Investor Newsletter #4 - December 2015

Welcome to our December 2015 General Finance quarterly newsletter. We appreciate your support. The purpose of this newsletter is to keep you informed about the company and various financial matters that may interest you.

2015 in Review
Yesterday the Reserve Bank decreased the Official Cash Rate from 2.75% to 2.5%.This was due to a weaker economy, both globally and at home. Inflation is posing no threats, as it is currently around a low 1%. The Reserve Bank would like to see some easing of our exchange rate to assist our exporters. Further easing has not been ruled out but this depends very much on the performance of our economy, how or if we are affected by the El Nino drought and how our dairy prices go. This is good news for those with mortgages; floating rates are expected to decrease by a quarter of a percent, whereas this rate cut has already been priced into the fixed rate mortgages.

Crystal Ball for 2016
The financial markets are always difficult to predict with interest rates, exchange rates and commodity prices constantly changing. But we see some trends. Interest rates will continue to stay low. The Official Cash Rate was lowered by a further quarter of percent this month, and is now at 2.50%. This means that the economy is slightly weaker than anticipated. The Governor of the Reserve Bank is hoping for some strengthening of our economic activity over the Christmas period, and the early part of next year. If this is not forthcoming, then one more rate cut next year, is likely. A conundrum for the western world is that despite interest rates having been low for several years, and oil prices dropping all year (and forecast to continue to ease), global economic activity is still relatively subdued. Growth in this country will remain low until dairy prices pick up, despite other sectors such as tourism performing well. Inflation is certainly not an issue, although oddly, it is in some countries, where it is now considered too low. Overall we are predicting another year much like the current one, albeit with softer interest rates.

Strong Population Growth
NZ is experiencing its strongest population growth since the mid 1970s. Last year the country had a net migration gain of 63,000 - that is the difference between the 120,000 who arrived and the 57,000 who departed. It is this net migration gain that is driving up house prices in Auckland and responsible for our GDP growth. The negative side of all this, is that our labour force is continuing to expand, and this is actually keeping wages and salaries down and our unemployment higher, than it would be otherwise. If the Australian market starts to pick up, our net migration rate will certainly ease.

Next Interest Payment
Our next quarterly interest payment will be made on Wednesday 31 December 2015. Direct credits will be processed that evening, with cheques (if applicable) and paperwork being forwarded during the week.

As this is our last newsletter for the 2015, we wish everyone a Merry Christmas and a Happy New Year. We appreciated your support this year and look forward to your continued support in 2016. If you have any questions about your investment, please do not hesitate to contact James Lockie on 09 526 7800 or by email to jlockie@general.co.nz. Our website is www.general.co.nz. If you want to invest more funds, you can obtain an investment statement and application form from Computershare Investor Services, our securities registrar. Their freephone number is 0800 500 602.