Everything is getting worse, nothing is getting any better.
Heavy rain, flooding in North Island spark warnings
24 September, 2015
The Moutoa sluice gates and floodway in Horowhenua were opened as river levels rose
Plunging oil prices could bring exploration industry to its knees
Oil and gas exploration in New Zealand threatens to grind to a halt, as economists warn of a structural fall in prices.
23 September, 2015
No offshore exploration drilling rigs are due to enter New Zealand waters in the coming summer, with Statistics New Zealand highlighting a drop in exploration already.
The oil industry claims the fall in drilling comes after a string of major projects came to an end, but acknowledges oil companies are cutting costs.
World oil prices have plunged in recent months, as the Chinese economy cools, reducing its demand for energy imports.
The drop in demand in one of the world's fastest growing economies follows a massive increase in production in the United States, driven largely by improvements in technology making previously uneconomic reserves viable for production. Now the world's largest economy, once a major importer, is producing enough oil to satisfy its own domestic needs.
In June 2014 the price of crude oil was above US$100 a barrel, but has fallen to below US$50 a barrel. Analysts at US investment bank Goldman Sachs warned recently that the price could fall as low as US$20 a barrel.
Westpac economists said this week that low world prices may push some producers out of the market, limiting further sharp falls, but were unlikely to rise far above US$60 a barrel by 2017.
Unlike previous sharp movements in the price of oil which matched economic cycles, the current fall appeared to be structural, Westpac economist David Norman said.
"We just have a new environment where oil and gas are just being produced in different ways and that's meaning that longer term we just can't see prices rocketing up to where they were before," Norman said.
Already employment in the industry is in decline in New Zealand, and further cuts are expected. Norman said the 6950 full time equivalents employed in the industry by March 2014 was up from just over 4000 in 2000, however between 2012 and 2014, employment fell 5.5 per cent.
"With mineral commodity prices continuing to fall since then, we would expect 2015 data, when available, to show an even greater fall."
Although no authoritative figures on the drop in exploration in 2015 have been made public, Statistics New Zealand has pointed to a fall in exploration. Between 2012 and 2014 there were around 30 exploration wells drilled in a calendar year, a number set to drop sharply when figures are published in early 2016.
The drop in exploration comes at a time of unusually high local oil production.
A recent report from the Ministry of Business, Innovation and Employment showed that the amount of crude oil produced in New Zealand was 24.5 petajoules in the three months to June 30, the highest quarterly production since September 2011, driven by improvements to the Tui and Maari fields in Taranaki.
But Norman warned exploration had currently "dried up" so there was "a reduction in the likelihood that we're going to have any new extraction come on stream in the future because we're not actually looking for new reserves".
The oil industry maintains that the recent movement in price is cyclical, as was the recent drop off in exploration.
"We incidentally had come off a period in the collective work programmes [of oil explorers] where you've seen a lot of exploration and drilling because that's the phase they were at. That was coincidence that that happened," said Cameron Madgwick, the chief executive of industry body Pepanz said.
As part of government permit allocations companies had committed to drilling in the 2016/17 summer, Madgwick said, with oil companies having to look through price fluctuations because of the nature of the industry.
"People in this industry have to take a long term view anyway. Even if you made a successful discovery through exploration drilling tomorrow, you're probably 10 years off production by the time you've developed the field."
He admitted though that even aside from the patterns of drilling programmes, the current climate was one which was leading to cost cuts within the industry.
"In the current financial environment, if there are activities that you can defer then that would be the prudent thing to do."
KPMG concerned by banks' exposure to dairy sector as rural debt soars
24 September, 2015
Farm debt is growing at its fastest rate since the global financial crisis, with banks' exposure to dairy labelled "concerning".
On Wednesday morning KPMG released its latest report into the banking sector's performance in the June quarter.
Total lending reached a new record high, with agricultural loans up 7.6 per cent year-on-year, the fastest growth since September 2008.
The debt boom comes at a time when Fonterra's forecast farm gate milk price is just $3.85 per kilo of milk solids, well below break-even.
MetService is also forecasting the most severe El Niño weather pattern in more than 20 years will create a "scorcher" summer.
The New Zealand Institute of Economic Research warned a "material weather event" could knock agricultural GDP, but also said recession was "far from inevitable".
Dairy prices have shown some signs of recovery in recent auctions, but KPMG head of financial services John Kensington said banks' exposure to dairy was concerning.
The increase in rural lending had been driven by farmers either borrowing more or repaying less debt than they otherwise would have, he said.
Those likely to be worst affected were new dairy farmers who had borrowed heavily to get into the industry.
Kensington said there was a very good chance banks would be forced to increase their provisions for bad debts.
The other factor driving lending growth was a 5.6 per cent increase in home lending, the highest rate in over five years.
Kensington said the heated Auckland market was responsible, with new information emerging every week about hotspots and million dollar suburbs.
"When the music does stop, and prices do come off a little bit, you'll have some people in trouble," he said.
The extent of any fallout would depend on the manner in which house prices eased, he said.
"Does it stop by gradually slowing down, or does it stop with a crash?"
If there was a crash, banks' residential lending growth would stop, Kensington said.
He said those who had bought recently at elevated prices with high leverage could end up underwater.
"I think it's something that must more and more come into people's minds. We can't just keep on going up forever – not at the ridiculous rates we're seeing."
Collective bank profits were little changed from the previous quarter, at $1.26 billion.
Kensington said lending volumes had driven the growth, with margins remaining tight and some bank expenses increasing.
I doubt, in the context of abrupt climate change, that there will be anything 'typical' about this el-Nino
El Nino points to a recession, but there's hope
24 September, 2015