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A review of things you need to know before you go home Friday; dairy prices up, more reinsurance cover, service exports targeted, DTI exemption wanted, swaps flat, NZD up

A review of things you need to know before you go home Friday; dairy prices up, more reinsurance cover, service exports targeted, DTI exemption wanted, swaps flat, NZD up

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

MORTGAGE RATE CHANGES
Nothing to report today.

DEPOSIT RATE CHANGES
No changes here either. But for an update of where things stand, see this.

ON THE WAY UP
The latest dairy price monitoring by the USDA is showing some interesting divergences. Oceania WMP prices are now well below those for Europe and South America - our product has a US$200 price advantage (meaning it is about US$200/tonne cheaper), it seems. We have similar, although slightly smaller advantages in SMP and butter too. But our butter prices are catching up fast - they are US$450 higher in the past fortnight. These changes may help explain why our dairy companies are more comfortable signaling higher farmgate milk prices.

MORE COVER
IAG Group has bought another AU$1 bln of catastrophe reinsurance to add to the AU$7 bln of reinsurance it buys every calendar year. An IAG spokesperson confirms the purchase isn’t related to the Canterbury earthquakes. Rather its CFO says: “We are always looking for ways to strengthen our reinsurance protection in a cost effective manner, and this purchase meets those requirements. It significantly extends the upper end of our gross protection.” IAG New Zealand in November bought another NZ$900 mln expensive reinsurance for its quake risks.

EXPORT TARGET: SERVICES
A new consultative group has been set up to help promote services exports. Services account for 70% of our GDP, 80% of our jobs and 31% of our current exports, amounting to NZ$21.6 bln and almost a third of total exports. Huge global growth opportunities for services exports and the digital economy have been identified and this new group is part of a coordinated effort to go after them.

A KEY DTI POSITION
The NZ Labour Party today came out against debt-to-income limits being applied to first home buyers. That seems a slightly odd position for them, to want to allow first home buyers to take on debt at levels that regulators know is probably very high-risk.

THE CLAMPS ARE ON
In Australia, lending levels are in decline. For housing finance, they are down -1.6% in April from the same month a year ago, and for the bit related to lending for investors, that is down -2.3%. The raw numbers show much steeper declines, but we are reporting seasonally adjusted data here to account for the different way Easter occurred between the two years. Personal lending and commercial finance are also in decline, and at an even greater rate.

HITTING INVESTORS, ESPEC WITH INTEREST-ONLY LOANS
And staying in Australia, ANZ changed some home loan rates today, increasing its interest-only loans by +0.30% which decreasing its P&I loans by -0.05%. That positions them with a lower rate that any of their three main rivals for owner-occupiers on P&I terms, but equal to higher than them in all other cases. Today's action is not likely to 'help' lending levels.

PRICES HIGHER
In China, inflation data out today confirms analysts expectations of higher levels of consumer price inflation, which are now back up to +1.5%. If it wasn't for fast-declining food prices, the levels would have been well over 2%. Producer prices are rising faster, but that rate of increase continues to moderate.

'HOUSE PRICES TO HALVE'
House prices in Hong Kong are the world's priciest. But they may not stay like that for long. They could fall by nearly half over the next 10 years as a rapidly ageing population coupled with rising supply of new flats will dent demand, according to a report by Deutsche Bank. The key driver of the trend? over-building. Hong Kong will join Christchurch to show that supply is the key factor in getting affordability realigned. Vancouver and Toronto are the exemplars of why trying to curb demand doesn't work.

WHOLESALE RATE CURVE FLATTENS
There are few changes today.. The 2-4 year terms are up +1 bp, and the 10yr is down -1 bp. The 90 day bank bill rate is unchanged at 1.94%.

NZ DOLLAR RISES AGAIN
NZD is up slightly from this time yesterday at 72.2 USc. On the cross rates, against the Aussie we are at 95.7 AUc, and we are at 64.5 euro cents. The TWI-5 is now at 76.4, pushed up marginally by the pounding the British currency is getting following their messy election. The NZD-GBP has little impact on our economy these days it now just a cultural curiosity. And bitcoin is up +4.6% on the day, now at US$2,850. Remember it hit US$2,957 three days ago, slipped, but is on the way back up again.

You can now see an animation of this chart. Click on it, or click here.

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24 Comments

What happened today? The conservatives just got the big middle finger in the UK. Be very afraid National, you are next.

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Why anyone thinks the situation here (economically) is similar to the UK beats me. And politically, we are even more different (MMP for a start). We have much more in common with Australia, and even on that score, we are diverging. Some of us just have to get over thinking NZ is still back in the 1980s. Our present (and future) is no longer tied up with England. One day TV news (the last hold-out) will figure that out.

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Well said, David.
To add to that, we may have our problems with our political leaders, but we are in a far-better situation than our British and Australian counterparts in those terms. Our problems are few and we are in a good position to collectively address them before it is too late, unlike the Brits, Aussies and Americans who are on the verge of political crises.

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The question is, will we address them?

Everything we're told by National is that everything is fine and nothing's wrong at all.

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wow - such naivety.
NZ is TOTALLY dependent on the world financial economic system. When its goes down, all supply chains go down.

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GBP has dropped FSTE is up, good buying time into UK markets

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Good time to sell that villa in Auckland and buy a nice place in Hastings or Canterbury. I couldn't believe how cheap things seem in the UK while shopping at Tesco.

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If the young voter wakes up.........

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You miss the point David. MSM and associated commentators are misreading the public mood and the polls time and time again. Nothing to do with being in the 1980s ( where divd that come from), it's more to do with the growing number of disenfranchised who have decided to vote ...and they are voting against the expected norm. So watch out national, the polls are meaningless in this environment.

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National have probably just collectively shat a brick.

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I think there a lot of similar threads
polls had conservatives comfortably ahead
labour leader was panned as no good
mainstream media backed incumbents with full force and most coverage was how big the win will be

mainstream media now reporting result is a huge surprise with huge swings to labour

will be interesting for nz election as we have many of the same threads here,
polls, MSM, labour leader, government leader inherited position
I would agree because of MMP our result could be very different especially with WP in the mix
and I am picking any lost voters from BE will head over to WP and GM not labour

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National is no longer 'Conservative' - they are more liberal & global corporate leaning. They have long left their conservative roots.

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Conservatives and corporations are not strangers to each other, Boatman.
They are the trouble though and it's not any particular party leaning toward them, it is more they are bloody great black holes sucking in anything that strays too near them.
I actually think it is them people are railing against but have no idea how to stop it.

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Tourism (both domestic and international) makes up 14% of NZ's GDP and 67% of services exports. The government has already put all its weight behind this labour-intensive sector and pushed it to the capacity limits.
Maybe a bit of financial and regulatory impetus is needed for the other services, like scientific, professional and technical services where better investment and skilled workforce is much needed. A strong presence in this sector directly benefits the larger economy as a whole.

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All good news then !

Dairy up , NZ$ Up, savings rates went up this week , economy stable , we will win the Rugby , we are doing great in the Yachting , and the cherry on top was the nice weather today ,..........

Lucky country , and we dont appreciate our good fortune enough

Have a good weekend

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Thanks Boatman! Have a good weekend also!

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You forget people living enmasse in motels.

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on a brighter note, at least they can watch the rugby on sky

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21st century version of let them eat cake?

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Yes all you Boomers sleep well, lucky buggers

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The Boomers are lucky buggers and came into the world at a very opportune time. I liken them to royalty in a way. They can swan around the world, unable to help feeling rather special, basking in their Western European privilege while at the same time comfortable in the knowledge that they have left the world a better place. Under Boomer stewardship the world is becoming more tolerant and diverse and all the people more equal no matter where they come from, what religion or creed they follow or which gender they choose.
A Boomer can sit by the resort pool on a tropical island, sipping a cocktail delivered by a local girl in traditional attire, while watching the sun go down over the ocean and truly feel that, yes, this really is the best of all possible worlds.

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UK election: showing how terrorism can affect elections.
Open borders is still the desired state by many - different reasons by different groups.

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DC. there is more to curbing demand that the efforts in Canada you cite as not being productive. Your conclusion does not stand upl Note the Canadian efforts were all about taxes and financial measure. But what Canada did not do was reduce demand by limiting the number of people, either by a population policy and it's subset of controlling immigraton.

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DC, thank you for reminding the common taters about the land-and-building-supply scene in Christchurch. It's possible to buy a plot at a '1' price and a house/plot deal in the high 3's/low 4's.

This may not exactly pass the 3-3.5 ratio championed by Demographia using international measures, but it's gotta be better than Awkland, where I haven't seen a ratio mentioned for months now - probably because it would increase presentations to A&E and mental-health clinics.

Christchurch benefitted from a benevolent dictatorship that sidelined the woeful City Council plannerista, from the competitive nature of surrounding TLA's who, frankly, couldn't believe their luck at the prospect of new residents, a wider rating base, and the accompanying economic activity; and from the response of the construction sector whose cash flow was provided, fairly much immediately, from insurance payouts and Gubmint action to relocate red-zoned suburbs.

Not, y'all unnerstand, that I am advocating a Natural Catastrophe to sort out Awkland. Some unkind types would aver that they've managed that without Gaia's assistance......

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