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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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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 ▼6.79 ▼6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 ▼7.29 ▼7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 ▼6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 ▼7.39 ▼7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 ▼6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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