Interest rates good, jobs bad

BRITISH immigrants to New Zealand have often been surprised that the mortgage rates have remained high over the last ten years while it has become ever cheaper to find a loan back in the UK.

Yet Kiwis are hopeful this reluctance to join the debt-frenzy of the rest of the world will shelter them from the worst excesses of the recession. Instead of the bleakest economic outlook since the 1930s, then, Kiwis are looking forward to a mere re-run of the 1970s.

That's the hope, in any case.

Nevertheless, results from the latest NZIER Quarterly Survey of Business Opinion (QSBO) point to a further contraction in domestic trading activity for at least the coming year.

"When seasonally adjusted, the net balance of firms reporting a fall in their own activity worsened to 47% in the March quarter, which is the worst result for this indicator since at least 1970. Expectations improved slightly, but are still very low. A net 38% of firms reported that they expect a drop in their own activity in the June quarter. The recession is therefore likely to be deeper than previously forecast," said the report.

But it means Kiwi houses will become more affordable. The report says, that a net 71% of financial services firms expected interest rates to be lower over the next twelve months than in the past year.

This, of course, would be good news if it wasn't coupled with the expected rise in unemployment, and a net 36% of firms report that they intend to reduce staff numbers over the next three months, after a net 34% actually did so in the last three months.

These figures are the highest since late 1991 and the report makes for gloomy reading overall. Bloomberg suggests that business confidence in New Zealand is at a 35 year low.