Across the Ditch: ANZ Boss Warns Of Housing Bubble Bursting – Fire in Southern Skies

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Across the Ditch: Australian radio FiveAA.com.au’s Peter Godfrey and EveningReport.nz’s Selwyn Manning deliver their weekly bulletin Across the Ditch. This week: ANZ CEO warns that hot housing prices in Auckland are now dangerously high, causing an economic crisis. He details measures the New Zealand National-led Government must make to arrest the price hikes.

Runsheet:

Weather.

Headlines roundup.

ITEM ONE:
ANZ CEO WARNS OF RESIDENTIAL HOUSING BUBBLE CRISIS

The CEO of the ANZ – the biggest bank operating in New Zealand – issued a public caution yesterday (Wednesday) that economic indicators suggest the country’s overheated housing market could collapse and that when it does so, it will be “a messy end”.

ANZ chief executive David Hisco is the latest in a line of respected people to speak publicly over concerns the National-led Government is not doing enough to arrest a rapid acceleration in median residential house prices in Auckland.

In an article for the New Zealand Herald, Hisco wrote: “New Zealand is a great country and we’ve come out of the Global Financial Crisis well compared with many. But logic tells me things cannot continue to run this hot.” (ref. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11678081 )

Significantly, the ANZ boss laid out what is really concerning the banking sector. He wrote: “There are storm clouds on the horizon for sure and when they break who knows what will happen.

One thing is certain, if employers start laying off staff because exports to an uncertain world are dropping, those people won’t be able to afford their mortgages and when that happens they will sell their houses. If unemployment rises and the dollar drops, overseas investors will cash in their chips and sell, most probably in a stampede.”

The comments came a day after the Reserve Bank of New Zealand hiked up the loan-to-value-ratio (LVR) to 40% for investors. Hisco said the Reserve Bank hasn’t gone far enough. He said the LVR rate for investors should be set at 60% minimum deposit.

The LVR for first home buyers remains at 30%.

Prior to this, former Reserve Bank governor, and former leader of the National Party, Don Brash, said house prices in Auckland should be at least 40% lower than the are currently. Recent statistics indicate the median house price sits at 10-1 when compared to the median income. Brash said this is a recipe for economic disaster.

The ANZ boss criticised the National-led Government for not creating a policy response to the crisis. He said the Reserve Bank can’t resolve the dangers of economic collapse on its own.

As the public mood has become critical of Prime Minister John Key and his Finance Minister Bill English’s non-performance over the housing crisis – the National politicians have become publicly critical of the Reserve Bank Governor and his deputy.

The result is a political shambles while the banking sector, Reserve Bank officials, economic analysts and the wider public, are all demanding the government intervene immediately with solutions designed to avert an economic collapse.

Hisco’s suggested solutions include:

  • Heavily increase LVR limits for property investors
  • Weaken the New Zealand dollar
  • Voluntary tightening of lending criteria by banks
  • Review immigration policies
  • Have a strong focus on infrastructure build, particularly in the growth regions.

ITEM TWO:
FIRE IN SOUTHERN SKIES

A fiery object lit up the souther skies of New Zealand on Tuesday night, causing hundreds of eye witness accounts all wanting to know what it was.

Some people thought it might have been a meteor, others wondered if it was an aircraft on fire and crashing back to earth. But apparently it was most likely space junk, and more than likely booster rockets launched into space to connect up with the International Space Station,

Space junk apparently is reasonably common and sightings of a fiery re-entry into the earth’s atmosphere are equally as commonplace.

As we understand it, over the years, numerous bits of space junk have made it through the atmosphere landing in Australia.

Tuesday night’s spectacle has some people over this side of the ditch wondering if NZ and Australia will be in the firing line when the International Space Station is finally deconstructed and its bits left to re-enter the earth’s atmosphere or burn up on approach.

Amazing thing that night’s sky. I wouldn’t mind getting a telescope one day.

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Selwyn Manning, BCS (Hons.) MCS (Hons.) is an investigative political journalist with 23 years media experience. He specializes in reportage and analysis of socioeconomics, politics, foreign affairs, and security/intelligence issues. Selwyn has extensive experience as a commentator and has provided live political analysis to a wide range of television and radio organizations broadcasting in New Zealand, Australia and globally including the BBC (Five Live, London) and BBC (World Service). He is currently a correspondent to Australia's FiveAA radio, and is a regular live-on-air panelist on Radio New Zealand's The Panel with broadcaster Jim Mora.

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