Endow Reporting From Rote

24 Jul, 2023


Endow Reporting From Rote

I've returned from a great surfing holiday in Rote, an island off West Timor. It is always truly amazing to observe how the locals are so resourceful in devising ways to earn a living in third-world countries. There is no formal social welfare system; essentially, if you don't work, you don't eat.

Having said this, families joined together for a common purpose to provide, and I did not observe anybody who did not have a smile on their face or enough food to eat. At Nembrala, where I stayed, the main income source was surf-related tourism or seaweed gathering.

About the latter, each family enjoyed an allotment of lagoon space and, primarily at low tide, would gather seaweed in a half-round plastic drum later dried on wood racks located on the beachfront. Once the material was suitably dried, it was exported to Japan to be turned into food extracts. I have attached photos of the local population and their activities which may interest you.

On my return to New Zealand, one of my first impressions was how the parliamentary election is now becoming more of a focus and the various political parties have begun their campaigns earnestly.

Normally, in the period leading up to an election, economic activity declines as people wait to see what the election's outcome will be and the possible effect the new government may have on their lives and businesses or workplace. The Reserve Bank has indicated no further rises to the OCR interest rate. However, following this announcement, the interest rates charged to borrowers have increased slightly.

Appearing to be a result of overseas factors, the peak in interest rates, if not here, is just around the corner unless any unforeseen circumstances arise.

Before I left for overseas, the talk was primarily about how higher interest rates affected homeowners.

However, upon my return, this conversation has broadened to the challenges higher rates place on businesses and other forms of property investment, such as commercial and industrial real estate. Opinion is divided on when rates will begin to drop to a normal level. However, this depends on when inflation confidently retreats to the target band of 1% to 3%. Unless again unforeseen circumstances arise, interest rates will start easing in the new year, perhaps as late as July 2024.

With the share markets in a wait-and-see mode pre-parliamentary election and economic activity slowing, the interest rates on the offer of around 9% to 10% per annum provide a relatively attractive return from our perspective. This is pleasing, given there have been extended periods of very low-interest rates, which have posed a challenge to investors seeking to generate sufficient income to meet their needs.

We have some interesting investment opportunities, which we will be posting on Endow's website over the next week, and we invite you to review these.