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Day of reckoning could be messy: Zollner

Low interest rates are compressing pricing of risks and a “day of reckoning” at some point could be messy, ANZ chief economist Sharon Zollner says.

Wednesday, September 23rd 2020, 6:08AM 1 Comment

Zollner addressed the Financial Advice NZ conference, being held across three days this week.

She said very low interest rates had forced people to take a “remarkably relaxed attitude to risk”. “Actual risks are really elevated but priced risks are not.”

Some people were taking on too much risk, she said.

“Are we putting off the day of reckoning by trying to save every investor, every firm?”

Debt was at record highs and “going vertical”, she said.

Zollner said the full economic impact of Covid on New Zealand would only be felt over the coming months as support such as the wage subsidy scheme was wound back and the gap left by international tourism became apparent. While the economy had been able to return to something closer to normal the outlook was challenging, with investment and spending weaker.

She said the support seen all over the world in fiscal and monetary policy had been a “huge step away from capitalism”.

It had been estimated that as many as 15% of companies in some countries were only operating because the cost of capital was so low.

Those “zombie companies” were blocking the potential for new firms to come in and take their place, as would normally happen in a recession that caused businesses to fail.

There was no measurement of the impact on the economy that would have, she said.

New Zealand would have to look to improved productivity to drive growth, she said. The only other options were more people – migration has ground to a halt – or faster use of the world’s resources, which was unpalatable from an environmental point of view.

Tags: ANZ risk Sharon Zollner

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Comments from our readers

On 2 October 2020 at 10:11 am JPHale said:
I’m intrigued as to how this is going to play out. Mass deflation of rent in NYC, $200-300 USD/ft/yr now in the $32-40 USD range (5th ave and time square areas). 60% of businesses closed for Covid not reopening, and mass abandonment of the city.

The UK is looking quite similar as is much of the rest of the world. My question is how long can the disconnect of a Fed pumped market continue when it is so disconnected from he reality on the ground?

I do risk n to investments, I’m seeing significant market risks that are yet to be realised and flow through. How this plays out and impacts in the detail, that’s the realm of the investment adviser...

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online 2.95 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 3.05 2.99 2.99
SBS Bank Special - 2.55 2.49 2.49
The Co-operative Bank - First Home Special - - - -
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 ▼3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.49 2.69 2.79
Median 4.55 2.94 2.99 2.80

Last updated: 23 October 2020 5:00am

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