By Chris Hutching
Friday 29th November 2002 |
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"We're taking the view that it's stabilising. We're concerned about Japan and the weakness of bank reform but the government there is pushing a bad debt regime a little harder now," he said.
"Germany has a weak labour market and should be reducing interest rates. But in the US consumer spending seems to be strong. Company earnings for the September quarter were like the previous ones lower than previously but above expectations, albeit there are much lower expectations than a year ago.
"Markets since October 9 seem to be rebounding, and the Kiwi currency is recovering.
"The story of consumer strength has been the same in the US as in New Zealand. Companies may not be buying machinery but there seems to be plenty of optimism judging by consumer spending."
Despite volatility on international markets there had been a relatively small outflow from equity funds, Mr Stobo said. By contrast, cash investments funds had experienced outflows because real returns from countries like the US were negative after taking inflation and tax into account. So people were switching to fixed income or even equities again, he said.
"The New Zealand house market is still strong. There was some winding back of resource consents in October after a record September. Australia and New Zealand are clearly performing better than the rest of the world.
"We're probably heading for 4% growth for the year, which is above the expected trend, and it reflects domestic demand and foreign export volumes.
"Export prices appear to be improving. Who knows, if the world economy picked up there could be explosive growth."
The threat of war in Iraq remained a big uncertainty for investment markets as weapons inspectors checked installations in that country.
Mr Stobo said the merger of Sagitta-Rothschild, BT and Westpac in Australia and New Zealand was bedding down after a decision to retain BT as the fighting brand in Australia for the enlarged group.
There had been a shake down among some senior executives and the contracting out of global equities investment to US-based Putnam Investments on the recommendation of Frank Russell Company, which helped with the selection of fund manager.
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