Friday, February 29, 2008

New Zealand a depositors' paradise

As a depositor, rather than a borrower, I should be "rubbing my hands with glee", Roeland van den Bergh writes in the February 28 edition of The Dominion Post.

Under a headline that reads Banks Eager to Chase Kiwi Customers' Cash, Van den Bergh quotes from a report by financial services research firm Cannex This says that, as the cost of borrowing on the wholesale market has soared, New Zealand banks "[have turned] more and more to the mum and dad depositors, also known as the retail market, to boost their deposit base".

"The competition for a greater share of deposit accounts . . . is great news for consumers, who can now make more money by parking their cash in a suitable savings account," Van den Bergh quotes Cannex analyst Jeremy Ooi as saying.

The Dominion Post article continues: "Reserve Bank figures show retail deposits with main banks reached $76 billion in December, up $9 billion from a year earlier and from $58.8 billion in 2005. Non-bank financial institutions held another $10.6 billion in the December quarter, steady on the year before."

Underlying recent trends, Cannex says, is "the continuing effects of the global credit crunch, the possibility of a US economic slowdown and the high volatility currently playing out in the share market". Combined, these factors have "resulted in a wave of financial uncertainty washing over much of the nation".

Thursday, February 28, 2008

New Zealand's banking merry-go-round

When I came to New Zealand in 1972, I opened check and savings accounts at the ANZ Bank in Palmerston North. But the late 1970s were the era of high inflation, which peaked in New Zealand at 18.4 percent per annum in 1980, and I soon found that I could get higher interest rates on my savings at Broadlands - a finance company whose office was conveniently located across the road from the ANZ.

As time passed, I put more and more of my money into Broadlands, and continued to do so until the deregulation of the banking sector (from 1984) saw Broadlands become Broadbank on July 22, 1987. This proved to be an ephemeral institution: one of several "banks" that flowered and died during the period. In fact, I still hadn't got used to the change of name when Broadbank was acquired by National Australia Bank on December 3, 1987.

Since National Australia Bank maintained the slightly higher interest rates, and seemed much more secure than Broadbank, I finally closed my accounts at the ANZ. "From now on, I thought, I will do all my banking at NAB." I was therefore a little disappointed when, in 1992, National Australia Bank bought the Bank of New Zealand, closed its Palmerston North branch, and delivered me into the arms of the BNZ.

I didn't particularly want to bank with the BNZ, because my wife was maintaining accounts there and I saw the possibility of confusion arising. (I had noticed, by this stage, that banks had started to make mistakes.) I therefore closed the accounts that had been set up for me at the BNZ, and looked around for another bank.

I decided on PostBank, which had been created in 1987, when the New Zealand Post Office was split up. (With privatisation, the Post Office's three components became PostBank, NZ Post, and NZ Telecom.) Again, I thought I had found a bank I would stay with for a long time, if not for the rest of my life.

I completely overlooked the fact that PostBank had been bought by the ANZ in 1989. What happened next? Yes, you guessed it! The ANZ closed the local branch of PostBank and transferred all its accounts to the ANZ's main branch in Palmerston North - the bank I had turned my back on so many years earlier, when I had gone across the road to Broadlands.

As I waited in the queue at the ANZ to conduct my first transaction, I sheepishly reflected on the curious way in which I had gone full circle.

Wednesday, February 27, 2008

Palmerston North City Council's squandermania

Every day for the past few weeks, I have looked down from my office window at a scene of frenetic activity in The Square, Palmerston North, New Zealand. Diggers, rollers and trucks seem to be on the go all the time, as the roadway below is redesigned.

The overall aim of the exercise seems to be to slow the traffic down - to make driving through the city center such a tortuous experience that motorists will take alternative routes to wherever they are going.

That, in itself, is probably not a bad thing. The problem is that, for several years, the city council has spent enormous amounts of money on its "revamp" of The Square, and now finds itself $156 million in debt.

And now we, the ratepayers, who would have preferred our money to be spent with a little more restraint, are being told that we face "a tough choice" between either "a significant rates rise or a cut in services".

But don't rates already rise significantly every year? Hasn't the council noticed that they already outpace inflation? How long does it think it can ask people who are struggling on static wages to pay more and more for its grandiose projects?

NZ's high interest rates; the kiwi dollar's rise

New Zealand has some of the highest interest rates in the world, says Export NZ.

The association of exporters claims these are driving up the currency, which reached a new, 23-year high of US81.80c about 11.30am today.

"As a result, productive and export sectors are hurting," says Export NZ chief executive Bob Walters. "This will affect the living standards of all New Zealanders."

Official interest rates are set at 8.25 percent to fight inflation, which is sitting at 3.2 per cent - just above the target band.

Today's rise in the dollar led to new calls from exporters and economists for the Reserve Bank to cut rates.

The high dollar is, of course, good news for consumers, who can expect import prices to at least hold. As a saver with several long-term bank deposits, I also benefit.

The interest rate on my latest investment of $20,000 with the ANZ Bank is 8.50 percent. This is for a six-month term that runs from January 5 to July 5, 2008.