It is not just New Zealand that is looking like it will have lower interest rates for longer than expected. Around the world central banks are cutting key interest rates or are having second thoughts about plans to hike rates. It is because they are looking for ways to stimulate growth.
World markets rallied at the end of last week after the Bank of Japan (BOJ) announced it was cutting a key interest rate to below 0 percent. Japan’s commercial banks will now have to pay the central bank if they want to deposit spare funds. The Bank of Japan hopes this will encourage the trading banks to lend more money to Japanese businesses.
The US markets rose over 2 percent on Friday after the BOJ’s announcement. But US markets are still down more than 6 percent since the start of the year.
New Zealand’s sharemarket has done better. It has fallen 2.4 percent since the start of this year.
Investors are spooked about the slowing Chinese economy. There are also plenty of people who doubt the official figures coming out of China.
But there are many other worries as well, like the falling oil price.
Crude oil prices fell 10 percent last month. Consumers like it when petrol prices fall, but it is not so good when you are an oil producer. Whenever an oil rig shuts that means workers have lost their jobs.
If prices stay at current levels it is likely we will see smaller and newer US oil producers going out of business. That is one of the reasons that the Middle Eastern producers have not scaled back production yet. If prices stay at these levels it could drive some of the competition out of the market.
The New Zealand dollar starts the week lower against the Australian currency. It’s trading at 91.4 cents.
The Kiwi is sitting at 64.78 US cents, 45.5 British pence, 59.8 Euro cents and 78.58 Yen.
Newshub.
