speaker 3: able to experience those higher prices in terms of what
• 8:28
  Speaker 3: it's charging. So the two percent prandom I'm talking about
• 8:31
  Speaker 3: in terms of inflation is also something that the firm
• 8:34
  Speaker 3: should be experiencing in their prices.
• 8:36
  Speaker 1: Cynical in a way because theoretically, I mean, we can
• 8:39
  Speaker 1: get distract about these things because it's not really the
• 8:41
  Speaker 1: question of the day. But theoretically, if there was no
• 8:44
  Speaker 1: inflation in people, I don't know, it doesn't feel like
• 8:46
  Speaker 1: the devil, but the way you explain it, it does
• 8:49
  Speaker 1: get a sense that there is always the potential for
• 8:50
  Speaker 1: things to be moving, I guess and people and energizing things,
• 8:54
  Speaker 1: is it.
• 8:56
  Speaker 3: It's kind of sneaky, isn't it. You know, because what
• 8:58
  Speaker 3: you're you're either saying to employees you are aware of
• 9:04
  Speaker 3: this general rise in prices, and you're then also aware
• 9:07
  Speaker 3: what I'm offering you in terms of your wage increase
• 9:11
  Speaker 3: for the year is less than that, and then you're
• 9:14
  Speaker 3: assuming that they're happy with it, or you're assuming that
• 9:18
  Speaker 3: perhaps they're not fully aware of just how much those
• 9:22
  Speaker 3: sort of general prices are shifting by. But I think
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  Speaker 3: the crux of it is this is something where firms,
• 9:29
  Speaker 3: when they're doing that, are usually doing it because they
• 9:32
  Speaker 3: are facing some sort of challenge, you know, some sort
• 9:34
  Speaker 3: of profitability type challenge, and it's giving them a way
• 9:39
  Speaker 3: to manage that without having to say to somebody, hey,
• 9:42
  Speaker 3: I've actually got to cut your wages here. You know,
• 9:44
  Speaker 3: we're not talking about a lower increase than what inflation's doing.
• 9:49
  Speaker 3: We're actually talking about, you know, reducing whatever you had
• 9:52
  Speaker 3: last year is going to be less this year.
• 9:54
  Speaker 2: And that's quite a tough conversation.
• 9:57
  Speaker 1: So getting back to the whole inflation thing, So with
• 10:00
  Speaker 1: it being trimmed by fifty basis points to four point
• 10:02
  Speaker 1: seventy five, and you've anticipated that maybe there could be
• 10:04
  Speaker 1: a whole I mean, could be more than one hundred
• 10:08
  Speaker 1: basis points. What do you think inflation round three percent
• 10:10
  Speaker 1: would be another one hundred What is that one hundred
• 10:12
  Speaker 1: and twenty five basis points? Let's not be too literal
• 10:15
  Speaker 1: about that, but there's be a lot of people who
• 10:16
  Speaker 1: be listening, could be who depend on getting a bit
• 10:19
  Speaker 1: of interest for their money in the bank, and what
• 10:22
  Speaker 1: invests you know what it means for the way people
• 10:25
  Speaker 1: who want some sort of fixed income, How are they
• 10:29
  Speaker 1: going to generate money if they're not going to have
• 10:31
  Speaker 1: it in the bank, are they?
• 10:33
  Speaker 2: That's right? What happens in these easing cycles.
• 10:36
  Speaker 3: What happens whenever interest rates move in an economy is
• 10:41
  Speaker 3: there are going to be winners and losers. And I
• 10:44
  Speaker 3: think you've identified a group that may feel as if
• 10:48
  Speaker 3: they're the losers in this. If you've been sitting on say,
• 10:52
  Speaker 3: term deposits and rolling you say it's a one year
• 10:55
  Speaker 3: term deposit, you're probably experiencing around about a underd basis
• 11:00
  Speaker 3: point or one percentage point drop in the rates that
• 11:04
  Speaker 3: you know you've recently rolled on to.
• 11:06
  Speaker 2: Relative to a year ago. So let's just use round numbers.
• 11:09
  Speaker 3: You probably, a year ago, we're getting six percent for
• 11:12
  Speaker 3: a one year term deposit. You're now getting five, And
• 11:15
  Speaker 3: if markets are right, in another year's time, it will
• 11:19
  Speaker 3: probably be half a percentage point lower than that. Again,
• 11:24
  Speaker 3: and this has some real impacts for people who are
• 11:26
  Speaker 3: relying on these things for income. You know, think about retirees,
• 11:30
  Speaker 3: for example, so they in some ways are a group
• 11:34
  Speaker 3: that lose to a degree when interest rates four.
• 11:38
  Speaker 1: Yeah. Well, you're a fixed income strategist, I guess, so
• 11:42
  Speaker 1: what are you guys? What are you doing? What advice
• 11:46
  Speaker 1: would you give to people who are on a fixed
• 11:47
  Speaker 1: income with that? Not specific financial advice, but where are
• 11:51
  Speaker 1: the places people are going to be wanting to put
• 11:53
  Speaker 1: their money?
• 11:54
  Speaker 4: Yeah?
• 11:55
  Speaker 3: I think what naturally happens in those times is people
• 12:00
  Speaker 3: reassess whether they have risk tolerance or a set of
• 12:06
  Speaker 3: financial objectives that would allow them to think about complementing
• 12:10
  Speaker 3: term deposits with other things. You know, obviously we are
• 12:14
  Speaker 3: one possible solution in terms of the funds that we offer,
• 12:19
  Speaker 3: but there are other solutions for these people as well,
• 12:21
  Speaker 3: And I think it's just the moment I suppose where
• 12:27
  Speaker 3: those questions start being asked. I mean, if you put
• 12:30
  Speaker 3: numbers around it, if you think about what an average household. Now,
• 12:35
  Speaker 3: this is the problem with averages because we've got you know,
• 12:37
  Speaker 3: Graham Heart at one end, who's skewing this average.
• 12:40
  Speaker 2: But let's use the average.
• 12:43
  Speaker 3: What the data for New Zealand tell us is we've
• 12:46
  Speaker 3: got an average household who has a probably a house
• 12:51
  Speaker 3: in terms of a non financial set of assets that's
• 12:54
  Speaker 3: worth about let's say eight hundred thousand of just round numbers,
• 12:57
  Speaker 3: This is the average, and then about the same again
• 13:01
  Speaker 3: in financial wealth. And so if you assume all of
• 13:06
  Speaker 3: that financial wealth that eight hundred thousand is in just
• 13:10
  Speaker 3: term deposits, you're talking about a drop in your annual
• 13:13
  Speaker 3: income and this is before tax, from about forty eight
• 13:16
  Speaker 3: thousand dollars a year to less than forty thousand dollars
• 13:19
  Speaker 3: a year. And so it's in these moments that I
• 13:23
  Speaker 3: think you get a reflection as to whether you know
• 13:27
  Speaker 3: that portfolio of financial assets is delivering the outcomes that
• 13:31
  Speaker 3: you need.
• 13:31
  Speaker 1: That Actually, I thought it was going to sound a
• 13:33
  Speaker 1: lot worse than that, But of course, if you've just
• 13:35
  Speaker 1: got an understand a bank account. It's probably going to
• 13:36
  Speaker 1: be a lot more dramatic than that, isn't it.
• 13:40
  Speaker 3: Yeah, I think your rates for your on call deposits
• 13:44
  Speaker 3: are attend to be a lot lower than what you're
• 13:47
  Speaker 3: getting for term deposits.
• 13:48
  Speaker 1: Hey, so what let's get back to So let's sort
• 13:51
  Speaker 1: of reset again. So the mortgage, sorry, the cash rate
• 13:55
  Speaker 1: has been cut by fifty basis points to four point
• 13:58
  Speaker 1: seventy five. How much has that affected mortgage rates? Because
• 14:03
  Speaker 1: I often hear when we're chatting with people about with
• 14:06
  Speaker 1: the experts about this, that they'll tell you that the
• 14:09
  Speaker 1: banks have already priced that in. But of course an
• 14:12
  Speaker 1: announcement like this comes with more pressure for the banks
• 14:15
  Speaker 1: to chop their mortgage rates. So what has actually happened
• 14:17
  Speaker 1: to mortgage rates as a result.
• 14:19
  Speaker 3: So if you think about just the past year, and
• 14:22
  Speaker 3: we just use a one year, but probably the one
• 14:25
  Speaker 3: year special mortgage rate is the one that you know,
• 14:28
  Speaker 3: people are probably talking about about most that's dropped just
• 14:32
  Speaker 3: over one percentage point. It's sitting around a lot of
• 14:37
  Speaker 3: talk about these special secret rates term that people get
• 14:40
  Speaker 3: offered on their bank caps. And I saw entry stock
• 14:42
  Speaker 3: code Oni and Zed saying please, you know tell us
• 14:45
  Speaker 3: what your secret rate is, but I'll use the one
• 14:48
  Speaker 3: that is posted publicly, and so that's sort of a
• 14:51
  Speaker 3: one year mortgage rate of just above six percent. And
• 14:55
  Speaker 3: then if you think about what the market has in
• 14:58
  Speaker 3: terms of its pricing, including the mortgage market, and we
• 15:02
  Speaker 3: think about where a one year rate could be in
• 15:04
  Speaker 3: a year's time, it's probably around another percentage point lower,
• 15:08
  Speaker 3: is what's being implied. So mortgage rates troughing for the
• 15:11
  Speaker 3: one year specials somewhere just above that five percent level
• 15:15
  Speaker 3: is what markets and the mortgage current mortgage rates are
• 15:18
  Speaker 3: telling you.
• 15:21
  Speaker 1: Yeah, it's funny. A lot of people. I didn't realize that.
• 15:25
  Speaker 1: I didn't realize that the cup that was being predicted
• 15:27
  Speaker 1: was as large as you're saying, because I think you
• 15:29
  Speaker 1: guys have even suggested it might take the OCA be
• 15:32
  Speaker 1: below three percent, which would make people who are just
• 15:36
  Speaker 1: doing who are reinvesting their mortgage, sorry, who are reborrowing
• 15:39
  Speaker 1: just for a year or six months, they're definitely probably
• 15:41
  Speaker 1: on the right track, aren't they.
• 15:43
  Speaker 3: I think that's the that's the interesting thing. You know,
• 15:46
  Speaker 3: you're right that borrowers have been fixing for increasingly short terms.
• 15:52
  Speaker 3: You know, so the six month mortgage rate has become really,
• 15:55
  Speaker 3: really popular, and I think it's because there's been mortgage
• 16:00
  Speaker 3: bokers pushing an idea that, look, the central banks on
• 16:03
  Speaker 3: the cusp of cutting rates or has just begun, there's
• 16:06
  Speaker 3: more to come, and as that happens, you will get
• 16:10
  Speaker 3: better deals for longer term fixed rates. I think where
• 16:15
  Speaker 3: we've got to now though, is if you're looking at
• 16:18
  Speaker 3: the consistency between what wholesale financial markets are pricing and
• 16:24
  Speaker 3: what the mortgage interest rates where they are. There's quite
• 16:28
  Speaker 3: a lot of consistency there now. So unless there's a
• 16:32
  Speaker 3: belief that we do go back to some sort of
• 16:35
  Speaker 3: COVID type levels.
• 16:38
  Speaker 2: Of the official cash rate and interest rates.
• 16:40
  Speaker 3: Which were sort of extraordinarily low, you know, emergency type settings.
• 16:46
  Speaker 2: You know you've.
• 16:47
  Speaker 3: Got to I think, except that there is this consistency
• 16:52
  Speaker 3: to return to normal. But it's not obviously a disastrous
• 16:59
  Speaker 3: period that we have a head so rates so are
• 17:02
  Speaker 3: not showing us what they what they did back then.
• 17:05
  Speaker 1: Okay, look, we're going to take some calls on this
• 17:07
  Speaker 1: if you want to join the conversation with Hamish Pepe's
• 17:09
  Speaker 1: director and fixed income and currency strategist to Harbor Asset Management,
• 17:14
  Speaker 1: the OCR has been cut in the week that's just
• 17:16
  Speaker 1: gone by fifty bases points bring it down to four
• 17:18
  Speaker 1: point seventy five percent. Just want your simple take on it.
• 17:21
  Speaker 1: Where do you hope to see it going in the
• 17:23
  Speaker 1: next month or two? And on that basis, what are
• 17:26
  Speaker 1: you doing with your money, either the money you've got
• 17:28
  Speaker 1: in the bank and your investments or the money that
• 17:31
  Speaker 1: you've borrowed from the bank. What's your strategy because where
• 17:33
  Speaker 1: you sent going? Because I don't mind telling you. I
• 17:35
  Speaker 1: thought that I've got accustomed to the higher rates, and
• 17:38
  Speaker 1: I thought with Adrian all loving the higher rates. So
• 17:41
  Speaker 1: I'm finding it hard to imagine I'm chopping it as
• 17:43
  Speaker 1: much as it's been predicted. But if we've got predictions
• 17:45
  Speaker 1: of maybe another one hundred points or even more, what
• 17:49
  Speaker 1: are your plans and what are your expectations? Give us
• 17:51
  Speaker 1: a call eight hundred and eighty ten eighty will be
• 17:52
  Speaker 1: back in just a moment, News Talks. He'd be twenty
• 17:54
  Speaker 1: four past five. That's welcome back to Smart Money. I'm
• 18:13
  Speaker 1: Tim Beveridge and this is the Weekend Collective. My guest
• 18:16
  Speaker 1: is Hamish Pepper. He's director and fixed income and currency
• 18:19
  Speaker 1: strategist at Harbor asset management. We're talking about the cash
• 18:22
  Speaker 1: rate dropping, is it going to go further? And what
• 18:25
  Speaker 1: do you wanted to do in your plans? Hamish, let's
• 18:27
  Speaker 1: talk to on a second Steve.
• 18:29
  Speaker 5: Hello, Yeah, hey, look a lot of a lot has
• 18:34
  Speaker 5: been made over the week. In actual fact, all the
• 18:37
  Speaker 5: talk is a you know, has been about around interest
• 18:40
  Speaker 5: rates and how it's going to affect the economy, right
• 18:44
  Speaker 5: as though it's the this panacea, it's going to fix everything,
• 18:48
  Speaker 5: but nothing has been mentioned. And what I think is
• 18:51
  Speaker 5: more important than interest rates is the migration levels. I mean,
• 18:56
  Speaker 5: it was on the news on Fridays, but none of
• 18:59
  Speaker 5: you guys have picked up on this and discussed it
• 19:01
  Speaker 5: and the implications. And I'm really perplexed about it because, look,
• 19:05
  Speaker 5: I think we might be in a situation. It might
• 19:08
  Speaker 5: be a bit negative, but we might be a bit
• 19:09
  Speaker 5: like what Japan was, and we're going to suffer what
• 19:12
  Speaker 5: you call a zombie economy for quite some time, a
• 19:15
  Speaker 5: very anemic economy because of our lack of migration. New
• 19:20
  Speaker 5: Zealand has never I can't remember a single time since
• 19:24
  Speaker 5: I started work in eighty seven, been through a lot
• 19:27
  Speaker 5: of ups and downs. I can't remember a single time
• 19:29
  Speaker 5: when we've traded well among ourselves and the economy flourished,
• 19:33
  Speaker 5: We've always relied on those high migration levels, specifically the
• 19:38
  Speaker 5: three waves of Chinese migration we had in the mid nineties.
• 19:42
  Speaker 5: They all start to come from Hong Kong, the early
• 19:45
  Speaker 5: two thousands, and then later on again we had a
• 19:48
  Speaker 5: smaller wave, but we had a massive wave just after
• 19:51
  Speaker 5: two thousand, didn't we And a lot of it came
• 19:54
  Speaker 5: from the students. We had a huge number of students
• 19:56
  Speaker 5: that came here, they ended up settling here. Now, I
• 20:02
  Speaker 5: don't you've made in the past, You've made a big
• 20:06
  Speaker 5: point of who's the labor MP said that Chinese didn't
• 20:09
  Speaker 5: affect the market, the housing market.
• 20:11
  Speaker 1: I think you can pass. I can't remember.
• 20:14
  Speaker 5: Yeah, yeah, well look they do, they do, they affect
• 20:18
  Speaker 5: it and.
• 20:18
  Speaker 1: They oh no, I remember it was it was about
• 20:22
  Speaker 1: It was about that there was a perception that immigration
• 20:26
  Speaker 1: was having a massive effect on the housing market. And
• 20:27
  Speaker 1: I think there was some push back on that.
• 20:30
  Speaker 5: Yeah, if you pushed back on it, and of course
• 20:32
  Speaker 5: the media, the left wing we always say is as
• 20:34
  Speaker 5: soon as you have mentioned a particular ethnicity, it's racism over.
• 20:38
  Speaker 5: You know, practical logical thought process and the logical thought process.
• 20:42
  Speaker 5: They were actually affecting the the Auckland property market, specially
• 20:46
  Speaker 5: especially the central areas through and unfortunately the New Zealand
• 20:49
  Speaker 5: data can't pick that up that they were through all
• 20:52
  Speaker 5: sorts of ways where they.
• 20:55
  Speaker 1: Data is not picking it up. I mean, it's that's right.
• 20:58
  Speaker 1: I'm vaguely recalling. Anyway, we probably needed to back into
• 21:00
  Speaker 1: Hamish's sort of air expertise. What's your what's your question?
• 21:05
  Speaker 5: Oh? Look, my question is is that, like I said,
• 21:08
  Speaker 5: I think the interest rates, I don't think they're going
• 21:11
  Speaker 5: to have the effect that everyone thinks they're going to have.
• 21:14
  Speaker 5: I think we're going to settle. We've got this short
• 21:16
  Speaker 5: little sugar rush and doorphin effect, but I think it's
• 21:19
  Speaker 5: going to settle back down to a very anemic feeling
• 21:23
  Speaker 5: because we just haven't got the migration levels and New
• 21:25
  Speaker 5: Zealand requires people with money to come in the front
• 21:28
  Speaker 5: door fright around, get the sugar hit a couple of
• 21:31
  Speaker 5: years before they get permanent residency, and then it goes
• 21:34
  Speaker 5: the other way because they jump on a welfare. But
• 21:36
  Speaker 5: that first lot had come in one hundred thousand ukan
• 21:39
  Speaker 5: a year, turbo charges our economy and with out it,
• 21:43
  Speaker 5: and apparently we're going to be having that, we're going
• 21:46
  Speaker 5: to have more people leaving next year.
• 21:48
  Speaker 6: Possibly.
• 21:49
  Speaker 1: Well, we do migration that's quite high right now, and
• 21:52
  Speaker 1: I think it's a record. It's incredibly it's fifty five
• 21:54
  Speaker 1: thousand people coming in.
• 21:56
  Speaker 5: Do you know where they're coming in from. They're coming
• 21:59
  Speaker 5: from India, so they're not even coming from China. And look,
• 22:01
  Speaker 5: they're not the ones to the high spend in Chinese
• 22:03
  Speaker 5: who come in and buy the houses and it pushes
• 22:05
  Speaker 5: construction and everything else there. Actually the engines, the engine.
• 22:08
  Speaker 1: People, we'll we'll bring We'll bring ham, We'll bring hamershin
• 22:13
  Speaker 1: and see you got your take on the Samish.
• 22:16
  Speaker 2: Yeah.
• 22:16
  Speaker 3: I think the point, the big one that Steve makes
• 22:19
  Speaker 3: there is we've had a big drop off.
• 22:22
  Speaker 2: If we look at the.
• 22:22
  Speaker 3: Monthly numbers for migration, you know, we're running around sort
• 22:26
  Speaker 3: of three three and a half thousand per month, which
• 22:30
  Speaker 3: means we've kind of gone back to the more sort
• 22:33
  Speaker 3: of historical average levels of net migration from the like
• 22:37
  Speaker 3: you say, Tim, the boom that we had just a
• 22:40
  Speaker 3: couple of years ago, and it does have implications for
• 22:43
  Speaker 3: the economy and the housing market is one that we
• 22:46
  Speaker 3: look at as many others first to pick up the
• 22:50
  Speaker 3: signs of those migration surges or indeed when they when
• 22:54
  Speaker 3: they tail off. And I think if you put this
• 22:59
  Speaker 3: story together, so we had a sort of a boom
• 23:02
  Speaker 3: and migration the last couple of years into earlier this year,
• 23:06
  Speaker 3: and then it's really fallen away. It's about the same
• 23:10
  Speaker 3: time that people have been puzzled that the housing market
• 23:13
  Speaker 3: hasn't picked up a bit more in response to, for instance,
• 23:18
  Speaker 3: the changes that we've had for investors when it comes
• 23:22
  Speaker 3: to investment properties, and also you know, the the kline
• 23:26
  Speaker 3: and mortgage rates more recently.
• 23:28
  Speaker 2: But the so it's there.
• 23:31
  Speaker 3: It's part of the picture, is what I'm trying to say,
• 23:33
  Speaker 3: and it's part of the reason why interest rates are
• 23:36
  Speaker 3: now you know, moving lower and are expected to continue.
• 23:40
  Speaker 2: To do so.
• 23:41
  Speaker 3: You know that I think the market gets it that
• 23:44
  Speaker 3: this is now turned into what was a positive has
• 23:46
  Speaker 3: turned into into a negative from a demand point of view.
• 23:51
  Speaker 3: But I just add one more thing. When we think
• 23:54
  Speaker 3: about migration, we think about it on a net basis,
• 23:56
  Speaker 3: so people arriving, less people leaving, and it really hasn't
• 24:01
  Speaker 3: been so much that people have stopped coming. There's been
• 24:04
  Speaker 3: a little bit of that, but it's been much more
• 24:07
  Speaker 3: that there's been a pickup and people leaving. So it's
• 24:11
  Speaker 3: got and it's sort of another part of your point there, Steve,
• 24:16
  Speaker 3: which is just how much faith do young people have
• 24:22
  Speaker 3: in this economy to deliver them the things that they
• 24:26
  Speaker 3: are wanting out of out of a career, and.
• 24:29
  Speaker 5: A lot of bothering me. You know, it's bothering me
• 24:32
  Speaker 5: though there's brain drain, isn't there. They're they're the ones
• 24:35
  Speaker 5: that twenty year old who are meant to be staying
• 24:37
  Speaker 5: here and buying the houses and pain the taxes for
• 24:40
  Speaker 5: the people going to be retiring. They're buggering off and
• 24:42
  Speaker 5: why wouldn't you? And the ones who are staying don't
• 24:44
  Speaker 5: have the qualifications, are on a benefit and we're left
• 24:48
  Speaker 5: with those types. And then we've got the retired people
• 24:51
  Speaker 5: on the other end. Then we've got the our age
• 24:54
  Speaker 5: team right, and then we're sort of buttoning back, but
• 24:57
  Speaker 5: we haven't got that power, the power demographic. They're leaving.
• 25:02
  Speaker 5: Why would they stay? Why would they want to stay?
• 25:04
  Speaker 5: I mean, and it's more to do with the economy.
• 25:07
  Speaker 5: It's more than just that there's something not quite right
• 25:10
  Speaker 5: in New Zealand culture at the moment, I could say
• 25:14
  Speaker 5: it might be because you might just but there is
• 25:16
  Speaker 5: a bit of that. I think people are just going
• 25:18
  Speaker 5: I'm tired of it.
• 25:20
  Speaker 4: Yeah, I don't know.
• 25:21
  Speaker 1: I mean I think you may be catastrophizing it a
• 25:25
  Speaker 1: bit more than I would with Steve. But I'm to
• 25:27
  Speaker 1: be honest, it's difficult without doing a really deep dive
• 25:29
  Speaker 1: into the immigration figures and the stats and who's coming
• 25:32
  Speaker 1: here in the settings and everything. So probably have a
• 25:34
  Speaker 1: discussion with that immigration minister probably I would image wouldn't
• 25:37
  Speaker 1: we amish?
• 25:39
  Speaker 2: I think that would be a great discussion to have.
• 25:42
  Speaker 3: I mean, I think Steve, just on one thing he
• 25:45
  Speaker 3: said there about sort of you know, relative kind of
• 25:48
  Speaker 3: economic performance is really the point I was taking. And
• 25:52
  Speaker 3: so I can see the logic for a young person
• 25:54
  Speaker 3: who looks over to Australia, for example, and realizes I
• 25:58
  Speaker 3: can get paid more and I have more affordable housing options,
• 26:03
  Speaker 3: and thinking, well, regardless of anything else, those are two
• 26:07
  Speaker 3: big things for me at this moment in my life,
• 26:09
  Speaker 3: and so I'm going to go for it.
• 26:11
  Speaker 1: I think also, I think also as well as remember
• 26:14
  Speaker 1: worth remembering Steve, that we have been losing new Zealanders
• 26:17
  Speaker 1: for decades. It's been it's almost part of the whole
• 26:19
  Speaker 1: thing of New Zealand. U zicand you know, would the
• 26:22
  Speaker 1: last fess and leave that switch out the lights. I
• 26:24
  Speaker 1: don't think it's a modern phenomenon.
• 26:26
  Speaker 5: It's more than that, mate. I'll tell you why. Younger
• 26:28
  Speaker 5: people now, they just don't want they want infrastructure. These
• 26:32
  Speaker 5: are not people who just need mountains and beautiful scenery, right,
• 26:35
  Speaker 5: we need far more than that. New Zealand's beauty. It's
• 26:37
  Speaker 5: like you know, you go out with a supermodel.
• 26:41
  Speaker 1: Oops'll right, it's the thing.
• 26:42
  Speaker 6: With New Zealand.
• 26:43
  Speaker 5: It's a beautiful country, but you do need more. And
• 26:45
  Speaker 5: we have poor infrastructure. We've got party government parties that
• 26:50
  Speaker 5: they're just arguments themselves. We've got crime rates. They're just
• 26:53
  Speaker 5: looking at Sydney and look at they've actually got a subway,
• 26:56
  Speaker 5: they've got public transport, they've just got so much more
• 26:58
  Speaker 5: than they've got. Well, I think a lure people here.
• 27:02
  Speaker 1: Well hopefully hopefully we're working on that. I think, yeah,
• 27:04
  Speaker 1: I think you're bit pessimist, more pessimists than i'd be
• 27:06
  Speaker 1: about things. But look, we're certainly a country that's got challenges.
• 27:10
  Speaker 1: Sorry that We had a bit of a long chat
• 27:11
  Speaker 1: there Hamish with Steve, but you know he had a
• 27:13
  Speaker 1: good crack of the whippon' me I've forgot where I've
• 27:17
  Speaker 1: got to. Okay, Well, I guess the question is, you know,
• 27:19
  Speaker 1: he was challenging the idea that we're going to get
• 27:21
  Speaker 1: all this economic prosperity that lower interest rates are going to, like,
• 27:25
  Speaker 1: are going to bring that. What's your take on how
• 27:30
  Speaker 1: the lower interest rates actually do make a difference to
• 27:32
  Speaker 1: the economic prosperity rather than just people investing in property.
• 27:36
  Speaker 3: Yeah, I mean, look, interest rates are hugely powerful. You know,
• 27:41
  Speaker 3: this is the price of money that is being set
• 27:44
  Speaker 3: by a central bank for an economy when they move
• 27:47
  Speaker 3: their official cash rate or equivalent. And so one of
• 27:51
  Speaker 3: the places where you can really see it show up
• 27:54
  Speaker 3: is in those that are either new home buyers so
• 27:58
  Speaker 3: they've recently bought or they're contemplating the purchase of a house,
• 28:04
  Speaker 3: because what interest rates will do as they fall is
• 28:07
  Speaker 3: really really switched that sort of serviceability calculation for household So,
• 28:13
  Speaker 3: for example, it was probably just at the end of
• 28:16
  Speaker 3: last year where a household would need pretty much two
• 28:21
  Speaker 3: thirds of their income.
• 28:24
  Speaker 2: This is the median.
• 28:25
  Speaker 3: Household in New Zealand to service an average mortgage that's
• 28:30
  Speaker 3: already dropped to fifty five percent. And like I said,
• 28:35
  Speaker 3: I if financial markets are right and we get another
• 28:38
  Speaker 3: sort of one percentage point hundred basis points of decline
• 28:41
  Speaker 3: and mortgage rates, you know, that should continue to fall
• 28:45
  Speaker 3: in terms of the amount of income required, and that'll
• 28:48
  Speaker 3: take it back to probably take it not just back
• 28:52
  Speaker 3: to the average that we've had since the GFC the
• 28:55
  Speaker 3: Global Financial Crisis, but probably below. And that's pretty meaningful, right,
• 28:59
  Speaker 3: you know, to the extent that this is. You know,
• 29:02
  Speaker 3: it's not just an asset, right, as you know Tim,
• 29:05
  Speaker 3: you know, owning your own home has all of these
• 29:08
  Speaker 3: additional benefits for those that live in it, you know,
• 29:12
  Speaker 3: feelings of security for example, and community and all of
• 29:15
  Speaker 3: that sort of thing. So yeah, I think to counter
• 29:18
  Speaker 3: Steve slightly there, I would say that, look, as these
• 29:22
  Speaker 3: interest rates for there is a really meaningful impact on
• 29:28
  Speaker 3: you know, these parts of the economy, and it results
• 29:32
  Speaker 3: in you better outcomes for these people household.
• 29:36
  Speaker 1: Right, good stuff. Look, we're going to come back and
• 29:37
  Speaker 1: this month we'll take a break. It's twenty one minutes
• 29:39
  Speaker 1: to five News Talks B and welcome back to the show.
• 29:59
  Speaker 1: This is smart money. I guessed, is Hamish Peppery. He's
• 30:02
  Speaker 1: a currency Oh god, I've got the job description. I've
• 30:04
  Speaker 1: lost my bit of paper to get it right, Hamish.
• 30:07
  Speaker 1: It's a fixed income and currency strategist. I actually googled
• 30:10
  Speaker 1: if we could simplifize that, but it just comes back
• 30:12
  Speaker 1: to me at the same thing. So hey, let's take
• 30:15
  Speaker 1: some more calls. Actually, just before we do a quick
• 30:18
  Speaker 1: question for you, Hamish. You know we're talking about cheaper,
• 30:22
  Speaker 1: cheaper borrowing and you know, the reduced cash rate and
• 30:26
  Speaker 1: all that, but of course, how does it get undone
• 30:29
  Speaker 1: by the fact that our counsels and insurances and general
• 30:33
  Speaker 1: coigh cost of living is still screwing homeowners and people.
• 30:36
  Speaker 2: Yeah, it's a great point.
• 30:39
  Speaker 3: There's a cohort out there for sure, where whatever gain
• 30:43
  Speaker 3: they might have experienced so far from the drop of
• 30:46
  Speaker 3: mortgage rates has been more than offset by those increases
• 30:50
  Speaker 3: and counter rates and insurance, as you say to them.
• 30:53
  Speaker 2: So this is.
• 30:54
  Speaker 3: Something for you know, the Reserve Bank to consider as
• 30:58
  Speaker 3: it is embarking on this using cycle and taking rates
• 31:01
  Speaker 3: lower that you know, maybe for that cohort they're not
• 31:06
  Speaker 3: getting the kind of bang for their buck that they
• 31:09
  Speaker 3: may be assuming or you know, may have been the
• 31:12
  Speaker 3: case in previous easing cycles. So yeah, I think ultimately
• 31:17
  Speaker 3: perhaps also explains some of why they've got into their
• 31:21
  Speaker 3: work as much as they have in terms of beginning
• 31:24
  Speaker 3: the using cycle and then accelerating.
• 31:26
  Speaker 5: It.
• 31:27
  Speaker 1: Shame that the that Adrian or can't really control too
• 31:30
  Speaker 1: much what the councils are rating us. That would be wonderful,
• 31:32
  Speaker 1: wouldn't if he just said no, no, steady on there, Yeah,
• 31:35
  Speaker 1: there we go.
• 31:36
  Speaker 3: That's an unfortunate reality. Yet obviously it's not just local
• 31:40
  Speaker 3: councils that they can't control. They can't control central government
• 31:43
  Speaker 3: what they're up to either.
• 31:44
  Speaker 1: No, although well, central government at least trying to pretend
• 31:49
  Speaker 1: that they're spending lest aren't they And maybe they are.
• 31:52
  Speaker 1: But anyway, that's another discussion for another day. Let's take
• 31:55
  Speaker 1: some calls, rob, Hi.
• 31:57
  Speaker 6: Yeah, Hi here you're going good?
• 32:00
  Speaker 2: Wow?
• 32:00
  Speaker 4: Good?
• 32:02
  Speaker 6: Yeah. I just thought i'd let you know. I went
• 32:04
  Speaker 6: to Ozzie in nineteen ninety three and went to the
• 32:06
  Speaker 6: Grand Final. Then I went back last year at twenty
• 32:09
  Speaker 6: twenty three, and I couldn't believe how far Auckland had
• 32:13
  Speaker 6: slipped behind Sydney. It was unbelievable. I went out to
• 32:18
  Speaker 6: a place called Balkan Hill, which was between Parametta and Penrith,
• 32:24
  Speaker 6: so it's not in a city Sydney or anything like that,
• 32:27
  Speaker 6: but they were out cleaning the streets at five in
• 32:29
  Speaker 6: the morning. It was the place was spotless. I live
• 32:33
  Speaker 6: in walk With and I go down to I've got
• 32:35
  Speaker 6: a place down in Point Chevalier and I stay away
• 32:38
  Speaker 6: from Workland as much as I can. But when you
• 32:40
  Speaker 6: go back down to Auckland, you just realize how much
• 32:42
  Speaker 6: it's really slipped and just turned really nasty, and honestly,
• 32:49
  Speaker 6: it's a real disappointment that the council have just not
• 32:51
  Speaker 6: stuck to their knitting and done what the rates are
• 32:55
  Speaker 6: supposed to be used for. They just waste money left
• 32:58
  Speaker 6: right on center and just on stuff it's not required.
• 33:01
  Speaker 6: I heard the other day that they are only wanting
• 33:03
  Speaker 6: to pick up the rubbish once every fortnight now in
• 33:05
  Speaker 6: one part of Auckland. Yeah, and you know, it's just
• 33:09
  Speaker 6: a shame that they've just allowed people have just allowed
• 33:12
  Speaker 6: that to happen. I tasteven grand a year rate and
• 33:18
  Speaker 6: Points Chevalier for a two bedroom nineteen twenties house.
• 33:22
  Speaker 1: Rob By, the way I've got you, you're going to
• 33:24
  Speaker 1: chat about the ocr not the council, because this is
• 33:26
  Speaker 1: smart money and the politics are was a couple of
• 33:29
  Speaker 1: hours ago. I know we've slipped in this direction in
• 33:32
  Speaker 1: Australian comparisons.
• 33:33
  Speaker 6: Yeah, I rang mainly. I rang mainly about that guy
• 33:36
  Speaker 6: that had told me that they had said that on
• 33:38
  Speaker 6: the radio just before that. He said that you're not
• 33:40
  Speaker 6: going to get the migration here and that the interest
• 33:43
  Speaker 6: rate cuts are going to have very minimal effect. And
• 33:46
  Speaker 6: I totally agree with him. I think Auckland is undesirable
• 33:50
  Speaker 6: for people. They'll all want to go to Australia. And
• 33:53
  Speaker 6: I think the housing market is not going to kick
• 33:55
  Speaker 6: on like they're all saying. I think he's dead right
• 33:57
  Speaker 6: with what he's saying. It's just going to be stagnant
• 33:59
  Speaker 6: for a.
• 34:00
  Speaker 1: Yes, gosh, that's okay, Rob, I'll throw that to Hamish.
• 34:05
  Speaker 1: That's a pretty pestimistic view of it, I must say.
• 34:07
  Speaker 1: How much it's worth noting that I went out the
• 34:09
  Speaker 1: other night in Auckland and I thought the conversation with
• 34:12
  Speaker 1: mates of mine were like, this is New Zealand's biggest
• 34:14
  Speaker 1: city and it's a Thursday night and it's eleven o'clock
• 34:17
  Speaker 1: and it's dead. But anyway, that was a pessimist view
• 34:22
  Speaker 1: of it. But what do you reckon?
• 34:24
  Speaker 3: Yeah, I mean, on that particular story you had there
• 34:26
  Speaker 3: to him. I mean, I think that's reflective of an
• 34:29
  Speaker 3: economy that still is hurting. You know, we've started to
• 34:33
  Speaker 3: lower interest rates, but they're still high. You know, they're
• 34:37
  Speaker 3: still putting downward pressure on activity and causing paying for
• 34:42
  Speaker 3: four households. So you know, the idea of discretionary spending
• 34:46
  Speaker 3: in that environment, you know, going out on a Thursday
• 34:48
  Speaker 3: night and having a meal, having some drinks, you know,
• 34:50
  Speaker 3: the many many people won't be something that budgets are
• 34:54
  Speaker 3: allowing just yet.
• 34:55
  Speaker 2: But I would hope that, you know, if we're.
• 34:57
  Speaker 3: To talk again on a similar matter of years time time,
• 35:00
  Speaker 3: that you know, it would be a different story for
• 35:01
  Speaker 3: you on Thursday.
• 35:03
  Speaker 1: Night, because we can all remember times when Auckland's been
• 35:05
  Speaker 1: heaven not. Actually, you know, what just came to mind
• 35:08
  Speaker 1: was when we were hosting the America's cupit Ones. Of
• 35:11
  Speaker 1: course that's in Barcelona, but never mind, let's not talk
• 35:14
  Speaker 1: about that one. At least we won those two races.
• 35:18
  Speaker 2: Steve.
• 35:18
  Speaker 3: Steve had another point there, which you know, look, I'm
• 35:21
  Speaker 3: not going to disagree with the infrastructure need that New
• 35:24
  Speaker 3: Zealand has. I mean, it's it's it's there. It's clear.
• 35:28
  Speaker 3: It has implications in terms of you know, people's rates,
• 35:31
  Speaker 3: but also you know taxes as well, because there's a
• 35:34
  Speaker 3: burden that central government have with that. So yeah, it's
• 35:36
  Speaker 3: going to be a bit of a painful Yeah, it's
• 35:38
  Speaker 3: going to be decades, isn't it. As we do, you know,
• 35:41
  Speaker 3: kind of improve that that aspect of society.
• 35:44
  Speaker 2: But in the meantime, you know, lower rates.
• 35:47
  Speaker 3: I still got to say, you know, I think we
• 35:49
  Speaker 3: were surprised how impactful they were during COVID, you know,
• 35:54
  Speaker 3: when when we had interest rates pretty much at zero.
• 35:58
  Speaker 3: You know, just remember those times in terms of how
• 36:01
  Speaker 3: much growth was generated and what it did to the
• 36:04
  Speaker 3: housing market for example. And sure we're not going back
• 36:06
  Speaker 3: to zero rates, but we're going to go a lot
• 36:09
  Speaker 3: lower if if markets are right than where we are today,
• 36:12
  Speaker 3: and so don't don't discount it.
• 36:14
  Speaker 1: Yeah, okay, right, tell you what. Well, Richard's holding for
• 36:17
  Speaker 1: a question, But we'll just take a quick moment and
• 36:19
  Speaker 1: be back and just take it is eleven minutes to
• 36:22
  Speaker 1: six News talks. He'd be.
• 36:25
  Speaker 6: Please go, that's you.
• 36:35
  Speaker 1: And welcome back to the wee Can Collective. My guest
• 36:38
  Speaker 1: is Homish Pepper from Harbor Asset Management. Take squeeze one
• 36:40
  Speaker 1: more before we wrap it up, Richard.
• 36:42
  Speaker 4: High High, I've got an on topic question.
• 36:46
  Speaker 1: Boom, then go.
• 36:50
  Speaker 2: Fantastic, Richard.
• 36:52
  Speaker 4: I'm renewing on having to refix my rate next week,
• 36:57
  Speaker 4: so I'm aware of what's happened where that there's going
• 37:01
  Speaker 4: to be the invasion rates can be announced next week,
• 37:04
  Speaker 4: which is going to be after I've had to make
• 37:07
  Speaker 4: a decision, except that I'm not stressed at all. So
• 37:10
  Speaker 4: I'm just looking at a strategy that will be sort
• 37:12
  Speaker 4: of long term game for short term day. And I'm thinking,
• 37:16
  Speaker 4: would it be smart to go on to a floating
• 37:20
  Speaker 4: rate and then maybe leave it a couple of weeks. Now,
• 37:22
  Speaker 4: I'm not asking you to tell me whether that's a
• 37:24
  Speaker 4: good idea, because.
• 37:25
  Speaker 6: You don't do that. But what I'm.
• 37:27
  Speaker 4: Interested to know is what pitfalls you see in that
• 37:30
  Speaker 4: sort of struggle.
• 37:31
  Speaker 1: What rate? Did you say?
• 37:32
  Speaker 4: A floating rate of floating? Yeah, so like you know,
• 37:36
  Speaker 4: at any time, I can just you know, in three
• 37:38
  Speaker 4: weeks time, I can say okay, now I want to
• 37:40
  Speaker 4: fix it. I understand that's the situation.
• 37:44
  Speaker 1: Well, ho musch, I mean there's a logic to that,
• 37:46
  Speaker 1: isn't there If you think it's going to fall fast
• 37:48
  Speaker 1: and quick, isn't it?
• 37:50
  Speaker 2: Yeah?
• 37:50
  Speaker 3: I think the thing to bear in mind with you know,
• 37:55
  Speaker 3: whenever you're contemplating a floating rate, it's just how much
• 37:59
  Speaker 3: higher those floating rates are relative to the fixed rates.
• 38:04
  Speaker 2: So you know, just for.
• 38:05
  Speaker 3: For example, you know, looking at say A and Z,
• 38:09
  Speaker 3: you know they're probably in the region of fifty or
• 38:11
  Speaker 3: sixty bases points above a six month rate, So they're
• 38:14
  Speaker 3: pushing up towards eight percent for a for a floating rate,
• 38:18
  Speaker 3: and so you know, just speaking generally, I guess you
• 38:22
  Speaker 3: need to be sort of calculating how long you would
• 38:26
  Speaker 3: want to be on that thing.
• 38:28
  Speaker 4: Before only only two or three weeks, you know, maybe
• 38:33
  Speaker 4: a moment. Yeah, look at what I'm what I'm not
• 38:37
  Speaker 4: clear about is you know they say, oh, the banks
• 38:40
  Speaker 4: predict the terms, but they would have, you know, they
• 38:42
  Speaker 4: would have. Maybe it doesn't what happened the other day,
• 38:45
  Speaker 4: but are they going to be predicting another rate? Prop
• 38:49
  Speaker 4: and winter next November?
• 38:51
  Speaker 1: November?
• 38:52
  Speaker 2: November November the next eight.
• 39:00
  Speaker 4: Right, so when would they start doing that, And you know,
• 39:06
  Speaker 4: if I was waite to say the mid November.
• 39:09
  Speaker 1: Yeah, yeah, Okay, we've got about a minute left though,
• 39:14
  Speaker 1: Just so you know.
• 39:17
  Speaker 3: I'll just quickly reiterate something I said earlier, which is
• 39:20
  Speaker 3: this is not a situation where mortgage rates are disconnected
• 39:25
  Speaker 3: from what wholesale financial markets are saying. They are pretty
• 39:30
  Speaker 3: well reflecting one another. So when I talked about financial
• 39:34
  Speaker 3: markets expecting almost one hundred basis points of rate cuts
• 39:38
  Speaker 3: between now and February next year, mortgage rates largely have
• 39:43
  Speaker 3: that in where their priced now. So you need to
• 39:45
  Speaker 3: think of a scenario where the market can contemplate even
• 39:50
  Speaker 3: lower rates again and that and that's when you might
• 39:53
  Speaker 3: get some movement. But otherwise you've got consistency. You've got
• 39:57
  Speaker 3: quite a bit of consistency between the two.
• 39:58
  Speaker 1: Of the mast. That's I mean, that's why they have
• 40:00
  Speaker 1: such enticing rates now for two years. Because you know,
• 40:03
  Speaker 1: if you wanted to say, do half of your mortgage
• 40:06
  Speaker 1: six months or floating and then fix a bunch of it,
• 40:08
  Speaker 1: that's five point sixty nine at the moment. If you've
• 40:10
  Speaker 1: got a bit of equity and A and Z, you know,
• 40:13
  Speaker 1: they are difficult. They're not. They don't mean to make
• 40:15
  Speaker 1: it easy for you, do they hamish anyway?
• 40:18
  Speaker 2: The banks after all time exactly.
• 40:21
  Speaker 1: Hey ha much, thanks so much for your time mate,
• 40:22
  Speaker 1: and for covering a range of conversations there. Really appreciate your.
• 40:26
  Speaker 2: Time and oh thank you it's been a pleasure.
• 40:28
  Speaker 1: Excellent. And just google the guys at harbor Asset Management
• 40:31
  Speaker 1: that's harbor Asset dot co dot nz and yeah we'll
• 40:33
  Speaker 1: look catch you again. He much, Thanks so much, and
• 40:35
  Speaker 1: thank you for listening. Check out our podcast I got
• 40:38
  Speaker 1: to iHeartRadio look for the Weekend Collective and thank you
• 40:42
  Speaker 1: once again also to my producer Tyre Roberts for great
• 40:45
  Speaker 1: work on the show again Tyra, and we'll look forward
• 40:47
  Speaker 1: to your company, same time again Saturday, three o'clock. Enjoy
• 40:50
  Speaker 1: your week