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A review of the things you need to know before you go home on Wednesday; dairy prices rise; Labour changes tax policy; swap rates continue rises; Aussie inflation higher

Posted in News
For Wednesday, January 22, 2014. Image sourced from Shutterstock.com

Here are the key things you need to know before you leave work today.

Today's Fonterra auction was a fairly tame affair, with average prices up +1.4% in USD and +1.1% in NZD. That was the biggest rise since October. But the interesting bits were in the detail.

Prices for milk powders were basically unchanged (at fairly high levels) but prices for butter and cheese were up +10% from two weeks ago. These moves pushed the average auction price to more than US$5,000 for the first time ever. Cheese is now up +47% in a year, a rise similar to WMP. Butter is only up +14% in a year though.

Meanwhile, the Labour Party has backtracked on its policy to remove GST from food, and to make the first $5,000 of income tax-free. This is said to give it $1.5 billion to 'reassign' to other election promises.

Exchange rates are pretty much unchanged from the start of the day, although we have fallen back 40 bps against the Aussie dollar.

Swap rates have continued their rise today. Most terms are up another 2-3 bps, and the one year term is up another 4 bps, taking it back to its recent high point at January 3.

Hydro lake water inflows are only running at 60% of average this week, but storage levels are excellent at 122% of average (88% of maximum). No problems on this front at this time. Wholesale electricity prices are still low.

Aussie inflation came in at +0.8% for the December quarter and +2.7% for the year. These levels were much higher than markets were expecting, and will complicate life for the RBA. Glenn Stevens was expected to lower their cash rate later in the year, but it is hard to see how he can do that if inflation is rising. Maybe the door is closing on lower rates in Australia.

Things are being helped by Aussie consumer confidence falling in the Westpac-MI survey. Its now at its lowest level since July last year.

There has been rain in the North Island - but it clearly nowhere near enough.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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6 Comments

Labour have flip flopped all

Labour have flip flopped all over the place on policy , now the $1,5 billion they are "saving " on fruit and veggies can be used for other carrots .
Watch some Chinese arithmetic come of of Labour in the next few days as they find new ways to spend the imaginary $1,5 Billion we dont have
Comedy Central has come early this year

A new report shows that 64

A new report shows that 64 percent of Chinese millionaires have either emigrated or plan to emigrate—taking their spending and fortunes with them. The United States is their favorite destination.
64% emigrating, or planning to do so, up from 60%, mainly as a result of one third of super-rich now already emigrated.
 
http://www.cnbc.com/id/101345275
http://www.hurun.net/usen/NewsShow.aspx?nid=2485
 
According to WealthInsight, the Chinese wealthy now have about $658 billion stashed in offshore assets
The mass millionaire migration out of China is also hitting luxury companies hard. Hurun said China's luxury sales last year fell 15 percent—the biggest drop in over a half a decade. Spending on gifts, which made up a sizable portion of luxury sales, fell 25 percent.
The hurun.net article has lots of detail on favoured brands, including:

International Luxury Destination Star Performer

New Zealand

 

NZ's economic recovery will

NZ's economic recovery will stall if the banks have their way with rate increases,  according to the EMA   

What is with your constant

What is with your constant grinding about rate cuts? They are heading up mate, get used to it and adjust your position accordingly.

SK, MortgageBelt is doing the

SK, MortgageBelt is doing the right thing. It is our general apathetic acceptance of one of the highest interest rates around the world that is decimating our manufacturing and export industries. Our traditionalist bank paid economists are just misleading the general public and allowing $4bilion in conveyorbelt profits to be paid to Australia plus likely billions in transfered costs in shared services, royalties and intergroup interest charges.
Our interest rates need to be in the midde of the pack and it is ridiculous to lead the world in interest rates. Madness for a tiny economy.

..you really think the

..you really think the decimation is about interest rates?  I suspect it is more to do with the wages in China versus those in NZ - amongst other things.  All low interst rates seem to be doing is promoting short termism - consumerism and house inflation.  Get the rates up, encourage savings and build up some capital.  Borrowing to fill the gap aint working.