BAD NEWS The Self-fulfilling Prophecy

Posted on Friday, December 2 2011

It never ceases to amaze me how things can change so quickly.

I wrote only last month on the outlook for next year and how we thought we could see the beginnings of a genuine recovery based upon the levels of leasing enquiry.

Since then, the New Zealand institute of economic research has come out saying that a rapidly worsening global economy will depress New Zealand’s fledgling recovery and keep interest rates on hold until 2013.

The institute’s latest quarterly predictions slash the growth forecast for next year to 1.5% from 2.6% in September. It sees a rising risk of Global recession with its centre in Europe’s sovereign debt crisis.
It sees the global growth outlook as being much softer and New Zealand slowing because of weaker exports and higher borrowing costs. The institute puts a “25%” probability on another global crisis in which financial markets seize up and a world recession ensues.

This is exactly the sort of press which fuels peoples’ fears and becomes a self-fulfilling prophecy. People operate in a herd mentality and react to such dire predictions in fairly predictable fashion by becoming cautious, not spending and fearing the worst. We are, after all, creatures of habit and tend to behave in line with what the media is telling us.

Whilst acknowledging the risks to which the I.O.E.R refers, I do not share their pessimism. My reasoning is simply that we as a country are not reliant on trade with the affected European economies. Rather, our trade is with Australia and Asia.

Certainly, there are signs the Asian and Chinese economies are slowing but that in itself is not a bad thing as they were becoming overheated in any event.

The Christchurch rebuild gets underway in earnest next year and this alone will provide some much needed stimulus to the domestic economy.

Our commodities will still be in demand even if they are not attracting the top prices of recent times.

We are still seeing reasonable leasing enquiry across the board on commercial property to give us some confidence.

What we don’t need is the doom merchants smothering the spark of recovery.

I have enjoyed sharing my thoughts with you over 2011 and look forward to being with you next year.

Until then, my thanks to Hadar and his team for a great job in getting the website to where it is today and have a great Christmas and a relaxing holiday.

D.J. McMahon
Managing Director
McMahon Commercial





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Denis McMahon

Brought to you by Property Managers Ltd: Pacific Property has been formed with the aim of building, over time, a diversified portfolio of Industrial, Retail and Commercial properties to provide strong sustainable returns to investors which will be managed by experienced property manager, Property Managers Limited (PML). The directors of Pacific Property Fund are Denis McMahon and Philip Tushingham, who together have over 45 years of experience in investing in, and managing commercial properties. “Pacific Property presents an opportunity for investors to invest in a brand new quality industrial building in Mount Maunganui and to join us as we build a quality commercial property portfolio diversified both geographically and across industrial, retail, and commercial assets.”

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