Wholesale Banking Performance Analysis
NZ regional outlook
Economic
Indicators (%)
CY10
CY11 CY12(f)
CY13(f)
CY14(f)
GDP growth
Unemployment
1.2
1.4
2.1
2.9
1.4
19
6.7
6.4
6.2
5.6
5.4
2.8
33
3.3
The latest business surveys are consistent with the
moderate recovery we are forecasting for New
Zealand. Although the rebuilding in Christchurch will
drive a lot of construction through the next year, there
is still quite a broad-based upturn in demand
This upturn follows years of restrained retail spending
and a sluggish housing market. House prices have
plateaued since 2007 but have more recently begun to
edge up. Households have lifted their savings effort,
building up their bank deposits. This process
suppressed consumer spending for a long time but
retail sales growth improved in the latter half of 2011
and the surveys show that continuing
The household sector has been gradually
strengthening its balance sheet through very low
borrowing, restrained spending and improved saving.
Debt to income ratios are falling, liquid assets are
building up. While it continues, this slow process
should hold down economic growth but lay the
foundations for a more sustainable economy later on
Activity has been boosted by very high commodity
export prices which have taken the terms of trade to
levels not seen since the early 1970s boom.
Commodity prices are now falling and the terms of
trade are off their mid-2011 peak, but prices are still
high by historical standards, supporting farm incomes
We expect only a modest recovery in system credit
growth as de-leveraging continues. Asset quality has
deteriorated through the long period of sluggish
economic performance but the system impaired loan
ratio remains very low (around 1.4% at end 2011)
Inflation
4.0
1.8
23
2.3
2.6
3.2
Cash rate
3.0
2.5
2.75
3.75
4.25
(end period)
System
FY10
FY11
FY12(f)
FY13(f)
FY14(f)
Growth (%)
Housing
3.1 1.6
1.4
2.4
3.4
Personal
-3.3 -1.0
0
1.5
115
Business
Total lending
Household retail
deposits
-3.0
-0.8
1.3
2.5
-0
0.4
0.5
1.3
133
2.8
28
2.4
3.3
7.2
8.3
7.5
6.9
Australian housing prices and debt
Real dwelling prices 1993 = 100
116
Index
Housing affordability
Index
Index
National Australia Bank
Index
50
50
200
200
Capital cities
40
40
150
150
30
30
Australia
20
20
100
100
10
10
50
50
0
2002 2006 2010
1990
1994
1998
1986
Source: ABS, deflated by private household consumption deflator
Index
150
Household debt-to-income ratio
%
50
120
40
Total (LHS)
Housing (LHS)
90
30
660
30
20
20
Household debt to
housing assets (RHS)
10
0
1986 1990 1994
Sources: ABS; NAB; RBA
0
1998 2002 2006 2010
Note: Income is disposable income after tax and before interest payments
Household sector excludes unincorporated enterprises
1986 1990 1994 1998 2002 2006 2010
Source: REIA
0
House prices have fallen from their peak in mid-2010,
though remain at relatively high levels
House price growth was most marked from mid 1990s to
2004, and also accelerated sharply through 2009 and the
first half of 2010
▸ Expectations are now for a stabilisation of prices in
coming months followed by only marginal appreciation
into the medium term
Housing affordability and the debt service burden have
improved in the face of lower mortgage rates (with recent
cuts to help further) and household deleveraging. That
said, the debt burden remains at historically high levels
National Australia BankView entire presentation