90 seconds at 9 am: Brexit triggered

US house sales jump; robots take 5 jobs each; England gives notice; US$1.7 tln looking for a home; Aussie power cos want to block home batteries; UST 10yr yield at 2.39%; oil and gold up; NZ$1 = 70.3 US¢, TWI-5 = 75.2

30th Mar 17, 7:39am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news Brexit has been triggered.

Firstly in the US, sales that went unconditional for previously owned homes jumped to a 10-month high in February and is +2.6% above the same month a year ago, pointing to robust demand for housing ahead of the busy spring selling season. Sales in the North East, an area that has been weak in the past, showed strong gains.

A new study in the US claims that industrial robots take up to five factory jobs each. This is a study of what happened between 1990 and 2007. Ten years have passed since then and this process has sped up and shifted out of the factory, especially into office work. It is the biggest social change of our lifetimes even though it is just getting started. And there is no going back.

In England, their government has formally given notice to leave the European Union. Meanwhile, the major international banks based in London are in the middle of deciding where to move to.

And staying in London, realtor CBRE is saying stronger economic growth and the availability of debt capital are expected to drive global capital flows this year, with $US1.7 tln of "dry powder" available to deploy in to commercial real estate. Their report skips any mention of New Zealand as a home for any of this money, however.

To understand China's wild-west credit markets, this is worth a read.

In Australia, details have emerged as to why the electricity industry works so hard to restrain the growth of solar and home battery storage. It is the reason a sceptic might jump to. They are trying to screw the scrum against disruptor innovation because so much current investment hasn't yet earned its money back.

In New York, the UST 10yr yield is down a little today and now at 2.39%.

Oil prices are up another US$1 today to just under US$49.50 for the US benchmark, while the Brent benchmark is still under US$52.50 a barrel. Crude inventories are expected to be lower this week.

The gold price is down -US$4 to US$1,252/oz. One of China's largest gold miners says it discovered deposits in eastern China that could be the nation’s largest ever.

And the New Zealand dollar starts today just a little lower at 70.3 USc. On the cross rates the Kiwi dollar is at 91.7 AU¢, and against the euro is at 65.3 euro cents. The NZ TWI-5 index is at 75.2.

If you want to catch up with all the 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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16 Comments

by sharetrader | 30th Mar 17, 8:07am 1490814475

interesting times ahead. will the EU go hard on the UK? to dissuade other countries jumping.
the EU is a failed experiment and sooner or later will implode as countries wrestle back their national identify.
it is the one reason NZ and Australia can never do a single currency, we would never allow them to make laws for our country

by Roger Witherspoon | 30th Mar 17, 10:00am 1490821244

Funny thing is, the very people who felt very strongly that we needed a new flag seemed to also believe the EU was a wonderful thing (whereas really it creates a colony out of each member state).

by MortgageBelt | 30th Mar 17, 8:03am 1490814221

UK returns to Democracy?
EU: "Power is vested in the unelected and unaccountable elite who make laws - in secret - to preserve the status of large multinationals at the expense of small and medium-sized enterprises (SMEs). Multinationals achieve their preferential status by spending enormous sums of money on lobbying. They create a complicated regulatory framework, which only large companies with their Human Resources departments can comply with. This drives small competitors out of business, destroys competition and encourages monopolies, forcing the consumer to pay a higher price for poorer quality goods and services."
http://www.huffingtonpost.co.uk/matthew-ellery/eu-referendum_b_9514608…
.
Almost sounds like NZ for the last few years.

by zorba - old | 30th Mar 17, 8:45am 1490816753

Yeah, let's see how wide awake the people are come September..

by Advisor | 30th Mar 17, 9:59am 1490821165

True. It is widely acknowledged fact that small businesses are critical to the socioeconomic success of a nation. #Mittelstand

by Roger Witherspoon | 30th Mar 17, 10:05am 1490821524

Yes, but we have our own version here, where the needs of foreign capital are given priority over the needs of our productive businesses. So we have a steady inflow of foreign capital into NZ property which pushes up the currency and thus deprives our export sector of revenue. So we become poorer as our house prices go up but our wages stagnate.

by redcows1 | 30th Mar 17, 8:48am 1490816904

Australian electricity. Same thing is happening here with a different slant to it. Here it involves the retailers and lines companies attacking household solar production as being bad for those without it, in the latest round its "solar bad news for poor kiwis". Obviously the poor kiwi bit just tugs at our heart strings and we can see that the industry only has the best of intentions for us. Someone should tell them under this government all they have to do is rock up with a decent donation and the legislation is done.

by OldMarmalade | 30th Mar 17, 9:07am 1490818020

There's nothing sinister or complicated in how the industry feels about solar.

Networks, the guys who need $100 a year to build and maintain the power line outside your house, are going to need to find half that money somewhere else if you pay half as much. The thing is, you still need that power line just as much as before and that your neighbour without solar is now paying your share of it.

Retailers aren't afraid of solar, if anything it's a marketing opportunity.

It'll be a while before Generators worry too much. Solar might drop national demand 1% in 5 years, the aluminum plant down South could drop it 13%.

by positivelywallstreet | 30th Mar 17, 9:23am 1490819023

Our line charges are more like $500 dollars a year and the the system reliablity in Northland is quite low compared to Southland
There will be motivation for the sunny north to install domestic solar and reduce its dependance on the grid.
However, some combination with a new charging structure would be sensible.

by Chris-M | 30th Mar 17, 10:15am 1490822152

Leaving the self interests of the different parties aside, I suspect one of the major issues is preserving a power generation and distribution network that is stable and controllable. Currently this is an important function, that to the public is largely invisible. Once we reach a point where we have a large proportion solar or wind generation we have sources of power that are very volatile and beyond human control. This is going to make it very hard manage the power system so that we have stable consistent power.

by positivelywallstreet | 30th Mar 17, 10:23am 1490822610

California is a decade ahead of us in these issues, our networks are trading on our ignorance.
greentechmedia.com is a good site for policy discussion for the obsessives that enjoy this sort of stuff.

by Chris-M | 30th Mar 17, 11:10am 1490825445

Yes California and Texas sure have a lot of renewables. I note that on the 23rd of March California produced 48.6% of its power from Solar and Wind. It would be very interesting to see how they manage to control the system under these conditions. I am not sure how the USA system works but I would assume that California would be linked to the rest of the country, so that would help a lot in accommodating the instability.
Here is a link describing some of the problems that the volatility from renewables can cause and how it can lead to the consequence that renewable power generators have to be charged to accept their power at peak generation times. Large scale well controlled battery systems would be useful in these circumstances.
https://www.technologyreview.com/s/601221/texas-and-california-have-too…

by positivelywallstreet | 30th Mar 17, 11:14am 1490825686

They must have it sussed because unlike the aussies they have'nt recently had a state wide outage that turns into a global spectacle.
We could ring them for advice if necessary.

by waymad | 30th Mar 17, 12:35pm 1490830523

Hah - SA has already discovered that '. This is going to make it very hard manage the power system so that we have stable consistent power'

Essentially, because the RET allows renewables to get paid for every electron they shunt, RET generators can bid negative for blocks of supply whether that supply is needed or not.

This has the effect, cheered on by Greenista, of driving coal, lignite, gas and diesel generators out of business.

This has the unintended consequence, known to actual engineers, economists and system thinkers but ignored by or unknown to politicians and Greenista, of removing large percentages of high-inertia synchronous generation from the electricity ecosystem.

This doesn't matter while the breezes blow and the sun shines.

But when the sun don't shine and the wind either drops, stops, or gusts above allowable windmill limits, then a large percentage-renewable ecosystem starts to exhibit massive swings in available dispatchable generation, against short-term-constant demand.

So the inevitable consequences range from

load-shedding in largish chunks (meaning significant industrial users with high demand),
importing from (gasp!) non-renewables elsewhere - like SA does from VIC or Germany does from - well, anywhere
Islanding entire grids (as VIC does to SA or TAS when the interconnects overload) to protect synchronous generation
Black system - everything goes down to the extent that not enough synchronous inertia exists to maintain frequency or voltage within safe limits, so synchronous generators drop out for self-protection, renewables which have to fllow frequency set by synchronous cannot dispatch, and SA goes dark....

The AEMO has a nice dashboard showing who's propping up whom here www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Data-dashbo…

And Jo Nova has a round-up here: http://joannenova.com.au/2017/03/aemo-report-blames-renewables-sa-black…

If only the Greenista and the pollies had observed the Precautionary Principle - don't poke large, complex ecosystems with dopey economic sticks.....

by positivelywallstreet | 30th Mar 17, 3:06pm 1490839606

Gee thats aweful.
Apart from the Aussies have there beeen any slipups that crash someones grid, Im being lazy and not researching. There was the mess inthe US that occured befor wind and solar were even considered. The one that took out the NE states.
I trust our NZ engineers have a handle on it and if they dont it wont belong before houses that can will leave the grid.

by CHRISTY GUINNESS | 30th Mar 17, 9:39am 1490819950

Oh, how I wish that England did have it's own government; inside or outside of the United Kingdom. At least the Grand Committee is a good first step.