My folks just came back from a 3 month vacation in New Zealand. They brought back a newspaper to satisfy my curiosity. I did a quick breeze through it last night and in the fianance section there were (what appeared to be) banks offering interest rates along the lines of 8%+ for deposits.
Is the New Zealand economy on fire right now? Or, is there some other reason that their interest rates are so high?
How difficult is it for a foriegner to open a bank acct in New Zealand? 
I don’t know but this site might be useful to you.
A quick check of that site leaves me unclear as to whether or not NZ has FDIC-style deposit insurance. If many/all of the institutions don’t, that could explain the high rates (i.e., high-risk).
And of course, having high interest rates would in no way indicate that “the New Zealand economy on fire right now.”
When I lived in New Zealand 1986-89, I was getting close to 20% on a 60 day term deposit. By no means was the economy “on fire” back then. Inflation was quite high, and the World Bank had just told the politicians that they had better cut back on social program spending, or NZ would have no more money. The had “hit the wall” as people were fond of saying then.
The interest was great, as I had student loan money in a lump sum to put in the bank. I don’t know about opening an account from overseas (I opened it from within the country), however, if you’re hoping to put some cash in and make good interest, do not forget about the exchange rates. If the NZ dollar goes down against the Canadian $ while your money is in NZ, you may end up losing more money than you gain.
I read on a financial discussion board that the paperwork associated with reporting overseas income was onerous. One may wish to review paperwork overhead associated with reporting this income to local, provincial and federal tax authorities prior to pursuing such a route.
Holy crap!
Yes indeed!
I spent most of the interest money on beer and women, and then I wasted the rest.
Of course the nominal rate that you read in the paper is comprised of the sum of the real rate and inflation rate. High rates can signal inflation; they probably only offer that rate on new zealand bucks, not US dollars.
“Is the New Zealand economy on fire right now?”
Err, that’s a negative, folks.
All the usual indicators point to an upcoming economic slowdown (e.g. declining exports, etc) and only this week the Central Bank cut the base interest rate by half a point.
A typical ‘high-street’ bank will currently offer a floating home loan rate of around 7.5% and five year term deposits of around 5.75%.
Many of the higher advertised rates are for secured or unsecured debentures, hence a higher return for greater risk.
I’ll do some more digging later.
Most accounts offer sux point sux pissant.
Thank you folks, I’ll be here all night.
A story.
In or about 1973, a smart lawyer in a town in Ohio heard that they were paying 12% on accounts in Mexico. IN the US he could only have gotten 4%. So he took X thousands of dollars in US cash down to Mexico. And deposited it. And probably got his first payment. He was a happy camper.
But he wasn’t so happy the next year or three when the Mexican peso was devalued against the US dollar. And he lost everything he had risked.
I am possibly off in my dates, but not in the end-relult of the story.
There aint no Santa Clause. You don’t spit into the wind. {You don’t rip the mask off the old Lone Ranger, and you don’t mess around with Jim.}
I just had to add the parenthetical part, for my soul.
Yeah but it’s New Zealand percents so that like 3 or 4 regular US percents.
I live in Australia and have accounts in NZ. The bank was not happy with us doing this and it was fairly complicated. The NZ dollar is currently climbing as well. I was not happy paying my NZ credit card in Australian dollars. The AUD is still stronger than the NZ but only just. I don’t know how you would go about opening an account from offshore. It was hard enough maintaining accounts when we left the country.
I’m sure, Primaflora, that anyone interested in opening a NZ bank account from overseas can simply Google any of the online banks in this country, as with this page, and get all the information they require.
Here in South Africa many banks have a sliding scale for interest rates, the more money in your account the more interest you get. At my bank at the moment anything over R100 000 ($10 000 approx) will get you around 7.75% per annum.
IIRC, in the week from 5-12th March 1985, NZ overnight money bills were paying over 100%. On the 8th the rate was 265%.
AT the other end of the scale, the yen carry trade i.e. borrowing Japanese Yen @ 0.25% and investing in US T-Bonds was one of the prime fuels that financed the hedge funds.
How did that happen? What was wrong with the economy at the time?
Dude, I’m no expert on this, but I think that the first step in you opening a NZ bank account is to convert the US dollars you give them into NZ dollars. Although several factors go into currency exchange rates, I think one of the biggest factors is the relative prevailing interest rates in the two countries, and the exchange rate will take out any benefit you’d get from higher interest rates.
So, assume the prevailing interest rate in the US is 2% and the prevailing interest rate in NZ is 8%. When you convert your US dollars to NZ dollars to open a NZ bank account, the exchange rate will insure that your NZ dollars are worth about 6% less than your US dollars. Also, the exchange rate could go against you during the term of your deposit.
(One way around this is to find a country where the value of the currency is tied to the US dollar (like Belize), and then hope to hell that it isn’t decoupled from the US dollar during the term of your deposit.)
All of this adds up to you really making a currency play instead of simply being a lender to a bank. If you want to trade currency, there are a lot better ways to do it than by directly opening an account in a foreign bank (i.e., by trading on the forex or trading currency futures, which are better in terms of ability to quantify and control risk and transaction costs). Trading futures also has certain tax benefits over receiving interest from a bank.
I’m really interested in this and I know I don’t know everything, so if any of the financial guru dopers would mind discussing whether any of the above is correct, I (and presumably the OP) would greatly appreciate it.
TaxGuy, I strongly advise that you don’t seek a career in international finance.
If you’re offering USD0.94 for a NZD, I’ll take as many greenbacks as your bank account and credit card can handle. I’ll swap them them back into Kiwis @ USD0.56.