The property market has continued its downward slide in September, according to the latest Mike Pero Mortgages-Infometrics Property Cycle Indicator (PCI).

The Reserve Bank's broad coverage of financial and economic functions has proved valuable in dealing with both financial and natural disasters, Reserve Bank Governor Alan Bollard said today when releasing the Bank's 2009-2010 Annual Report (http://www.rbnz.govt.nz/about/whatwedo/0094054.html).

As predicted, the Reserve Bank's July increase in the official cash rate (OCR) has taken the housing and productive sector into a perfect storm. A new recession is now brewing on the horizon.

NZIER's Quarterly Survey of Business Opinion (QSBO) shows the economy contracted in the September 2010 quarter, after stalling in June. Firms' experienced activity fell from -4% to -15% on a seasonally adjusted basis.

Poor GDP figures have followed an increase in our Balance of Payments deficit demonstrating that the imbalances that have plagued our economy for decades remain, say the New Zealand Manufacturers and Exporters Association (NZMEA).

The property market worsened in August, according to the latest Mike Pero Mortgages-Infometrics Property Cycle Indicator (PCI). "The nationwide PCI is now at its lowest in two years," says Mike Pero Mortgages Chief Executive Shaun Riley.

A fall in fixed mortgage rates because of a more moderate outlook for economic growth helped improve home loan affordability in August to its best level in a year, the Roost Home Loan Affordability report shows.

Economic Outlook

The September Monetary Policy Statement was surprisingly dovish, with markets focusing on the RBNZ's slashing of its monetary policy outlook.

CURRENCY: Look for a quieter NZD session locally today as markets digest the events of the week. Offshore the strengthening EUR and stable AUD should help to negate attempts to move lower at this point.