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A review of things you need to know before you go home Wednesday; Productivity Commission's report; R&D spending growth positive; tertiary academics under pressure to lower standards; Trump's wall faces funding pressures; local swap rates up; NZD lower

A review of things you need to know before you go home Wednesday; Productivity Commission's report; R&D spending growth positive; tertiary academics under pressure to lower standards; Trump's wall faces funding pressures; local swap rates up; NZD lower

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
SBS Bank has raised its floating mortgage rates by +14 bps, from 5.65% to 5.79%.

DEPOSIT RATE CHANGES
Heretaunga Building Society has raised its 1 yr term deposit rate by +10 bps to 3.70%.

SUBSTANTIAL OVERHAUL REQUIRED
The Productivity Commission’s final report on improving urban planning in New Zealand has highlighted the need for far-reaching change to avoid further harmful effects of spiralling house prices and infrastructure shortfalls. The report makes 64 recommendations ranging from changes at the central government to the local council levels, details of which can be found here.

RESEARCH SPENDING GROWS
The spending on research and development (R&D) grew by $531 mln (20%) from 2014 to 2016 and represents 1.28% of GDP or $3.2 bln. This is a big improvement from the 2014 survey, which showed a rise of just 2% from the 2012 levels and as a percentage of GDP the level fell from 1.25% to 1.17%. The improvement in R&D spending was led by a $125 mln increase in computer services, $105 mln in machinery and equipment manufacturing and $143 mln in the tertiary sector. The R&D spend split between business, government and tertiary sectors is 50%, 20% and 30% respectively.

INCREASED PRESSURE TO LOWER EDUCATION STANDARDS
A survey of 1,006 academics (number of respondents out of the roughly 10,000 members), conducted by Tertiary Education Union, has highlighted the increasing pressure to pass students in response to rising completion rate requirements imposed by their managers and departments, including pressure to inflate grades and make assessments easier. This pressure was much worse at the institute of technology and polytechnic institutions as opposed to universities, with 71.7% and 57.1% of the respondents, respectively, saying the pressure was worse than it was ten years ago. The respondents also reported increasing pressure to admit students who did not meet the minimum requirements for the respective courses.

TRUMP'S BORDER WALL
Republicans in the US Congress are considering delaying their decision on President Trump's request to fund a wall along the Mexican border, one of Trump's major campaign promises. The Republicans have said that the spending bill that must be passed by April 28, to fund federal agencies whose funding expires then, is more easily managed without the wall, and that funding for the wall would be better considered at a later time. The Democrats, on the other hand, are threatening to block the funding bill if it includes a budget for the wall.

WHOLESALE RATES RISE
Wholesale swap rates curve steepened today, with 1 yr, 2 yr, 5 yr and 10 yr rates rising 1 bps, 2 bps, 3 bps and 4 bps respectively. The 90 day bank bill was also up by 1 bps to 1.99%.

NZ DOLLAR LOWER
The NZD had declined against the USD today, from 70.5 USc this morning it tested lows of 69.2 USc multiple times before trading at the current levels just above the 70.0 USc mark. On the cross rates we are also lower against the AUD and EUR to trade at 91.7 AUc and 64.8 euro cents. The TWI-5 is now at 74.9.

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Source: CoinDesk

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12 Comments

The NZX50 is up 0.67% which seems to be rebounding from the market hit after Fletchers misreported their income and killed their share price by 20%.

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Misreported is a nice way to put it...I'd say f&^k%^g lied but hey-ho. No way you are that wrong within a month unless your vault of cash catches fire.

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The language I would use everyday to describe it would end up moderated. When your financial reporting for a publicly listed company is that bad then what else is wrong?

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I have friends in both the university and PTE spaces. According to them, with international students there's massive pressure to pass students who are there for the NZ visa and have no interest in the courses. As they see it, they paid $15-30k for the visa, so they should be passed by rights.

Some of them don't even attend classes, but still expect to be passed.

This doesn't sound much like Stephen Joyce's "world class education" to me. What are we allowing our universities to become???

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International students around the world use educational institutions as a gateway to work and reside in foreign countries. However, in our great nation educational institutions are playing along in this sham for short-term financial gains and the government is either clueless or uninterested as long as GDP and employment figures look strong.

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Problem is, they're also devaluing their own reputation in the NZ job market.

"Oh, you have a degree from X? Ah...but they're practically giving those away these days. What can you actually do?"

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Do PTE's issue degrees?

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Tough titties, Millennials. Even if you honestly earned your degree, it's now completely tainted and devalued. Is the National motto 'Relentlessly Dropping Standards and Destroying Value Since 2008'.

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Our way for showing thanks for obtaining a worthless and degraded degree is to make you pay for it over the next 10-20 years with a 12% tax over $19k.

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Missing productivity:

Outside of recessions, US corporations have been drawn to share repurchases over the past thirty years in a way they never were before (they were, in fact, practically unheard of before the 1980’s outside of the relatively rare private equity transactions). There is no particular reason why this behavior should be harmful on its own, and we certainly do not need nor want any government agency deciding when or if it is. But in the case of especially the 21st century economy, it becomes clear that this is a big and destructive distortion made so by the manner of eurodollar redistribution.

Around the time of the dot-com bubble, global monetary finance changed radically from a system intended to give and distribute resources for the purposes of ordinary trade to one that was a complete and parallel offshore money and banking system feeding volume at all considerations. In terms of its effects, US corporations invested productively offshore where the eurodollar debt binge led them to cheap labor. Given that capex was taken in that overseas direction, what was left for US companies to do inside the US? Buy back stock more exclusively (somewhat hyberbole), and especially after 1998.

Once the burst of productivity due to the dot-com bubble itself started to wear off by the time Bernanke was talking about asset bubbles, the “new plateau of prosperity” that Fed officials were sure was happening as a result of their own policies throughout the 1990’s disappeared with pets.com. Without onshore capex as opposed to onshore buybacks, the results were initially less labor but at first supplemented with debt before giving way after the Great “Recession” to just less labor. Read more

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Ever since Enron financial engineering and fiddling the books has been the priority on Wall Street. Their entire stock market and derivative markets are likely a giant fraud at this time. People shouldn't be investing in the companies that borrow to buyback stock. Either they are not growing and the capital is misallocated, or they are borrowing money to buyback stock and issue dividends for untaxed off-shore profits.

So there's stock market price inflation but the money would be better invested in small business if they really want productivity. Regulations need to change to make that happen but Wall Street is obsessed with removing all regulations so that doesn't happen.

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University culture is publish or perish, the rest is jobs for the boys/girls, like the old NZR

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