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 today.
TODAY'S DEPOSIT RATE CHANGES
There were no term deposit rate changes today.
JULY DEFICIT BIGGER THAN EXPECTED
New Zealand recorded a $649 million trade deficit in July, according to Statistics NZ, which was bigger than the $600 million expected by economists. At $4.2 billion, exports recorded the highest goods exports value for a July month with strong rises in fruit and meat exports. Imports, however, were valued even higher at $4.85 billion, with strong increases in consumption goods such as clothing, and capital goods such as mobile phones.
At 15% of exports, the deficit compares to an average of 9.2% over the previous five Julys. For the year to July, the annual trade deficit came in at $2.7 billion, or 5.5% of exports, which was down from $2.8 billion, or 5.9% of exports, in the June year.
CHINESE SHAREMARKETS DOWN AGAIN
At the time of writing Chinese shares were down again, albeit not as much as they have been in recent days. According to Reuters, by mid-morning the Shanghai Shenzhen CSI 300 Index was down 0.5%, and the Shanghai Composite Index was down 1.3%. This, Reuters reported, was after China's key share indexes attempted to move higher several times during early trading only to be "slapped back by waves of selling."
Meanwhile, the Westpac MNI China Consumer Sentiment Indicator rose 1.8% to 116.5 in August from 114.5 in July, its highest level since May 2014.
RBNZ REVIEWING BANKS' OUTSOURCING POLICY
The Reserve Bank has embarked on yet another round of consultation with banks, this time on its outsourcing policy. It notes the existing outsourcing requirements date from 2006 and apply to all locally incorporated banks whose New Zealand liabilities exceed $10 billion, focusing on underpinning the provision of liquidity to the financial system in the event of stress or failure of a bank or of a service provider to a bank. However, the Reserve Bank says its Open Bank Resolution policy may have implications for the outsourcing policy, which will now also aim to enhance banks’ ability to provide basic banking services after a separation from a parent or post the failure of a service provider.
There's also a need for "enhanced clarity around the requirements of the policy and greater consistency in its application across the banking sector," the Reserve Bank says.
WESTPAC, NZ'S 'FIRST DEMENTIA FRIENDLY BANK'
Westpac is proclaiming itself as NZ's first dementia friendly bank. The bank says it has partnered with Alzheimers Auckland to support 50,000 people with dementia. Westpac is training staff to help recognise, understand and respond to the needs of customers living with dementia and their carers. Lorraine Hunter, head of Westpac's dementia friendly project team, says branches are working towards dementia friendly accreditation in association with Alzheimers Auckland. Hunter says people with dementia have difficulty using banks and can be confused over legal documents such as an enduring power of attorney, which can stop carers from carrying out financial decisions on behalf of their loved ones.
WHOLESALE RATES LITTLE CHANGED
Swap rates in the short to mid-term end of the curve were marginally lower following offshore moves overnight. The 10-year swap rate rose one basis point to 3.54%, which led to a slight steepening of the curve. The two-year swap rate's at 2.82%, and the five-year is at 3.11%. The 90 day bank bill rate is broadly unchanged at 2.91%.
NZ DOLLAR MIXED
The NZ dollar is a little lower than it was this morning at US64.90 cents, up against the Aussie at AU91.04c, with the Trade Weighted Index (TWI) five fractionally higher at 68.80. Check our real-time charts here.
The Kiwi was sold off initially after news of the wider than expected trade deficit emerged, but has found some support during the afternoon.
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10 Comments
In BHP's case, suppose you have a mine valued at $10 billion that you have paid for, and you extract and sell $1 billion worth of stuff from it, getting $1 billion in net cash. You amortise $800 million from the value of the mine, meaning a $200 million profit. But you have an extra $1 billion in cash.
Similarly my understanding is that the power companies have been allowed to value their hydro and other assets at recent valuations. Sell $1 billion worth of power. Amortise $500 million off the value of the assets. Profit of $500 million; cash surplus of $1 billion. And in hydro's case you really still have the asset you started with, less some modest need for maintenance. Borrow money to further reduce tax.
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