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Immigration the Key to Growth

I’d been thinking about it for some time – just how long can these low interest rates go on for?

Take me down to the paradise city
Where the grass is green and the girls are pretty
Oh won't you please take me home
I wanna go, I wanna know

Guns N' Roses - Auckland concert 

I’d been thinking about it for some time – just how long can these low interest rates go on for?

What prompted me to action was the article in this morning's NZ Herald where Liam Dann says "There is virtually no chance of any change in the official cash rate and focus has turned to the odds of any change at all in 2017."   

But it was Roger Kerr’s article in on 31 January that caused me to reflect on the changes in interest rates since I entered investment banking over 40 years ago.

Roger says he “finds it surprising so many pundits thought record low interest rate would continue” and that “Higher fixed term mortgage rates, higher bank lending margins to corporate/commercial borrowers and more stringent bank lending/credit criteria are a feature of the debt and interest rate markets in early 2017”. 

In my own experience the residential first mortgage rate in 1968 was about 7% and in 1986 18%. This Reserve Bank of New Zealand graph shows the change in rates from 1990 and notes the highest was 20.5% in June 1987

So it was really interesting to see another article by Jarrod Kerr in which he says “we are in the middle of the largest demographic shock ever seen”. He suggests interest rates are destined to remain low as population growth (which induced the high interest rates in the 1980’s) declines. 


Jarrod’s view is it’s all about migration. I’m not going to get into detail, it’s a long article. Enough to say the U.S (hmmm maybe with Trump that might change), Australia and New Zealand have much younger populations “and that migration flow can solve (or at least postpone) a lot our first world problems.” See New Zealand statistics here

I read the article several times and the more I read it the more I liked it. It’s very thought provoking. He says, “There is push back against immigration, competition and globalisation. That could give rise to an inflation pulse in due course. But more importantly, baby boomers have been retiring and supplying interest rate product. A large driver of the glut in global savings has been the saving of baby boomers into their retirement.”

A must read in the article is “Lucky Country. Lucky to be in Demand” and the section on Australasia’s proximity to Asia and especially Figures 33 & 34. He says “Australia and New Zealand are part of the hottest club on the planet” I’ve mentioned the importance of our proximity before – see my newsletter written 5 years ago on the Asian Crescent Moon. 

By the way, the popularity of New Zealand as a destination for tourism and immigration has been growing rapidly, with population growth from migration more than trebling in the last 3 years. See NZ Herald article by Sophie Boot

Interest Bearing Investments.

Of course your view on interest rates will depend upon whether you’re borrowing or investing money. Low interest rates are great for home buyers and businesses. 

But if you’re retired and looking for a regular income to pay the rent or mortgage and every day expenses, higher interest rates are a boon. To see the 2 year term deposit rates for the most common interest bearing investment available to everyone click here. These range from 1.0% to 5.5% p.a.   

There may well be higher rates available and anyone interested should talk to their financial adviser. At TBK Capital we do not give financial advice but structure investment opportunities for “wholesale” investors, one of which by the way, is a first ranking secured fixed interest investment paying 12% p.a.

Other Investments with a Fixed Return

I mentioned some of these in my November newsletter Investing in Property and Fixed Interest.  The most common available here fall under the heading of managed “Funds”.  They vary as to the asset classes within the fund which include property, shares and fixed interest. The recommended minimum term of the investment seems to be about 3 years. This is a specialised area and for more information you should contact your financial adviser. 

Property funds are also popular. There’s a certain feeling amongst investors about the stability of the underlying asset of property. Some funds simply offer a fixed return while others include any appreciation in the property. At TBK Capital we’ve offered these in the past only to wholesale investors. But we’ve got a new one coming up shortly which has a Product Disclosure Statement and accordingly is open to the public. Let me know if you’d like a copy when it’s available.   

Borrowing Money

Of course low interest rates are attractive when you’re borrowing money. 

At TBK Capital we offer a service arranging debt finance for business and property.  To see more about this read my March 2016 newsletter “Debt Finance Options Available through TBK Capital”.

Recent Government regulations attempting to slow the rising cost of housing, have made it more difficult to raise residential mortgages, and over the last few months the banks have made it harder to obtain finance for subdivisions and residential and commercial property developments. However there are other ways – and we can help there.

However we have noticed in our sister company Tabak Business sales, the banks' appetite for lending to businesses has improved. So remember if you’re interested in selling or buying a business check out their website. Alternatively if you’re looking to arrange the finance to purchase a business or to expand an existing operation, email or give me a call on 021 902 901 or 09 307 3257.




John Paine B.Sc., Dip BIA
TBK Capital Limited
Level 10, BDO Building
120 Albert Street
Auckland 1010, New Zealand
Phone +64 9 307 3257
Fax +64 9 309 4519
Mobile +64 21 902 901


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