Finance with Don Fraser Fraser Farm Finance

New Zealand is set to fly during the next 18 months. Brace yourself – as all the
indicators are there.

Here is my thinking around why...
1. Auckland and Christchurch house prices have led the way, as they have in past recoveries.
2. The Reserve Bank is smartly adjusting Loan to Value Ratio (deposit percentage) on housing rather than pushing up interest rates, which would take the growth out of the economy.
3. Interest rates will rise, but they will be held down as long as possible. In fact, I think they just keep threatening a rise to keep us in check.
4. Fonterra's increase in payout will see an additional $4 billion hit the economy.

But wait, there is more...
5. With a multiplier of six (that is a calculation to show how the money goes round and round), this Fonterra payout injection balloons out to a $24 billion boost.
6. Sheep, beef, kiwifruit and avocados are also looking strong.
7. Banks are back competing and actively looking for business, taking on more risk and doing deals.
8. We have the Government's Deputy Prime Minister and Minister of Finance Bill English with his hand firmly on the country's chequebook with standout results. He and we (New Zealand) are recognised worldwide as one of the fastest economies to recover from the recession.
9. We have good growth in the economy.
10. On a worldwide scale, we are politically very stable.
11. We have vast reserves and resources of minerals, particularly petroleum products. Did I hear somewhere that we could be the next Saudi Arabia of this world?
12. Our main export income is based on a renewable resource – grass. Don't laugh, it is true. Every year, we grow grass and convert it to food and products to sell – only to do the same next year.

So, there you have it. Look out, because our economy is going to move up a gear. And yes, farm prices will increase; and yes, inflation is arriving faster than we realise. Watch out for cost increases; and try and hold the profit in your business and avoid consumption spending. Enjoy the ride and ensure you make good logical decisions.

These are the opinions of Don Fraser of Fraser Farm Finance.
Any decisions made should not be based on this article alone and appropriate professional assistance should be sought. Don Fraser is the principal of
Fraser Farm Finance, and a consultant to the farming industry.
Contact him on 0800 777 675 or 021 777 675.