Nz Fallout To Hurt Australia
The Age
Monday August 4, 2008
MORE than 30 New Zealand financiers and investment trusts have failed or been forced to stop investors withdrawing their money in the past two years, underlining the exposure of Australian banks to bad debts in New Zealand.
AMP's move to halt redemptions from a New Zealand property trust on Friday is just the latest sign of the collapse in confidence in mortgage and property companies in the recession-hit economy.This collapse, and the downward spiral of property prices - particularly in Queenstown and Auckland - will have repercussions for Australian banks as home mortgages, credit cards and corporate loans turn sour.And the rapid fall from grace of New Zealand's economy, which only last year was enjoying a major housing boom, highlights the risk to Australia from inflated property prices and high interest rates.Last year, central banks in both countries lifted rates several times to fight inflation.But the Reserve Bank of New Zealand has begun cutting rates, as it becomes clear the economy is on for a long period of weakness, despite the benefit of high international dairy prices.Among Australian banks, ANZ is the most exposed to the New Zealand economy, with about 22% of earnings from the country, excluding the bank's institutional arm, according to Deutsche Bank.The other big banks have about 9-13% of their earnings from the country.
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