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Dairy prices buoyed by WMP; less than half of Australians expected to be home owners by next year; US housing starts up; more work to be done reforming benchmark rates; UST 10yr yield at 1.55%; oil down, gold up; NZ$1 = 70.5 US¢, TWI-5 = 74.5

Dairy prices buoyed by WMP; less than half of Australians expected to be home owners by next year; US housing starts up; more work to be done reforming benchmark rates; UST 10yr yield at 1.55%; oil down, gold up; NZ$1 = 70.5 US¢, TWI-5 = 74.5

Here's my summary of the key events overnight that affect New Zealand, with news dairy prices are flat. 

The GlobalDairyTrade price index remained stable at last night's fortnightly auction. At US$2,336 per metric tonne, there hasn't been too much movement in the last three auctions. Yet the price of Whole Milk Powder has inched up 1.9% to US$2,079 per metric tonne, recovering from its third consecutive drop. 

AgriHQ dairy analyst Susan Kilsby says the aid granted by the European Union will help to slow growth in milk production a trend that has already started to occur. She says this will be good in the short-term, allowing global supply and demand to rebalance quickly. But continuing to support inefficient farms means we are likely to be faced with over supply issues again in the future.

A University of Melbourne study has found fewer than half of Australian adults will own a home by next year. The results from the Household, Income and Labour Dynamics in Australia survey (known as HILDA), which tracks the same 17,000 Australians each year, differ from the commonly quoted figure that two thirds of Australians are home owners. Nonetheless, they show a trend, with their home ownership rates dropping from 57% in 2002 to 52% today. 

Over to the US, the number of new houses being built rose more than expected in June. Yet downward revisions to the prior months' data indicates the sector's hit a lull, as permit requests and construction activity are no longer accelerating sharply.

The Financial Stability Board says progress has been made reforming controversial industry benchmark rates in the wake of rate-fixing scandals. The Board, chaired by Bank of England governor Mark Carney, says regulation around European, UK and Japanese interest rate benchmarks, known as inter-bank offered rates (ibors), has tightened. Yet there’s still more work to be done. 

The UST 10yr yield has dropped to 1.55%. Meanwhile, after yesterday's surprise LVR announcement, local wholesale interest rates have sank sharply and start today at record all-time lows across the curve.

The US benchmark oil price has fallen to just below US$45/barrel, while the Brent benchmark is just below US$47/barrel.

The gold price is up to US$1,331/oz.

Yesterday's LVR announcement has seen the NZ dollar soften to a three-week low against the US at 70.5 US¢. It's up a bit to 93.9 AU¢ and down slightly to 64.0 euro cents. The TWI-5 index has fallen to 74.5.

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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7 Comments

once the minority (tenants) become the majority watch out landlords your good times will be up as government will enact policies to appease their voters.

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if it is a National Government they won't care. they'll be too busy sucking up to the money. Labour, based on history, they'll be making the right noises while they do the same.

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take a little bit more than that - maybe once the % of tenants who actually vote is higher than that of owners and landlords ....
until then vested interests will be homeowners and pensioners!

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GDT prices are quoted per metric ton, not per kilogram. You might want to update your post before New Zealand's dairy farmers all die of happiness.

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Whoops - good spotting. I have amended the piece now. 

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The continuing low oil prices (mid 40s) suggest that the shale boom will soon be over and the trajectory of this graph:

http://www.euanmearns.com/wp-content/uploads/2016/07/toatlliquidsscenar…

will be maintained.

(full article here: https://www.theautomaticearth.com/2016/07/the-peak-oil-paradox-revisite… )

The fundamental energy predicament that governments have assiduously ignored for so long appears to be set to demolish the financial system in the near future (much as predicted as long ago as the early 1970s).

Lowering interest rates 'to stimulate economic growth', the only narrative central banks and governments seem capable of, will not fix the underlying declining energy availability predicament, which will undoubtedly get much worse as time passes.

On the matter of lowering interest rates, according to Simon Black negative yielding government bonds are 'going exponential'.

https://www.sovereignman.com/trends/the-financial-system-is-breaking-do…

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BAML’s July survey of fund managers said a record net 44 per cent of investors “think global fiscal policy is currently too restrictive” and 39 per cent expect the introduction of so-called helicopter money — an increase in the budget deficit financed by a permanent increase in a central bank’s monetary base — by a country in the next 12 months, a 12 percentage point jump from June. Read more

Hmmmm.....

Most of what passes for modern monetary policy is nothing more than one assumption piled upon another (and then another, and so on). Taken for granted for so long, rarely are these unproven precepts ever challenged to justify themselves to the minimal standard of internal consistency, let alone prove discrete validity by parts. The latest is “helicopter money”, another sham in a long line of them proffered by at least one central bank today because it knows, as the others, nothing they have done has worked. Read more

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