NZ Engine

Source: Radio New Zealand

The official cash rate might have been cut – but how much further can we expect home loan rates to fall?

The Reserve Bank cut the OCR on Wednesday by 25 basis points (bps), taking it to 2.25 percent.

That was widely expected, but what was a little more surprising was how little room the bank left itself for further cuts to come. It said it would cut again if it needed to, but only if the economy was likely to really underperform its latest forecasts.

It forecast a bottom for the OCR of 2.2 percent, indicating little room for downward movement, and for increases to 3 percent around the end of 2028.

While banks responded with cuts to floating rates, commentators said the indication that the Reserve Bank probably thought it had done enough in terms of interest rate cuts meant fixed rates might not have much further to fall.

Markets had already priced in the 25bps reduction, and a trough in the forecast of 2.15 percent. One-year swap rates have fallen from more than 3 percent in August to less than 2.5 percent.

Kiwibank chief economist Jarrod Kerr noted that swap rates rose by a little more than 5bps after the announcement.

Infometrics chief forecaster Gareth Kiernan said there could be pressure in the near term for the bigger banks to match the one-year rates being offered by banks such as SBS and the Bank of China.

SBS has been offering 3.99 percent for one year and the Bank of China 4.28 percent. The big banks are all advertising 4.49 percent.

“However, today’s statement means there’s little likelihood of wholesale rates heading much lower unless we get a bad run of economic data or the market’s AI bull run suddenly ends,” Kiernan said.

“Having said that, with the OCR expected to hold around current levels for about a year, I don’t think there’s a massive hurry to rush out and lock in a fixed rate – it’s probably not until mid-2026 that any upward trend might start to emerge in most of the retail rates.”

BNZ chief economist Mike Jones agreed that if the OCR had fallen as far as it would go then there was limited scope for mortgage rates to keep falling. He said Wednesday’s move had been more than 100 percent priced in by markets.

“We probably thought it was on its last, or that downtrend was on its last legs anyway, and the statement today was probably more of a shift towards a neutral bias.

“They are not quite there, but more of a shift than people might have expected. So I think the scope that perhaps was there to keep cutting mortgage rates has been reduced a little bit because we’ve seen wholesale interest rates jump up a bit. That may not stick around because, of course, the bank has given itself that optionality to respond if some of the signs of life in the economy don’t get established over the summer.”

He said what happened internationally would also play a part.

It could mean it was time to lock in a longer rate, he said. “People sort of dipped their toes into long-term fixes if you look at bank data a few months back but then kind of backpedalled into the shorter fixed terms… I think we are going to see more of a debate from here about fixing terms and whether it’s time to push out the average term of borrowing a bit further into the future.”

ANZ economist David Croy said the bank had for some time been of the view that the low point in the mortgage rate cycle was approaching and borrowers could benefit from locking in a longer term.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

A Hamilton company has done a deal to supply its virtual reality (VR) training systems to a multi-billion-dollar defence contractor.

The deal between Company-X and UK-based Babcock follows on from the New Zealand Navy using the systems.

Company-X’s head of training and simulation, Lance Bauerfeind, would not put dollars or jobs figures on the deal as it had just been done, but said it was the biggest they had done in the VR training space.

“That’s going to enable us to take our VR simulation training to the world.”

It was in line with the government’s push to develop a local defence export industry.

“They are supporting and encouraging you know these large multinational contractors to work with us local businesses here in New Zealand, and that’s great for the economy and it’s great for us … and also it’s great for the defence and tech sector.”

Without the Defence Capability Plan that bankrolls tech developments, the deal would probably have taken “a lot longer” to secure, Bauerfeind said.

The 13-year-old company’s VR headgear and software is used to train for chopper landings on ships and rescuing divers from the seafloor.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

The retail sector is still hopeful it can convince the government to ease its hardline stance on banning card surcharges.

The government plans to ban surcharges on in-store card payments like Paywave by May next year, a move that has alarmed industry groups like Retail NZ, the Auckland Business Chamber, and several other chambers of commerce.

“Our members have been really unhappy about it. We’ve surveyed all our members and we’ve been talking about it for a while and they’re really clear that it’s not something that they support,” Retail NZ chief executive Carolyn Young said.

Young hoped to convince the government to compromise by capping surcharges instead of banning them entirely.

“What we’re trying to do is provide a solution that’s a middle ground that should appease everyone,” she said.

Her proposal was for surcharges on debit card transactions to be capped at 0.5 percent, and for credit cards to be capped at 1 percent.

“You could review it in a year or two years’ time. You could do a full consultation with the whole sector, but at least in the interim, we’d have a solution that the minister would be able to have the certainty of what consumers would be [paying] and merchants would understand fully what they could charge,” she said.

Young said the consensus among retailers was that they would raise the price of their products to offset the loss of revenue from surcharges.

“If [customers] weren’t getting surcharged, they’d get a price increase. So, regardless of how they pay, our members have told us that they would increase prices.”

The government has stood firm on its decision to ban surcharges outright, but Carolyn Young hoped that position could thaw.

“We’re really hopeful that we can get a little bit more airtime with the minister to go through and discuss this more fully,” she said.

“I know from Select Committee that a significant portion of submissions did not support the surcharge ban. So, we want to be part of the solution and we want to find a way in which we can say to the minister, ‘how about we look at this as a solution?’, and it’s a road that could keep everybody happy from consumers to business to government.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

Class action has been filed against national grid operator Transpower and its maintenance contractor Omexom over the toppling of a power pylon in mid-2024 that cut power to the entire Northland region.

The legal action is being taken on behalf of the roughly 20,000 businesses affected by the outage and, if successful, could end up costing the two companies millions of dollars.

Hannah Brown, a partner in Sydney-based law firm Piper Alderman, said no specific sum was mentioned in the legal papers filed late on Wednesday – but an estimate last June by economic consultants Infometrics put the cost to businesses at $60 million while the Northland Chamber of Commerce gave a figure of $80m.

A report last year by Transpower found the pylon at Glorit, northwest of Auckland, fell over on 20 June last year when contractors removed the nuts from at least two of its legs at once.

Brown said a subsequent review by the Electricity Authority concluded the collapse was caused by “entirely avoidable” factors including inadequate procedures and training.

“This wasn’t just another power outage or an accidental or unforeseeable event like a weather event or a storm. It was something that was completely avoidable, and for that reason, we think those responsible should be held to account, and if they aren’t, that just breeds a sense of complacency in the future.”

The power cut affected about 180,000 people.

Most homes had power restored within seven hours but some large businesses, such as timber mills and dairy plants, lost more than three days’ worth of production while restaurants had to throw away spoiled food.

After pressure from Northland MP Grant McCallum and the local Chamber of Commerce, Transpower and Omexom each contributed $500,000 to a “resilience fund” for projects designed to lift the region’s economy.

However, Brown said that amount was “completely disproportionate and insufficient” given the actual losses suffered by Northland businesses.

Along with Piper Alderman, the class action was being run by New Zealand law firm LeeSalmonLong and bankrolled by litigation funder Omni Bridgeway.

Brown said it was intended to be an “opt-out” lawsuit, which meant all affected businesses would be included unless they chose not to take part.

There was no cost to businesses taking part, but if the “no win, no pay” class action was successful, the law firms and funder would take a commission.

Without class action, Brown said it was hard for individual businesses to take on the might and resources of a state-owned enterprise like Transpower or a large multinational such as Omexom.

Omexom’s France-based parent company, VINCI Group, declared net income of just under $10 billion last year.

“This is about giving businesses access to justice and an opportunity to group together to fight for compensation,” she said.

Class actions have been rare in New Zealand, and reputedly hard to win, in the past.

However, Brown said that was changing thanks to recent reforms making class actions more accessible.

Successful cases, such as the ASB’s settlement in a banking class action over disclosure breaches, showed the legal landscape was evolving.

She said the law firms were confident they had a strong case, much of which was built on Transpower and Electricity Authority reports.

“We wouldn’t be pursuing this if we didn’t believe it had strong prospects,” she said.

Northland businesses affected by the outage would be invited to register and provide information about their losses.

Some were already on board but now that the class action had been filed, it would be much easier to engage openly with affected businesses across Northland.

If the class action was successful, Brown said compensation would be distributed among those businesses in proportion to their losses.

A Transpower spokesman confirmed legal papers had been served on the company late on Wednesday, but would not comment given that the matter was before the courts.

Omexom could not be contacted.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand