A review of things you need to know before you go home Friday; no rate changes, migration peaking, visitor numbers impress, new bigger Tasman Housing Accord; RBNZ extends currency swap deal with China, swaps & NZD slip

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

MORTGAGE RATE CHANGES
No changes to report today.

DEPOSIT RATE CHANGES
None here either.

PEAKING?
Migration still running at record levels with net gain of +71,885 in the April year. Population gains from migration are now 15 times higher than 4 years ago in the April year. But the migration gain appears to have peaked.

A YEAR-ROUND DESTINATION
"Tourist arrivals shot back up in April, increasing +22% from a year before. The timing of Easter, in April, mitigated some of the weaker growth seen in March, with strong tourist boosts from Australia, North America and Europe. Even accounting for the difference in Easter dates between years, April saw significantly stronger tourist arrivals from a broad number of countries, suggesting New Zealand’s traditional tourist season may well be expanding, with April normally the start of the shoulder season." - analysis from Infometrics.

RENEWED, BUT NO INCREASE
The RBNZ has renewed its currency swap facility with People’s Bank of China. It is used to "support the settlement of cross border transactions between New Zealand and Chinese businesses." The arrangement was first agreed in 2011. The size of the swap facility is RMB 25 bln (NZ$ 5 bln) and it has a three year maturity which may be extended if both parties agree.

'THE RBA NEEDS TO MAKE MULTIPLE CUTS'
According to Credit Suisse analysts, yesterday's Aussie job data holds clues to some key weaknesses and a stubbornly large output gap. They are calling for the 1.5% policy rate to be cut "multiple times this year".

AUCKLAND CAN'T, BUT TASMAN CAN
A new Tasman Housing Accord aimed at boosting the district’s housing supply has been signed today. The previous Housing Accord in May 2015 set a goal of 260 additional sections and 620 new homes over two years, and these have been well exceeded, with 457 new sections and 693 new homes. The new targets for the period 2017-19 are for 800 sections and 1100 homes.

A LIVE EXPERIMENT
In Vancouver, their new housing restrictions are having a dramatic effect on the market. Sales are down sharply, down -23.9% in April compared with the same month a year ago. But sellers have withdrawn their homes from listing with inventories down -17%. Both these are huge reactions. And none of this is improving affordability. Their average price is virtually unchanged. "On a seasonally adjusted basis, active residential listings have declined 50 per cent since 2012 and are now at their lowest level in over 20 years. The imbalance between supply and demand is continuing to drive home prices higher in most regions, further eroding affordability," says the local real estate association. I wonder if this is the market reaction the British Columbia Government had in mind when they imposed their new taxes and market restrictions?

PEER REVIEW
Tonight is when the 2017 Canon Media Awards will be announced, and this website has made it as a finalist in both the "Best New Website" and "Website of the Year" categories. Gareth Vaughan and Diana Clement are also finalists in their categories.

WHOLESALE RATES SLIP
Most wholesale rates are unchanged today, although those from five to ten years are lower by -1 bps today. The 90 day bank bill rate is unchanged at 1.98%.

NZ DOLLAR LOWER
The NZD is a little lower at 68.9 USc. On the crosses we are at 92.8 AUc, and 62 euro cents. The TWI-5 is still at 73.3 and marginally lower where we were at this time yesterday.

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Daily exchange rates

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4 Comments

According to Credit Suisse analysts, yesterday's Aussie job data holds clues to some key weaknesses and a stubbornly large output gap. They are calling for the 1.5% policy rate to be cut "multiple times this year"

The reality that previous rates cuts have proved insufficient to remedy the low wage growth malady is hardly reason to call for more failed "stmulus" actions. Witness Japan.

Thus, the decline of interest rates to zero corresponds with a monetary imbalance in favor of deflation, if at least an abundance of deflationary pressures. This is something that Milton Friedman also talked about, particularly in 1998 with regard to Japan. He called it the interest rate fallacy, meaning that low nominal interest rates signify "tight" money conditions, or what would be consistent with significant deflationary pressure. It is and remains a fallacy because economists like those at every central bank around the world have decided instead that low rates are only "stimulus."

To correct this view, Friedman pointed out the basic, non-trivial distinction between a liquidity effect and an income effect. Low rates can be stimulative in the short run (the liquidity effect), but over the long run their persistence means something far different. A yield curve is supposed to be upward sloping given the core time value of money and investing. That arises from opportunity cost, meaning the more plentiful the opportunities the greater the time value and the steeper the curve (the income effect). Yield and/or money curves (the eurodollar curve and even the history of the OIS curve) that collapse and remain that way unambiguously demonstrate that "stimulus" deserves only the quotation marks.

Policies that continue to be categorized in that fashion while the interest rate fallacy remains are devoted to the economy that "ought to be", not the economy that is. The danger comes as Keynes warned, in repeating mistakes rather than learning from them. Read more

Congrats on the nominations. You guys have been crushing it. Keep it up!

Re Vancouver , dont worry too much, the consequence was likely as intended or must have been anticipated.

They have simply taken the wind out of the demand side , now they just need to address the supply side , and they have time to address this , even if it takes years ( as it does) to bring new builds to market .

Frankly , we should do the same .

Interest rates are on thir way back down
http://www.smh.com.au/business/the-economy/rba-will-have-to-cut-rates-mu...
Likely for NZ also after Australia