This is the home of past editions of Rodney’s Ravings. 

It represents our attempt to help people better understand some of the big-picture economic issues of on-going relevance.  The reports are unashamedly tainted by our view of things economic and not everyone will agree with our perspective, while we make no apology for our occasional non-PC transgressions and our inclination to put the boot into economic forecasters.

Click on the report titles to download the reports in pdf format.

Time to give the residential building industry a fair go – managing a business in an industry that can grow 30% one year and contract 30% the next is a challenge.  This Raving looks at the challenges facing the industry and proposes some remedies.

Housing affordability – is the solution in the wings? – plans by the government to review urban limits and the Resource Management Act offer the potential for NZ to again experiencing affordable housing.

Property price prospects – the real story – what matters in the long-term is the performance of property prices relative to prices in general (i.e. real prices), with NZ real house prices still 25% above long-term sustainable levels.

House price versus consumer spending prospects – not only do the RBNZ’s forecasts for consumer spending growth in 2010 look weak, but its view of relative prospects for house prices versus consumer spending look to be topsy-turvy.

New Zealand faces the prospect of a North Sea oil-style boom/shock – it seems to be a matter of when not if NZ makes a major oil discovery so this Raving looks at the role the government is playing in achieving this and puts the issue in context.

International financial linkages and NZ’s latest monetary policy experiement – The global crisis has resulted in NZ financial markets being closely linked to overseas developments, but this won’t always be the case especially when the RBNZ has a habit of going off the rails.

House and section prices, affordability and international competitiveness – NZ house and section prices remain high relative to incomes, with further adjustment likely once the veil of affordability offered by low interest rates is removed.

Should Australia take over NZ monetary policy? – The Transtasman Taskforce is investigating whether NZ should adopt the AUD.  Doing so would see the RBA take over NZ monetary policy, which could be the best reason for NZ adopting the AUD.

The share market and the economic recovery revisited – the rise in share prices so far should just reflect the removal of the extreme negative sentiment that existed earlier in the year, with the market not close to pricing in the full extent of the strong economic recovery I expect.

The financial crisis – debt, asset prices and economic growth – some economists are predicting that the economic recovery will falter because of the negative impact of falling asset prices but in the case of section/land prices the unfolding falls will help fuel the recovery.

Why the economic recovery will arrive earlier than is generally expected – This Raving uses the international car market to explain the major role the stock cycle will play in driving an earlier recovery in economic growth than is generally expected.

A lower OCR need not mean a lower NZD - There has been another call for the RBNZ to cut the OCR in an effort to get the NZD down and help the traded-goods sector but in the current environment further OCR cuts are more likely to result in a higher NZD. 

Consumer spending will recover earlier than is generally expected – most economic forecasters expect the deteriorating labour market to drag consumer spending down with it but this view reflects a poor understanding of what drives economic recoveries.

Is the housing recovery about to fold? – A Westpac economist has predicted a return to low house sales and falling house prices in the second half of 2009, but this pessimistic view doesn’t appear to be well-founded.

Insights into NZD prospects - This Raving looks at the impact of the financial crisis and why the NZD, especially the NZD/USD, has appreciated and why it is likely to appreciate further provided virus-infected pigs don’t fall from the sky.

Treasury’s pessimistic forecasts for residential building are nonsense – in the Budget Treasury forecast a 22.7% fall in residential building activity in 2009/10 despite the fact that the leading indicators are suggesting a sharp recovery is underway.  Is that dumb or what?!

Putting the cut in Fonterra’s payout in perspective – some people in places like the Waikato are worrying that the slashing of the dairy payout could derail the housing upturn but history shows that interest rates and net migration drive housing activity not the dairy industry.

More interest rate stimulus to come – while the RBNZ and banks agry-bargy over whether the latest OCR cut gets mirrored in floating mortgage interest rates this Raving focuses on a much larger interest rate stimulus in the pipeline.

Unemployment prospects and implications – we believe there is good reason to expect the unemployment rate to increase less than most economists are predicting.

Recessions and investing in the share market – this Raving looks at why recessions offer a great opportunity for would-be share market investors to set up share portfolios.

Residential building prospects and the miserly forecasters – even the most optimistic of the economic forecasters surveyed by NZIER doesn’t expect a recovery in residential building until 2010/11, while our unique leading indicator analysis points to an upturn starting soon.

How to interpret seasonally adjusted data – if it has even puzzled you what is meant by seasonally adjusted data, with seasonal adjustments often done to data on the likes house sales or migration, you should read this Raving

Positive news for economic growth in 2009 – most bank economists are picking that economic activity will fall around 1% in 2009 but there are several potential sources of positive surprise for growth that the doomsayers appear to be overlooking or discounting

Could house prices fall 42% - according to an article in the NZ Herald on 6 January we are picking that house prices will fall 42% which is a sufficiently large misrepresentation of our views to warrant putting the record straight.

Housing hell update – following on from the original Housing Hell Raving released in August of last year this report looks at how far through the housing nightmare we have come so far

Portfolio diversification – investing in a diversified portfolio has many merits but diversification has become a mantra of a marketing machine that overlooks the important need to also assess whether the markets/securities the portfolio is invested in offer good, bad or indifferent value.

Monetary policy madness – this 15 page booklet is a cut down version of the booklet produced in 2002 that identified the stupidity behind the RBNZ’s inclination to march interest rates up the hill just to march them back down again, and makes a case for more stable interest rates.

The idiots guide to investment – the smell of naïve investors getting fingers burnt off has inspired me to write what will most likely be Part 1 of The Idiots Guide to Investment.

What really drives the NZD/USD - the popular view that interest rate differentials drive the NZD/USD is occasionally right, but it is only part of the story.  This is a must read Raving for any firm exposed to the currency because it shows what really drives the NZD/USD

Housing hell revisited - the Raving “Are we heading for housing market hell?” (see below) has proved so popular we decided to revisit the issue of whether NZ faces the risk of an imminent large fall in dwelling and section prices.

Are we heading for housing market hell? – the historical experience with the busts that follow major booms in house prices provides some sobering insight into what might follow NZ’s unfolding house and section price booms.

Inflation causes, costs and cures - attempts to boost economic growth on a permanent basis by running more inflationary economic policies will eventually backfire because the costs of higher inflation will come home to roost.

The costs of the latest monetary policy experiment – the “go for growth” approach to monetary policy pursued by Governor Bollard has been great while the party lasted, but exporters and gullible investors are starting to face the consequences of this misguided experiment.

The house, section, lifestyle and coastal markets are starting to creak - this Raving provides anecdotal evidence of the growing number of “motivated” vendors in the house, section, lifestyle and coastal markets. 

Monetary policy and political conspiracy theories – an independent central bank constrains politicians bent on winning elections by hook or by crook, but monetary policy may no longer be fully independent, while next year’s election poses the risk of more political conniving.  

What really drives the major cycles in the NZ dollar – the popular view that interest rate differentials drive the exchange rate is occasionally right, but it is only part of the story; this must-read report shows what really drives the NZ dollar.

How strong can the economy grow on a sustainable basis – the Reserve Bank and most economists are too optimistic about New Zealand’s sustainable rate of economic growth, while the starting point for the economy is critical in assessing even medium-term growth prospects.