Infometrics September newsletter
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September 2017

As we wait for inter-party talks to determine the makeup of our next government, Infometrics takes the spotlight off politics and takes a look at some broader economic issues.

Dr Adolf Stroombergen questions whether large transport infrastructure projects can deliver economic benefits much greater than conventional analysis predicts.

Mieke Welvaert looks at the booming car market and explains why we have pushed up our car sales forecasts.

The Cadbury factory closure has given Dunedin some negative publicity but its economy is in good shape - Kelvin Davidson looks at opportunities in its commercial property sector.

And to round off, Mieke examines why the Reserve Bank are unlikely to consider rolling back loan-to-value ratio limits.

The Wider Economic Benefits of Greater Connectivity
wp-Oresund bridge2
The Oresund bridge between Copenhagen in Denmark and Malmo in Sweden, a truly transformational (€4 billion) transport project that led to economic benefits much greater than would be estimated using standard cost-benefit analysis. Although something on that scale is unlikely in New Zealand, it does raise the question of whether investing in large transport infrastructure projects could deliver benefits additional to those estimated using the NZ Transport Agency’s Economic Evaluation Manual.
Why are our car forecasts so much higher than last time?
We have revised up our car sales forecasts considerably over the five-year forecast period when compared to our February outlook. A big part of this long-term lift is a change in our forecasts for net migration. But there are also factors, such as high ownership rates and an improving economy, which are also going to push up demand for vehicles throughout our five-year forecast period.
It’s worth keeping an eye on Dunedin’s commercial property market
wp-Dunedin commercial property
Commercial property in Dunedin tends to slip under the radar a little, with few buildings being of sufficiently high value to get the big institutional investors interested. However, given a solid local economy and the long-term impetus that will be provided by the hospital redevelopment, the future investment returns on offer from Dunedin property could be quite attractive.
Reserve Bank unlikely to consider rolling back LVRs
Plummeting house sales prompted the Real Estate Institute to call on the Reserve Bank to review its loan-to-value ratio limits. But the effect of LVRs is only part of the picture. Floating mortgage interest rates have ticked up over the past year. And, after being downgraded by Moody’s and Standard and Poor’s for their high exposure to property markets, it appears that Australian-based banks are being more selective in their lending. With the target of financial stability, the Bank appears to be nowhere near the removal of LVRs.