Articles by The Professional Trustee Team
Santa Claus has been and gone, the tree has been taken down, and the bells have rung in a New Year. The wind down is over and now it's time to wind up your thinking and actions for 2014. But before you attack the 2014 year, it pays to have a quick look back at 2013 because history is often a precursor of the future.
2013 saw a marked improvement in our own economy. Dairy, meat, wood and wool prices all did exceptionally well and this was despite the lifeless world economy's performance. What we produce was indeed procured by world citizens and at fantastic prices.
• Exchange Rates
If you were into importing, the strong NZ dollar was your friend. You could buy more American, European, British and Australian goods for your dough than you had in previous times. Currency rates remained solid and long reining. Different story, however, if exports were what you were earning your bread from.
• Current Account Balance
Good and bad news here. Thanks to high export commodity prices, we've just experienced the best terms of trade (a measure of export prices relative to import prices) we've ever had in about 40 years, since around 1973. Despite this, we haven't managed a trade surplus and we haven't made much of a dent in our current account balance.
No surprise here. When an economy is moving, so are people and jobs. More of our population became employed and unemployment correspondingly fell. In particular, the construction, engineering, forestry and communications industries snapped citizens up.
Kiwi Land is an attractive place to live, as 4.5 million people (give or take) can attest to. The figures of those coming in through our gates outweighed those leaving by circa 20,000. The modest economies in other countries, as well as the slowdown in Australia's economy, certainly helped us attract people to our shores.
You'd have to be living on another planet not to know what's going on in the housing market. There have been remarkable house price surges and no more so than in respect of Auckland realty. In fact, figures tell us that house prices and household debt echelons are way ahead by historic standards, relative to the incomes from which those debts (mortgages) have to be satisfied. By way of an intervention attempt, the Reserve Bank acted by introducing its macro prudential tool. This saw the subsequent implementation by the banks of the LVR regime. For all the reasons noted in my previous blog on LVRs, this tool does not appear to have had its desired effect in respect of Auckland house prices, although it could well hinder regions outside of the Auckland area in my humble opinion.
• What it Meant for Businesses
When an economy is hustling along, businesses get excited. More products and services are ordered and sold. More people and equipment are required. Confidence subsequently grows.
• What it Meant for the Man in the Street
When unemployment decreases and house prices increase, we feel wealthy, and we show just how wealthy we feel by devoting our time to splurging and spending. Consumption grows and savings dwindle.
Taking a topical snapshot, I guess we could sum 2013 up by saying it was a year of strong development in certain areas. The construction, forestry, communications and housing sectors all experienced good growth. The high NZ dollar, positive migration into NZ and of course an uptake in employment overall, helped to fuel personal and business confidence and consequently acted as the basis for lighting the fires of spending. Overall, a positive year I think. But will such economic progression continue in the wake of expected 2014 events? And what should you be watching out for, capitalising on, and implementing to improve your financial affairs in life? Keep an eye out for my next blog for the answers!
Very informative, a great learning journey. If you are serious about property, or thinking about investing in property, then Property School is a must. - Name withheld
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