Brian Berry - Financial Advisor
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Despite the fact that the Aussie Reserve Bank increased their version of the OCR (Official Cash Rate) on Tuesday, it appears that there is not going to be a flow-on effect on our wholesale interest rate market here.

Australia continues to be the ‘Lucky Country' as it is the economy that has best come through the ‘Credit Crunch', in fact, avoiding a recession completely (only one negative quarter versus the three required to be classed as a recession). Saying that, they lost the first ODI on Wednesday night, so it's not all good from their point-of-view!

World financial markets are now starting to view NZ and Australia as being more separate than previously and this is reflected in a lower NZ dollar against the Aussie dollar. This is good for those exporting to Australia as they will receive more for their exports and this assists the NZ aim of achieving an export-led recovery.

A major reason for this altered viewpoint is that the Aussie OCR now sits at 4 per cent versus the 2.5 per cent here. That is a considerable difference and that combined with the strength of the Australian economy encourages more investment in Australia and less in NZ.

With regard to interest rates in NZ, it looks like it's ‘steady as she goes' for the next couple of months as we wait to see how positive the economic data is for the start of 2010. There is currently no pressure on the Reserve Bank to start hiking the OCR and with improved lender/bank margins, there is little likelihood of increases in home loan rates in the short term.

This points to a strategy of taking the variable rate in the short term, but being prepared to consider fixing for perhaps two years once the economic data starts improving and before the Reserve Bank starts increasing the OCR in response to that.