Here are the key things you need to know before you leave work today.
TODAY'S MORTGAGE RATE CHANGES
There were no mortgage rate changes announced today.
TODAY'S DEPOSIT RATE CHANGES
ANZ cut term deposit and PIE rates today by -10 to -20 bps across the board. The Police Credit Union did similar. NZCU Auckland also cut across the board with their changes ranging from -5 bps to -30 bps.
TERM DEPOSIT ALTERNATIVE
AMP has today made some useful points for savers in a low interest rate environment. Firstly, KiwiSaver funds have been earning better than TD rates. And, “unlike a term deposit, where you may have to wait for 31 days to take your money out, once you reach 65 you can make partial or full withdrawals from your account whenever you need to as long as you have been a KiwiSaver member for five years. You can also continue to make contributions should you decide to return to work but what many people don’t realise is that once you reach 65, if you leave KiwiSaver, you can’t get back in. Maintaining your KiwiSaver membership into retirement means you can keep your options open,” says AMP.">
IRRATIONAL EXUBERANCE
A shortage of new homes in Auckland keeps pushing up house values says QV. They were up +18.8% in Auckland, unchanged year-on-year in Wellington, and up +4.1% in Christchurch. QV says Auckland is reaching a 'crescendo".
SUVs RULE
Year-on-year growth in car and commercial vehicle sales are leveling off, but holding high levels. However the shift to SUV's is gathering pace with 35% of all sales now in this category. (In July 2014, SUV's took 30% market share.)
COMMODITY ROUT
The ANZ Commodity Price Index for July declined by a massive -11.2%. This is the fourth consecutive fall in the index, which is at its lowest level since October 2009 but it is also the largest monthly decline ever in the series. The fall this month was broad based, with thirteen of the seventeen main commodities monitored recording a decline. The index is -27% lower than 12 months earlier. The declines are much less in NZ dollars as our currency has adjusted down to reflect the changes.
'BANKING SYSTEM SAFE'
Moody's says its outlook for the New Zealand banking system is stable, based on the banks' healthy capitalisation, strong asset quality and stable profitability, which offset the risks arising from weaker economic growth. High house prices also presents another key risk. However, Moody’s expectation for continued strong asset quality is supported by a) a declining NZD and RBNZ Official Cash Rate will provide support to the dairy sector, b) Farmers have become more cautious – dairy sector leverage has been stable, despite record milk prices in 2014, c) housing loans make up the largest part of bank portfolios (53%). Losses in this sector are likely to stay low on the back of stable employment conditions and low interest rates, d) asset quality has continued to improve strongly since 2010 – any weakening from here will be off a very strong base. Moody's conclusions were backed by by RBNZ core funding ratio data out today. Then again, 81.8% of bank funding is due within one year.
WHOLESALE RATES DROP YET AGAIN
Swap rates sharply again today but not as sharply as we saw on Wall Street last night. They are down -1 and -2 bps out to five years and down -3 bps for ten years. The 90 day bank bill rate has seen another sharp drop, down -3 bps to 3.03%.
NZ DOLLAR UNCHANGED
Despite the further interest rate falls the currency markets are virtually unchanged from this time yesterday. The NZ dollar is currently at 65.6 USc, at 90.0 AUc, and at 60 euro cents. The TWI is still at 70.6. Check our real-time charts here.
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11 Comments
hows this for $2 worth
Yin’s company, Shanghai Zhongfu Group, agreed in 2012 to invest A$700 million ($511 million) in clearing and developing an expanse one-and-a-half times the size of Manhattan in the tropical East Kimberley region of Western Australia state.
In exchange, the Western Australian government agreed to lease Zhongfu’s local subsidiary Kimberley Agricultural Investment two parcels of land totaling 13,400 hectares (33,000 acres) for A$1 a year apiece for 50 years and to build infrastructure such as roads and irrigation channels.
http://www.bloomberg.com/news/articles/2015-08-03/shanghai-cop-grows-su…
makes cwp look pricie
UK's total energy consumption drops below 1965 levels.
"...industrial output has fallen, in terms of gross value added, and that has contributed to lower energy consumption. But about double the energy savings (7.5 Mtoe vs 4 Mtoe) are due to rising efficiency..."
http://www.rtcc.org/2015/08/03/uk-total-energy-consumption-falls-below-…
Chinese textile business relocating to the US.
"Today, for every $1 required to manufacture in the United States, Boston Consulting estimates that it costs 96 cents to manufacture in China. Yarn production costs in China are now 30 percent higher than in the United States, according to the International Textile Manufacturers Federation.
“Everybody believed that China would always be cheaper,” said Harold L. Sirkin, a senior partner at Boston Consulting. “But things are changing even faster than anyone imagined.”
http://www.nytimes.com/2015/08/03/business/chinese-textile-mills-are-no…
dig deeper - notice the incentive payments? the tax benefits? the discounts for trading as a business in the US (vs import tariffs). There will be almost no labour, so it's not like they're hiring much in the way of US citizens, and with cross-border US taxation not much point hiding income in China.
This means they can shift people to "critical performance" and "outstanding development" to US, and start acquiring connected assets inside the US - which they can't do as "aliens"..... sound familiar...
Very likely the US shop will just rebrand/launder Chinese product, and relabel it as "US made" for a premium.
'BANKING SYSTEM SAFE' - For whom?
The rating agency's low government support assumptions for the banks reflect the country's Open Bank Resolution policy, which provides the government with a framework to impose selective losses on bank creditors. Read more
Who is brave enough to define "selective" and get a little more explicit? Not Moodys - I guess they believe a direct attribution of liability might set off a bank run.
Contact Energy's senior management team is set to benefit to the tune of almost $3.8 million from today's announcement of the exit by its 53% shareholder Origin Energy.
http://www.nbr.co.nz/article/payday-contact-senior-managers-triggered-o…
TD alternative
Kiwisaver funds are excluded from OBR pre-positioning. (Kiwisaver scheme assets in the bank are subject to OBR and are pre-positioned as with any other transaction investor. )
However what is the position of a Kiwisaver scheme member's assets held in trust in the event of a triggered OBR in the managing bank? Assuming the investor is post 65 etc and withdrawal qualified. Would the members assets be 100% frozen as not pre-positioned?
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