The latest news this morning from the Reserve Bank is that the OCR is unchanged and remains at 2.5 percent

Alan Bollard, the Reserve Bank Governor said: “The outlook for the New Zealand economy remains consistent with the projections underlying the December Monetary Policy Statement.”

He continued with “Global activity continues to recover, helping push New Zealand’s export commodity prices higher. Economic growth is most apparent in China, Australia, and emerging Asia. However, sustained growth throughout our trading partners is not assured, with many still facing impaired financial sectors and overall activity still reliant on policy support.”

“Similarly, the New Zealand economy continues to recover. Policy stimulus and improving export earnings have seen a pickup in household spending. That said, households remain cautious, with credit growth subdued. Business spending remains weak.

“Annual CPI inflation is currently at the centre of the target band, and is expected to track comfortably within the band over the medium term.”

“The economy is being assisted by both monetary and fiscal policy support. As growth becomes self sustaining, fiscal consolidation would help reduce the work that monetary policy might otherwise need to do.

“If the economy continues to recover in line with our December projections, we would expect to begin removing policy stimulus around the middle of 2010.”

So some good news in the interest rate market however things are still looking tight in other areas.

Our expectations are for the Reserve Bank to hold the Official Cash Rate steady tomorrow, even though the markets will be searching for clues as to how long the cash rate will stay at current levels.

Economists and analysts from the major banks all believe the OCR will be held at its current level of 2.5 percent.

Chief economist for Deutsche Bank Darren Gibbs suggests there is little scope for surprise in the Reserve Bank’s monetary policy statement and an official cash rate review.

The focus for markets will however be on the Reserve Bank’s updated economic projections, which were last published in September, and in particular, the central bank’s implied stance on monetary policy for 2010.

This morning (8am on 4 December 2009) the money markets were at the following levels:

Official cash rate    2.50% (unchanged)

90 day bill rate       2.78 (unchanged)

1 year swap rate    3.38 (up from 3.35)

3 year swap rate    4.87 (down from 4.95)

10 year bond rate   5.91 (down from 5.95)

Kiwi dollar             0.7273 (down from 0.7380)

Warren Buffett, perhaps the world’s most admired investor, said the financial panic that gripped the globe last year is a thing of the past, even as the U.S. economy’s struggles persist.

The financial panic is behind us,” the world’s second-richest person said at Columbia University’s business school.

“Our economy was sputtering, still is sputtering some.”

Buffett, 79, nevertheless said there is greater opportunity for investments inside the United States than outside, noting that the U.S. economy is far larger than any other.

Last month, preliminary government data showed the U.S. economy expanded in the third quarter, the first three-month period of growth since the second quarter of 2008.

Read the whole story here.

http://www.nzx.com/home/3059880/The-financial-panic-is-over-Buffett

The outlook for the New Zealand economy and financial system has improved in the past six months as international conditions have stabilised, but some risks and challenges remain, Reserve Bank Governor Alan Bollard said today when releasing the Bank’s November 2009 Financial Stability Report.

“Financial market strains have eased, equity markets have mounted a recovery and confidence has improved. Economic forecasts are now tending to be revised upwards rather than downwards. However, global recovery has been fuelled by stimulatory fiscal and monetary policy settings which cannot be kept in place forever. Also, the global banking system remains vulnerable to further shocks.”

I am pleased that Dr Bollard has acknowledged that the markets remain vulnerable.

Some comments however would not be received well by the Real Estate industry who have been looking forward to a recovery and a continuation of the mini boom that many areas have been experiencing.

Dr Bollard said “…To assist this we need to ensure there is no return to a debt-fuelled housing cycle, which would likely bring with it further exchange rate pressure and erosion of competitiveness.”

His comment “”The banks nevertheless remain very cautious in their credit and funding decisions. While generally supporting this approach, we have continued to emphasise that the banks should not overly restrict lending to the business sector.” which is great news for business owners however I doubt the lending institutions will do much about making funds easier to access for business owners.

In the Wednesday ruling, Justice Keith Long reaffirmed his March ruling that invalidated two Springfield foreclosures. After the mortgages had been spun through Wall Street and turned into exotic “mortgage backed securities,” Long ruled, the foreclosing lenders, U.S. Bank and Wells Fargo, couldn’t legally prove they actually owned the mortgages in question.

http://www.necn.com/Boston/Business/…255562400.html

Westpac ordered to pay $ 918m -

Westpac has been ordered to pay $918 million after the Auckland High Court dismissed its challenge against the Commissioner of Inland Revenue over a tax avoidance bill.

ANZ Bank reviews after Westpac loss -

Australia & New Zealand Banking Group is reviewing its legal strategy in light of yesterday’s High Court decision against Westpac Banking Corp.

Listed property up 10% -

The listed property sector gained 9.8% in September, resulting in a more than 55% gain since the sector hit its low in May this year.

Aus unemployment falls -

The jobless rate across the Tasman fell to 5.7% in September, according to latest reading from the Australian Bureau of Statistics (ABS).

Baby boomers hardest hit by GFC -

The recession is continuing to hit the Baby-Boomer generation hard with latest statistics from New Zealand’s largest credit bureau showing a significant 19.37% increase in defaults for those aged 44 to 62 years.

EUFA calls for BlueChip legal fund -

The group championing Blue Chip victims, Exposing Unacceptable Financial Activities (EUFA), has written to the Minister of Commerce and Justice calling for a legal fund to be set up for BlueChip victims.

RBA lifts rates -

Australia has become the first developed nation to reverse the cycle of cuts since the Global Financial Crisis hit. RBA yesterday announced a 25 basis points rise, taking the OCR to 3.25%.

Firms see good times ahead -

NZIER’s October 2009 Quarterly Survey of Business Opinion provides strong evidence that the worst of the recession is over and that the economy is on the mend. Business confidence surged into positive territory in the September quarter (+27% from -14% on a seasonally-adjusted basis), the highest level in a decade.

Confidence on the rise: BNZ -

A net 50% of 20,000 respondents surveyed for the latest BNZ Confidence Survey feel the economy will get better over the coming year.

Houses more affordable -

Houses became more affordable in the three months to 31 August, thanks to lower interest rates, according to Massey University’s latest Home Affordability Report. Home affordability improved by 2.3% in the quarter, albeit less than the 8.5% improvement between February and May.

This is an interesting article I received today talking about the changes that are occurring in the Australian Financial Services industry.

I find it interesting that NZ is going through a similar transitional period and therefor I take note of what is occurring in Oz as the odds are in favor of NZ following suit in many areas.

A review of submissions to the Ripoll Inquiry highlights at least four areas that potentially impact Financial Planning Practices

• Commission – debate around progressively removing or banning the payment of commissions (including trail or service fees) from product or platform providers;

• Licencee over-ride payments – greater visibility of subsidies paid to Licencees by platform and product providers in exchange for support; and debate on the potential conflicts of interest inherent in these arrangements;

• An emerging industry preference for the separation of Advice and Platform fees;

• Asset based fees – divergent views of the appropriateness of fees charged as a percentage of assets under management.

Pre-empting what might be recommended in the Inquiry, and what might ultimately be adopted, our response is as follows:

• Financial Advice and Wealth Management remains a growth industry, where the demand for quality Advice, exceeds the current capacity of the Industry. The cost of client acquisition, of complying with the present Financial Advice regime and servicing clients is expensive, limiting comprehensive Advice delivery to a small percentage of those who need it. To impose a remuneration regime(such as banning commissions) may be politically unsaleable if the ban carries the potential to further limit access by the ‘mid-market’, to Advice. That said we are on a journey that may ultimately separate Advice and Platform fees and reduce the ability of Adviser s and their Licencees to rely on commissions or over-rides.

• Review your current business model – determine the value you derive for Clients and charge separately for it. If you use an outsourced Asset Management model and external Platform prepare your business for the day you may not be able to collect fees for that activity from the Platform.

• Any move away from asset based fees would require significant structural change to the industry and threaten the viability of many funds management, custodial and advice businesses. It would also be out of step and unattractive to larger international funds providers to enter the Australian market – not an outcome that will encourage competition, so highly likely to be avoided.

In my opinion this has been a long time coming and it is about time it happened.
I also think we will see more of it in the future especially as new regulation comes in.

In what has been regarded a landmark case, a client has been awarded compensation of around $250,000 by the court for “negligence and breach of fiduciary duty” by her financial adviser. The judge in the case said, “It is apparent that the advice Mrs Breeze received was wholly deficient for the circumstances. The defendant (VPFS) has been Mrs Breeze’s adviser for some years, and knew her position and her investment profile”.

“It was an unsuitable investment for her, and obviously so. Even if everything went well, the maximisation of gains was some years down the track. Bearing in mind Mrs Breeze’s age and immediate needs, it was not an appropriate investment. It put at risk her one significant asset, namely her home”.

This is yet another case where things go wrong, not primarily because the product failed, but because the adviser failed to make recommendations that were appropriate for the client’s circumstances.

It is proper process leading to justifiable recommendations that is the mark of a professional.

Read the entire article here