Here are the key things you need to know before you leave work today.
TODAY'S MORTGAGE RATE CHANGES
There were no rate changes today.
TODAY'S DEPOSIT RATE CHANGES
NBS (Nelson Building Society) has today trimmed -10 to -30 bps from its term deposit offers. This affects all rates from 6 months to 3 years.
WDKHLWA
Graeme Wheeler kept the OCR unchanged today as nearly everyone expected. But his tone and analysis suggested optimism about the economy and confidence he has the monetary policy settings about right. Markets expecting a rate cut in 2015 would have been disappointed. We seem to be avoiding most of the negative impacts from rampant QE in the rest of the world which is a rare achievement. Westpac noted: "Today’s Monetary Policy Statement was both more and less complex than we’ve come to expect from the Reserve Bank in recent times. More complex due to the growing number of conflicting considerations for monetary policy, as reflected in the increased length of the document itself. But less complex in terms of the ‘bottom line’ message delivered to the market."
CREEPING HIGHER
Food prices rose again in February, which now makes it five straight months of increases on a year-on-year basis. The rises are not high however.
TWO SPEED
February emphasised the two-speed housing market. There was a big rise in the number of homes sold in February but outside of Auckland prices are largely flat, according to REINZ data out today. In Auckland, the rise was +14% whereas for the rest of New Zealand it was +0% from the same month a year earlier.
WISHFUL THINKING?
Meanwhile, Trade Me Property is reporting sharp rises in asking prices, not only in Auckland but for around the country. But asking prices are not deal prices.
BEING PREPARED
Cyclone Pam warnings are important to heed if you live in the Bay of Plenty and the Hawkes Bay/East Coast. We are tracking the changing forecasts here.
WHOLESALE RATES FIRM
Today, local wholesale interest rates fell today following the Wall Street signals. But after the RBNZ statement rates firmed to 'unchanged'. Bond markets seemed to agree the RBNZ settings suggest the next change is not down. The 90 day bank bill rate was up +1 bp to 3.64%.
NZ DOLLAR RISES
Check our real-time charts here. The kiwi dollar initially struggled to make sense of the RBNZ's statement. But as the day has progressed the NZD has risen against most, and even eked out a small gain against the USD which has been surging higher against most recently.. It is at 73.2 USc, at 96.3 AUc, and the TWI is at 78.8. A rising exchange rate is not what the RBNZ wants however
You can now see an animation of this chart. Click on it, or click here.
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54 Comments
Something like 23 Central Banks have cut rates so far in 2015, so they are all wrong?
How long can NZ maintain its high interest rate policy in the face of USA, EU etc?
What are we achieving with a refusal to benchmark our currency and cost of borrowing with the rest of the world? Some sort of kudos for economic orthodoxy? maybe our high dollar, high interest rates suppressing 'inflation' is actually the worn out outdated policy.
I agree with you - it's not a great/ideal solution - however, by doing nothing or raising rates it would be worse for many of those countries. E.g. if Australia did not start cutting then they would be facing certain recession or worse. If NZ had continued hiking in 2014, it risked seizing up sectors of the economy. Remember, we also have a government that is cutting spending significantly so this is also acting as a another brake and transmits more inequities.
David - the real question not answered here, is why do we need to cut rates ? We are not in the same situation as 95% of those other countries when you compare their economic stats with ours, and we surely know the adverse consequences if we follow the herd on the basis that "they did, therefore so we should too" - the most idiotic of mentality. The fact is that by just about every measure you can name, NZ is doing extremely well and other than a somewhat lower NZD (which most exporters are handling but would be nice if it was a littel lower), the vast majority are doing pretty damn well. The only ones in my observation that are screaming for lower rates, when theyre not needed for anyone else, are some retail borrowers and the over-leveraged, and epecially the ones that will be sucked into immediately buying more over blown assets on the back of any rates falls they may get.
What about the tradeables stats? -1%?
So businesses, the lifeblood of our economy like so many right wingers believe (I go with it as well) are in deflation? and have been for a while? Surely if our small businesses are finding it tough and they are so essential to us (and I agree) why isnt the Govn paying more attention and helping? Maybe its been captured by the financial classes, the parasites who expect a "decent" interest rate off the backs of these businesses? You know you can only flog a horse for so long, once its dead the parasite dies as well, mind you the parasite never cares it just move to the next victim.
You dont have business doing badly when growth is running at 3%, and if the RBNZ's latest GDP forecasts are correct, 3.8% this year. Very very few businesses I deal with are either not doing extremely well, or just comfortably well. There will always be the odd industry, or poor business that will struggle, but the average is are strong as I've seen it in 10-15 years.
NZ GDP 3.0 - 3.8%
Retail fixed rates at levels prior to RBNZ hike
NZD 15 big figures below its highs
Fuel costs - at multi year low
Tourism - booming
construction industry - booming
Manufacturing - strong
Commodity prices - barring diary (improving), strong
Auckland housing - 8-10 times income - massive bubble
STRUGGLING - over-leveraged home owners and property investors
Is it such a mystery that until this changes, the RBNZ certainly won't, despite the desperate calls for it from the latter lot on the basis of "the others have". Be like the others, and we'll have reason to, in the meantime fortunately the RBNZ does actually engage its brain.
While yes we have some strong indicators we also have a big worrying one Inflation well below 2% and at best staying there. Lets look at what is pushing that up, things like rates, 5%? electricity? things that we have no option but to pay, so monopolistic. That means there are sectors that are being "starved" , that have to be losing to compensate for the above. I concur that some parts of NZ is doing very well, the top earners, say 20% sure, the bottom 20%? hmmm. Just how are they doing well? if they are in a position of "robbing Peter to pay Paul" then not so good. Right now for me I am very uneasy this isnt going as well as it should be or is implied.
Why would we be concerned about low inflation when its not being delivered by poor growth as is often the case with very low inflation or deflation (the latter being extremely rare) ? Yes Bill would like a bit more inflation to get his tax take up but that's not a good enough reason, especially when the debt loading isn't a burden. Theres a miriad of reasons for the low inflation, a high NZD (that most exporters are handling) that is dragging down imported costs and making Kiwis richer, very low interest rates globally that have seen an abundance of borrowing by business that has gone into production facilities that are producing an over supply of goods, an oil price crash that has put money in everyones pockets.
Yes Steven some poor people don't have cars, and the bottom 20% might be struggling, but at least we're living in a country that is capable of supporting them through the likes of accomodation supplements, working for families etc. But if its only the top 20% benefiting from it, please tell the other 80% to stop being so bloody positive in consumer sentiment surveys (only 6 points off its 2007 pre-GFC highs). People should start understanding what's not good for them. Things can change certainly, we are after all a small boat on a very big ocean and potentially vunerable, but until they do, lets stay positive and watchful
While in-effective its better than trying to raise it. Of course just what is the problem is the first thing? The second is can a RB do anything about it? ie should it be a Govn? So with Peak oil for instance a RB can do little but have a low OCR I cant see it can do anything else, the rest is all down to Govn [in-]action.
The Wheeler experiment is doomed to fail. The entire world is in the crapper and we are not the sole exceptional economy that Key and his cronies are making us out to be. As more and more of New Zealand rural land and businesses including tech companies are sold to overseas interests and the profits head offshore the worse it will get. There is one certainty - we are heading into an extended period of deflation. Swap rates will continue to decline and mortgage interest rates will collapse. The Wheeler experiment is a failure and he will be looked back on in a few years time as the least effective RBNZ governor we have ever had. All he is doing is holding up the exchange rate. His meddling will do nothing to arrest the Auckland house price gains as the net migration surge, lack of new house construction and declining interest rates are too powerful against any of the fiddling he is proposing.
Many do not/will not face this reality. The spin is that in 12 months time we will return to a pre 2007 era of normal demand and healthy inflation. This 2008 to 2015 era is just a little glitch for NZ. (According to this line) .
Addto this scenario major govt spending cuts.
There are no "major govt spending cuts". There's not even any cuts. According to the Crown accounts released yesterday for the seven months to January 2015 (the latest available), Govt spending in that period was $41.4 bln compared to $40.1 bln for the same seven months a year ago. That is an increase in Govt spending of $1.3 bln.
If you work in a Govt Department, DOC, Health Board, Schools, university, ITP, etc etc you would be aware that all these organisations are being deliberately short funded and face deficits of millions of dollars. This is current National policy - to get back to surplus.
http://www.radionz.co.nz/news/political/261870/dhbs-may-face-more-funding-cuts
http://teu.ac.nz/2014/05/assault-regional-polytechnics/
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11375312
http://www.students.org.nz/2014_budget
http://union.org.nz/news/2014/232-million-effectively-cut-health-budget
http://www.stuff.co.nz/national/education/9147208/NZ-universities-lose-ground
http://www.radionz.co.nz/news/national/259785/community-groups-%27fear-speaking-out%27
Govt spending is very high in NZ and something has to give.
http://www.tradingeconomics.com/new-zealand/government-spending
you can only massage the GDP figures for so long, expect more cuts.
https://www.beehive.govt.nz/release/gdp-figures-show-growth-all-nz-regi…
Your second link is dated the 11th March 2015:
Economic Development Minister Steven Joyce today welcomed the latest regional gross domestic product (GDP) data release, which shows that all regional economies in New Zealand have grown in the last 12 months.
Joyce may be - lets be polite - 'welcoming' his GDP numbers but they are for the 12 months from the 1st April 2013 to 31st March 2014. A period where commodity prices were a little different to current.
If its government department, it can't be shortfunded.
It can only have it's budgetted funds misallocated, and too many demands made for resources provided.
Start by the wages at the top...do they represent the true business risk and personal liability of the underlying business?
Are staff compensated in line with at-the-till receipts from voluntary use of the service they perform ?
If neither is yes, then there's your problem. If you can't bill your customer the correct amount, then time to cut services or close the doors. 1 + 1 = 2.
Same report David, but go down to page 15 of 33 being:
ANALYSIS OF EXPENSES BY FUNCTIONAL CLASSIFICATION
Fourteen out of fifteen classifications are below forecast. They include health, defense, education, housing and community development, and core government services.
The one line that is up (and big time) is 'Economic and industrial services'.
It would be interesting to know more about what is included in 'Economic and industrial services' that warrants increased expenditure against below forecast expenditure in all other classifications.
Colin.
They may be "below Forecast" but they are higher than the same period a year ago.
For example, Education is running $284 mln ahead over the seven months; over twelve months will probably come in close to NZ$0.5 bln higher than the prior year. Still the sector 'complains'.
Overall, core Crown operating costs are NZ$1.3 bln higher in the seven months to January than the prior comparable period. That is a lot, even in % terms. These costs are up +3.2% and far higher that inflation (and private sector wages for that matter who pay the tax that funds it).
AndrewJ's link to the TradingEconomics chart is instructive. Still at 35.9% of GDP and on the way down at least by this measure it "not out of control". But taxpayers should expect it to continue declining as a % of GDP at least. Surpluses are essential if we are ever to pay down the big run-up in Govt debt we took on in the GFC to keep things ticking over and keeping all those teachers and nurses employed without any hiccups (unlike for the rest of us).
Surpluses are not going to be easy....Govt will have to cut some of the excess out....and public servants should have a compulsory pay cut. There is absolutely no reason to pay teachers, nurses etc the wages they are getting......the value in their wages/salaries does not filter through to the rest of the economy in a postive productive way.
Back in the 1970s both teacher and MP wages were much the same, with back bench MPs earning a little less than teachers. Had teachers simply maintained parity with inflation the top teaching rate today would be $109,000, Roberts said.
“Of course we will not be asking for that much, but what we would like to see is teacher wages that enable us to catch up and keep up with inflation,” she said.
“We have seen around one third of our salary, in real terms, whittled away over the past 40 years.” Read more
Backbenchers' salaries have increased by almost $22,000 since 2007 and they now get almost $148,000 a year, plus perks. Read more
I suppose the clever and eligible will leave just as I did back in the early eighties to collect a GBP salary and bonuses valued at 3 NZD to one pound STG. I worked for 20 years rather than 60.
I'm not an advocate of having public services that private enterprise can run as a business model......it is nothing short of a job that is heavily subsidised which distorts the real pricing of the service being offered......every Government around the world is on this distortion racket and teachers have lowered themselves to that of a parasite......
The scoop article highlights a slick campaign promoting their worth without any proper analysis on the outcomes between private and public providers.....
Teaming up currency differences with parasitic behaviour is obviously highly rewarding!!! I was obviously neither clever nor eligible and paid the horrendous price of Government incompetence footing interest rates of 20%+.........
The private side has done remarkably well and some would say unduly so if the US is a market leading example. I doubt society can afford to reward capital so well into eternity.
“Total Securities” as a percentage of GDP is helpful for Bubble Analysis. After beginning the nineties at 173% of GDP, “Total Securities” ended the Bubble year 1999 at an unprecedented 341%. The bursting “tech” Bubble saw this ratio decline to 267% to end 2002. Mortgage finance Bubble reflation then pumped this ratio to a record 360% by the end of 2007. The Bubble burst and “Total Securities” ended 2008 at 297%. Six years of incredible monetary inflation had Total Securities ending 2014 at a record 417% of GDP.
I have on a quarterly basis chronicled the inflation of Household sector Net Worth as a key facet of Federal Reserve reflationary policies. Household Assets inflated another $1.61 TN during Q4, with a 2014 gain of $4.431 TN. For the year, Household Real Estate Assets increased $1.223 TN and Financial Assets rose $3.045 TN. And with Household Liabilities growing $363bn, Household Net Worth (assets minus liabilities) jumped another $4.068 TN in 2014 to a record $82.912 TN. Since the end of 2008, Household Net Worth has inflated $26.403 TN, or 47%. This “wealth creation” goes a long way in explaining the economic recovery – as well as its vulnerability to asset market weakness.
As a percentage of GDP, Household Net Worth began the nineties at 379% ($21.5 TN). Net Worth rose to 446% ($43.1 TN) of GDP to end 1999, only to fall back down to 398% ($43.7 TN) to close 2002. Net Worth inflated to a record 461% ($66.7 TN) to end 2007. Net Worth closed 2014 at a record 476% of GDP ($82.9 TN). Read more
Hospitals, schools, universities, polytechnics, IRD, Winz, DOC, kindergartens, Police force, military etc are all best delivered under the service ethos of a Government.
This provides a good framework for businesses and private enterprise to operate alongside. Without these services it would be difficult to run a business and bring up a family.
All these govt funded workers spend their wages in their local community and so also serve their community in this way as well.
In times of recession, Govt spending through these enterprises benefits communities far better than 'trickle down' or from QE type operations which simply funnel money into financial assets and equities bypassing the general economy.
Take away the Police, your kids school, your grandkids university etc. - then just see how successful your efforts in private enterprise are - lawlessness, corruption & illiteracy make businesses difficult to run!
The push to privatise everything really just puts public-good assets/services in the hands of non-benevolent corporations only concerned with the bottom line. these corporations are now competing for political power against the legitimate Govt. E.g. tobacco, electricity,
At least Govts are still accountable to their citizens in some way. Not so many corporations.
But the said fact Mortgage Belt, is that many public servants do not operate a public service ethos. Rather they operate in a well embedded sense of entitlement. They run to suit themselves and we are to support that. Note the behaviours of local government, extensively discussed on these pages.
Of course Rogernomics was a huge success. - let's sell all our govt services so the market imposes financial discipline and removes the social good aspect. Great track record (excuse the pun). Destruction of our Railways (so we can have more trucks endangering our roads) bankrupt farmers, sale of govt assets/Energy to incompetent corporate owners, merchant bankers making millions commissions on the sales, corporatisation of TV stations for more dumbing down, open up the floodgates of international finance (leaving housing bubbles), loss of manufacturing jobs etc.
Are you going to get better service under a commercial ownership regime? Your kids school run by Microsoft, Auckland University run by Google, Police run by commercial mercenaries, hospitals run by Pfizer, IRD run by SAP, etc ... Is that actually a democracy?
MB...Don't you mean that it is your belief that these services are better delivered under the ethos of a Goverment? In order for you to conclude that this is the best option then you would have had to consider the service ethos results against the results of private providers which I don't think you have bothered to do. If private enterprise is running a service and not doing it very well then customers can walk away to another provider.....when the State is delivering the service whilst you can walk away and find a private provider you end up paying for the service twice.....once in your taxes and then for any private service you might use.
If the Public system was working in health care then we simply would not have the need for private health insurance......Education is the same....why do you think parents end up forking out extra to private providers along the way?....the number of children attending Kip McGrath and other similar types of providers has been growing incredibly fast....
The last time I had occassion to ring the police the lazy sh*^ts never even bothered to turn up......I found our stolen goods for sale on line within a very short time....I had the name and a contact phone number of the person who had stolen them and still the police couldn't bother turning up........3 weeks passed before they took any action and by that time the thief had sold our gear and got caught with someone elses. Given they can't bother to turn up after I had done most of the work for them then I take it that it is fine for me to invoice them for my stolen property.
How many business programmes air in the evenings on TV? I can't think of any....but there sure as heck is a large number of public servants showing themselve on the front line....go figure why this is.....These programmes should be labelled "The Nanny State Reprogramming the Human Race" .........Glorifying the role of the public servants takes us another step closer to the ultimate objective they have and that is Communist Control.
You state"In times of recession, Govt spending through these enterprises benefits communities far better than 'trickle down'.........has it ever occured to you the hardship that is placed on private enterprise in a recession????? Everyone who works in private enterprise takes a realistic cut when things are tough......AND not one person in the public services is affected......they go home with the same pay, the same amount of days of work etc......the govt spending during a recession severely hurts the people who work in the private system.........but you wish to punish one group of people often with severity because you believe that peope are better off.....there are no benefits!
Have you also ever considered the fact that it is Governments and the public servants through their stupid policies and spending that cause the recessions in the first place???
You are using fear to justify the existence of the large public services......fear is the same tactics applied by religion to keep the populace under control.......we already have all the issues you outlined....we have a public services system that completely over-rides all Constitutional Rights that Individuals are meant to have - is that not lawlessness and corruption? we have illiterate people they have gone through the public system........you don't have to use a corporation but Govenment is enforced upon people so can never be accountable.
Well said notaneconmist, but it will always fall on deaf ears with the big Govt supporters - God knows why, they complain enough about them, and even when a Govt says "we aren't good at running businesses" they still insist that they do - I will never understand that logic
OK, I can understand your point of view (as the son of a small business owner who held similar views!).
So, was Rogernomics a success for NZ as a whole?
Have you ever considered that the new Socialism may actually be brought in by the large corporations who have even less accountability, rather than by Big Government? Corporations don't allow much scope/room for SMEs anymore.
Muldoon gave us:
our current non-means tested universal Super scheme. - designed for the ordinary kiwi.
Home Ownership bank accounts with tax back on contributions (thanks Rob)
clyde Dam - last of the Hydro schemes before the door closed (enjoying your power tonight?) no PM will ever have the courage to ever build another Hydro scheme
Expanded Marsden Point refinery
Ggas conversion plants and other similar projects
actually BUILDING things that provide future value and income to all NZers.
Better news entertainment with Excellent camera glaring and put downs of pesky journalists on TV
Carless days! An environmentalists dream policy!
A better sense of what affected the MortgageBelt in NZ.
Direct Govt intervention on wages, inflation, unions , whatever needed a good hiding!
Memorable quotes: E.g. people who were going to Australia to work and "raising the IQ of both countries."
resistance to selling NZ to foreign owners
Interestingly, North & South recently published an article comparing John Key with Rob Muldoon, Both being populist PMs , different styles, but actually quite similar gut feel for the NZS household. However, Muldoon wins for character and genuine achievements despite his final years decline - despite his faults he was a patriot.
I think you need to assess which Government organisations have shareholdings in the big corporates? If you're a large corporate you can't stop an organisation from buying shares on the open market........you can't stop Government organisations from forming entities to buy shareholdings in any company.......large corporates have many checks and balances in place......there are no appropriate checks and balances on ANY public service sector so accountabiity is absent......
I have long been an advocate for enforcing constitutional rights that have been historically granted to individuals.....these rights are what makes the system accountable!!!!! Not a socialis,t not a big Government and not a large corporate!!!! I think I have already answered the SME's problem above....lawlessness and corruption of individuatl rights!!!
Ok, would you acknowledge that it is more difficult for a small business to start up or operate now in a market/area where a large corporate/s has completely dominated & secured the supply chain, than,say, the 60s 70s? Is this healthy for an aim of balanced mix of govt services, large business, & small business?. I guess we are discussing the ideal mix, and opportunitiesframework for households and business to operate/thrive under. E.g. Retail groceries, farm supplies, ..etc . Lack of healthy competition and barriers to entry, & reasonable distribution of income.
The ideal framework is as I have stated above....government shouldn't ever be in business and I'm over hearing how asset sales are destructive when the most destructive thing is in the Government owing the assets in the first place.....the disgusting practice of propping entire public organisations and professions up needs to stop......teachers, nurses, Doctors, Police etc have no right to fleece private enterprise under the guise of public good......why should they be provisioned with constant income protection mechanisms that have no relationship to the markets????
You want have to worry about the mix or getting it right framework for households and business because we are heading in the communist direction.........so all the decisions will be made for you/us...
Interesting to see the hostility towards people employed by public service, police, nurses, teachers, etc when most are on fairly fixed salaries, & many could earn more in the private sector but elect to provide a good service in a school, rural town policing etc.
Steven your standard answer is to always make a persoanl attack on an individual when issues outside of your comfort zone come up for discussion/debate.......your comment adds nothing to whether public servant wages/salaries distort market prices, or the effects of Governments owning and poorly running business and/or bailing them out.....neither do you make any reference to the people who work in private enterprise who wear the brunt of economic direction changes to the downside.........
Private enterprise has to live within its means while the public services enforce the means to live.......!!!!!
*/
David.
Surpluses would be great if they were meaningful. The current $77 million is not, and certainly not against crown net worth $3 billion below forecast. Crown net worth is still $20 billion short of where it was in 2008.
NZ has hard issues that are not going to be addressed by more of the same - high immigration, inflating asset bubbles, poorly directed expenditure on infrastructure or amalgamating local governments.
Focusing on an OBEGAL surplus suggests that National's economic policy – now in its 7th year – is not delivering. Are they too arrogant to notice and change? Have they run out of ideas? Or are they too timid and unwilling to upset vested interests.
Surpluses that result from successful economic policy are a good thing. Surpluses that are imposed or contrived in the face of poor economic policy and malinvestment are meaningless and a distraction from more fundamental economic performance.
A thing to know...Friday the 13th. Another horror story for dear old Auckland Ratepayers.
How to spruce up your waste disposal experts...as if they needed any help.
http://tvnz.co.nz/national-news/exclusive-auckland-ratepayers-pay-prett…
I couldn't find any Friday humour today....but irony, does suit...this occaision.
How they can dress up waste....another way.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11406141
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