Here's my summary of the key events overnight that affect New Zealand, with news Aussie bank behaviour has cost them the support of their centre-right government.
But first, in the US, the latest data out on jobless claims came if slightly worse than expected. And June factory orders fell - although this was just a confirmation of an earlier 'flash' report. Economic news is slim out of the world's largest economy at present as they are in annual holiday mode.
In Australia, their government has moved to force the banks to explain their key policies to parliamentarians in a formal way. This follows anger at the big commercial banks capturing about half of the recent policy rate cut by their central bank for themselves and not passing it on to customers. Anger at banks behaviour has risen particularly sharply this year. Until recently, the centre-right government has insulated them from many consequences, but it looks like that cover is is now withdrawn.
In China, they are about to launch their own credit default swap market, a hedging tool that protects investors in case of bond defaults. Chinese corporates have been increasingly defaulting on their debt recently.
In Europe, the EU has imposed anti-dumping tariffs on some Chinese and Russian steel imports for the next five years in a fresh effort to protect their own local steel makers who are struggling with the consequences of overcapacity in the world steel making industry.
In England, their central bank cut its core policy interest rate to a new low of 0.25% and said it would buy government and corporate bonds as part of a new program to stimulate the their economy that has taken a sharp economic shock following the Brexit vote. The immediate market reaction was a fall in bond yields, and a fall in their local currency.
In New York, UST 10yr yields are lower today at 1.50%. And the re-rating of the credit risk for NZ sovereign debt continued its impressive improvement yesterday. And keep an eye out on the local 2 year swap rate today - it could well fall below 2%, accentuating its track lower that started way back in June 2014. It went below 4% in October 2014, below 3% in July 2015, and has fallen another 100 bps since then.
The US benchmark oil price has had another day of rises. Crude is now just under US$42/barrel and the Brent benchmark is over US$44/barrel.
The gold price is up as well, now at US$1,361/oz.
The NZ dollar is marginally higher than this time yesterday, opening at 71.8 US¢, at 94.1 AU¢, and at 64.5 euro cents. The TWI-5 index is still at 75.
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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15 Comments
In England, their central bank cut its core policy interest rate to a new low of 0.25% and said it would buy government and corporate bonds as part of a new program to stimulate the their economy that has taken a sharp economic shock following the Brexit vote. The immediate market reaction was a fall in bond yields, and a fall in their local currency.
Yeah right!!!!
Because money printing should be easily observed through at least inflation if not economy, we can only conclude that either money printing no longer leads to the same expected outcomes, or that what central banks offer is not it. Given human nature and economics (small “E”), the latter is far more likely.
Central bank monetary policy has failed because in reality it is only a subset of systemic monetary policy set by global bank balance sheet factors. We find no evidence of public balance sheet effects because private balance sheet effects are far more central to the economy, and overall much larger and more important (in terms of qualitative reach, not just quantitative volume). Again, this was hinted by the contrary behavior of inflation established long before the systemic break in 2007.
Central banks have been reduced to at best random noise and at worst coincident victims of their own unscientific biases. While perhaps a harsh statement, it is at least supplied by a great deal of evidence; “stimulus” has none. Read more
David Chaston good morning mate. I have a few 90 second at 9am questions for you:
Now that you have had time to digest the Australia and Canada Stamp Duty taxes on foreigners. Do you agree that
a) They apply to all foreigners including resident foreign students & Temporary visa workers
b) That “Foreign” can include local residents ? ie people that are not citizens or Permanent Residents are foreign
Would be great if you can now agree with me . My goal is to ensure that the NZ media understand
1. what Australia and Canada have done and
2. their definition of foreign purchaser.
See you comment back in JULY below
http://www.interest.co.nz/opinion/82853/mortgage-broker-john-bolton-arg…
by David Chaston | Sat, 30/07/2016 - 00:34
Both Canada and Australia have had "stamp duty" (a transfer tax) for many decades. What Vancouver BC (only) and Victoria AU (only) have done recently is add a 15% transfer tax to foreign buyers (who are not resident). Neither apply it to locals/residents. Vancouver isn't applying it to high net worth migrants either.
In New Zealand "foreign buyers" don't make up "39% of sales" generally. If that is true, it will be so only in a very few specific neighborhoods and probably only in Auckland. Any evidence for your number claims as I would be interested? "Foreign" can never include local residents.
We are missing the point completely , we need to recognise that foreign property buyers are only one part of the crisis , and that we need to address the issue multi -dimensionally instead of one dimensionally.
This includes
1) Taxing foreign buyers
2) Restricting them to new builds ONLY
3) Addressing the issue of land bankers , who add no value whatsoever , and are leeches
4) Taxing vacant , unused sections in Auckland which are being held for speculative gain ( Introduce a vacant land tax )
5) Scaling back the immigration settings ( they are too liberal especially the investor category ........... we have enough $2 Shops already )
6) Incentivising development through an easy walk -through process in Council
7) Changing the RMA to make it facilitate development rather than hinder development
8) Reduce outrageous fees and administered costs such as $15 k for a water connection in Auckland ,it just adds to the land prices
None of this is hard , hell we don't even need law changes , we can just do it !
Bonds jumped globally after the Bank of England cut interest rates in response to the U.K.’s decision to leave the European Union, reinforcing the trend for monetary easing worldwide.
Treasuries climbed with European securities after the BOE reduced its key rate for the first time in more than seven years and announced asset purchases and loans to ramp up defenses against a Brexit-induced slump. The moves sent the yield on U.K. gilts to a record low. Read more
More elitist artifice calculated to prise open lowly taxpayer pockets, ever wider, to welcome the already wealthy to prey upon them.
"In Europe, the EU has imposed anti-dumping tariffs on some Chinese and Russian steel imports for the next five years in a fresh effort to protect their own local steel makers who are struggling with the consequences of overcapacity in the world steel making industry"
So more Chinese steel looking for a market. How long before our industry here is crushed?
what is most interesting about that comment is that the world is actively moving away from the "free market". I know it has been going on for a while now, but subtly, and not across all markets. Needs to occur in a balanced way to protect jobs, and living standards. That way everyone wins, not just the money.
Does the Swiss National Bank really understand the consequences of it's actions?
Tom McPhail of financial adviser Hargreaves Lansdown said monetary policy was “proving to be pretty unpleasant medicine for pension schemes”.
“It may be supporting asset values and keeping the economy turning but it is also driving down annuity rates and driving up final salary scheme liabilities,” he said. “This means employers are having to pump more and more money into final salary schemes and individuals are having to save more and more into their personal pension if they want to buy an annuity.
“Too much of this medicine is not healthy for anyone’s finances and for final salary schemes in particular, there is a risk that it may actually be killing the patient. The government is going to have to intervene soon.”
The rate cut means that annuities, which promise an income for life, have fallen to new lows. Read more
Brilliant piece of politicking here:
https://www.theguardian.com/commentisfree/2016/aug/03/climate-crisis-me…
I was going to cut some out like:
- Trump saying Climate Change is a hoax and then applying to build a wall to protect his golf course from rising sea levels).
- the Democrats believe they can solve climate change by expanding roads and airports
But this seems far more important:
Already it has climbed by 1.3C – faster and further than almost anyone predicted. In one respect, the scientists were wrong. They told us to expect a climate crisis in the second half of this century. But it’s already here.
Watch the pound plummet again in the next few weeks. BBC article: Bank Of England Cuts Interest Rates http://www.bbc.co.uk/programmes/p042spf0
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