US proposes big tax cuts; durable goods orders strong, US house sales weak; China limits Beijing population; Aussie crane volumes high, population growth strong; UST 10yr yield at 2.31%; oil and gold slip; NZ$1 = 72.3 US¢, TWI-5 = 75

Here's my summary of the key events overnight that affect New Zealand, with news of some big population changes.

But first, in the US Republicans and the White House called for slashing tax rates on businesses and the wealthy, as part of a new tax plan that offers few details about how to pay for tax cuts without expanding the American federal deficit. Their top tax rate will go from 35% to 20% - if they can get this past Congress. This debate will now shift to budget deficit projections.

Meanwhile, new orders for American-made durable goods increased more than expected in August and shipments maintained their upward trend.

But pending home sales volumes for August fell -3.1% year-on-year and far more than markets were expecting. Supply is tight. As a consequence, prices are on the move up and are +6% higher than the same time a year ago.

China has announced it is capping the population of its capital Beijing at 23 mln by 2020. It is almost there now. It will do this by moving heavy industry out of the city, shifting it to a more administrative centre.

The latest update of the HSBC Expat guide has New Zealand ranked the third best place for expats, behind Singapore and Norway. Australia was ranked 7th.

In Australia, their latest Crane Index has brought some somewhat surprising news. Housing construction continues to defy predictions of a collapse, with increasing residential cranes across Australia, and now at a new high. More new cranes went up on housing projects than were taken down, pushing the number of home-building cranes up to 551 this month from 547 six months earlier. In addition, rising numbers of cranes on hotels, civil and mixed-use projects pushed the total up to its highest since the survey began in 2012, and as strong as construction during the Sydney Olympics seventeen years ago.

That can be explained by the latest population data out for Australia. This rose by +389,000 in a year (up +1.6%), with growth in Victoria up 149,000, and in NSW up +123,000. These two accounted for 70% of all their population growth in the past year to March. There are now 24.5 mln Australians. (For reference, New Zealand's population grew +2.1% in the year to June.)

In New York, the UST 10yr yield has raced higher today and is now at 2.31%, perhaps fueled by the US tax plan and the expectation it will cause financial stress.

The price of crude oil has inched up today to be just over US$52 a barrel, while the Brent benchmark is marginally down at just over US$57.50. Actually, crude oil prices are a remarkable +23.8% higher today than they were one year ago. At some point soon that will feed into inflation.

The price of gold is lower, down -US$2 to US$1,297/oz.

But the Kiwi dollar is also higher. It is now just at 72.3 US. On the cross rates we are also higher at 91.9 AU¢, and 61.5 euro cents. And the TWI-5 index is now at 75.

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 ».

Daily exchange rates

Select chart tabs »
The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

10 Comments

A perceptive piece on the US housing market:
https://www.cnbc.com/2017/09/26/stop-sugarcoating-the-housing-market-eco...
Not too dissimilar to NZ. I wonder where the marginal buyer in NZ may be from.....?

A couple of differences between US and NZ is that rental yields here in NZ are quite low, whereas the article states that US yields are quite healthy. This is aligned with the fact that NZ rents are not rising nearly as quickly as home prices. My decade of renting that ended the beginning of last year had my rent increasing by 2% in total over a decade... and yes, my starting rent was market value and was negotiated at the start.

Oz cranes in residential building just mean apartments. Apartments mean pre sales already done and dusted, the developers sales trips to China & the middle east well done!

As for other crane activity now matching the period 17 years ago!
Pity the poor folk there. Matching a 17 yr old level just points to the nothing thats been going on there since 2000.
Other than the NSW politicians now in jail!.

I wonder how much having an influx of non english speakers effects our productivity if only for x number of years.

Today, the Federal Reserve released its triennial Survey of Consumer Finances (SCF) which collects information about family incomes, net worth, balance sheet components, credit use, and other financial outcomes.  A superficial flip through the first few pages of the 2016 SCF as most will do, reveals "broad-based gains in income and net worth since the previous time the survey was conducted, in 2013" as the Fed puts it. Unfortunately, reading between the lines reveals that while net worth and income did increase in the past three years, it was exclusively for the "top 10%" of Americans. The "bottom 90%" got virtually nothing of this so-called recovery.

As the following chart shows, the share of income received by the top 1% of families was 20.3% in 2013 and rose to 23.8% in 2016. The top 1% of families now receives nearly as large a share of total income as the next highest 9 percent of families combined (percentiles 91 through 99), who received 26.5 percent of all income. This share has remained fairly stable over the past quarter of a century. Correspondingly, the rising income share of the top 1 percent mirrors the declining income share of the bottom 90 percent of the distribution, which fell to 49.7 percent in 2016, the lowest on record. Read more

Are cherished alliances about to be torn asunder?

The government has warned aircraft manufacturer Boeing it could lose UK defence contracts over its part in a US decision to slap punitive tariffs of 219% on rival Bombardier, in a dispute that threatens to sour trade relations between London and Washington. Read more

Best news all year.... let's build some damn houses.
(Bad language removed. Appreciate your enthusiasm for the building of houses, but we can do without the swearing. Ed.)

Government is over rated. Belgium managed to chug along without one for a couple of years. "The country is recovering well from the downturn, with growth last year at 2.1 percent (compared with the E.U. average of 1.5%), foreign investment doubling and unemployment at 8.5 percent, well below the E.U. average of 9.4%. ‘By and large, everything still works. We get paid, buses run, schools are open,’ says Marc De Vos, a professor at Ghent University.”
http://washingtonmonthly.com/2013/10/09/how-belgium-survived-20-months-w...

Boeing scored a big victory against its Canadian rival, but it may start a nasty trade war

https://www.businessinsider.com.au/boeing-commerce-department-bombardier...