Originally Posted by
Balance
Had a chat with one of my banking contacts yesterday regarding interest rates outlook and as an aside, his view on HGH.
They (the bank which btw is an international bank, not one of the locals) believe that the RBNZ has well and truly misread the weak state of the NZ economy and is well behind the curve. They are observing many very weak points already apparent in the economy (financial stress, retail spending, recession despite record net migration, weak property prices, declining tax take, increased unemployment despite record migration to Australia and big increases in insolvencies and receiverships) and are concerned that the RB will overdo using high interest rates to crunch inflation.
Especially when inflation is already heading lower (annualized March quarter was 2.4%) and will continue to go lower due to the above weak points. Domestic inflation being targeted by the RB is unlikely to come down in a big hurry given it's ever increasing local council rates, government charges and household servicing costs like insurance driving costs increases.
Net net, they believe the RB is going to have to cut rates sooner than later and cut sharply. He likened the RB to a drunken driver in charge of the monetary policy car driving along a windy road!
AS for HGH, his view (not the bank) is that buying Challenger Bank makes a lot of sense for one strong and compelling reason - access to cheaper funds courtesy of the Australian FCS deposit guarantee scheme. Australians do place their funds up to $250,000 with different banks to take advantage of the guarantee, say $250k with 4 banks than $1m with 1 bank. He thinks that's something which has been missed by many in the market.