Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report today.
TERM DEPOSIT RATE CHANGES
None here either.
OUR CANARY IN THE MINE
Our annual migration gain is still at historically high levels but easing back quickly compared to the last two years, and since new rules were added in July 2017. Net migration between Australia and New Zealand switched later starting in January this year, with the number of people leaving for Australia exceeding the number of people coming from Australia, a shift starting just after the 2017 election. Six years ago, the net outflow from New Zealand to Australia almost hit -40,000 people; in July 2018 the rate was only -1,000 . Watch these figures carefully as more New Zealanders moving overseas (usually to Australia) can quickly reduce net migration.
GLOSS OFF I
Tourist arrival numbers edged up between June and July and were +1.4% higher than July a year ago. There is a slowdown in underlying growth in the tourism sector, even if the headline annual growth rate is still being dampened by the lingering effects of last year’s British and Irish Lions tour, says Infometrics.
A JOLT LOWER
A sharp reduction in Chinese buying power has resulted in a big drop in prices for export logs, even as Chinese log stocks reduce. There are lower prices flow from India too
GLOSS OFF II
New data out from the RBNZ shows that the peak seems to have passed with credit card debt growth, even if it is still cyclically high. The peak was in March and there has been a waning since then. Now only a bit over 61% of all of this debt atrracts interest, the second lowest proportion ever.
CONCENTRATION AT THE TOP
As at June, the total value in all KiwiSaver funds rose to $52.3 bln. The largest fund (contributions plus gains) was ASB's Conservative default fund now worth $3.6 bln and rolling up 7.0% of all funds in the system. The top ten KiwiSaver funds now encompass $20.5 bln in assets, or almost 40% of all funds; the top 20 exceed $30.4 or 60% of the 248 funds in the system. This all grew from 2007. To put this in perspective, the NZ Super Fund is currently worth just on $40 bln after a 2001 start (although to be fair, it had to grow its FUM without new contributions for eight years).
SOCIALISING PRIVATE LOSSES
The Government has announced it will pay out the 2007/08 rateable value for all uninsured homes in Christchurch, or buy them at those pre-quake values. The new precedent seems to imply you will get paid out even if you don't bother insuring. Moral hazard.
A BRAINY MERGER?
The Government has welcomed a prospective merger between Lincoln and Canterbury Universities. Both parties are expected to submit their formal proposal by the end of 2018.
SWAP RATES LOWER
Wholesale swap rates are down -1 bp across the rate curve again. The UST 10yr is lower at 2.83%, down -3 bps after Donald Trump reportedly criticised the US Fed in a party fundraising event for trying to raise interest rates. That has had the effect of making investors more risk averse and raising bond prices. The Aussie Govt 10yr is at 2.53% (unchanged), the China Govt 10yr is at 3.67% (down -2 bps), while the NZ Govt 10 yr is now at 2.56%, down -4 bps. The 90 day bank bill rate is unchanged at 1.90%.
BITCOIN DOWN
The bitcoin price is now at US$6,310, down -3.3% from this time yesterday.
NZD FIRMER
The NZD is a little firmer against the USD at 66.5 USc toady. On the cross rates we are marginally softer at 90.5 AUc and 57.7 euro cents. That puts the TWI-5 at 70.2.
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42 Comments
The credit card debt growth is interesting . Is it seasonal ( as in winter ) or is it real ?. The interactive chart is great , and it shows a slowdown every July , and an increase around Christmas
It begs the next question , is there a slowdown in credit extension in other forms of credit such as HP and vehicle finance , Mortgages and personal loans ?
Interesting that it would appear that around 40% of credit card debt is being paid off before it attracts interest ( or am I missing something or misreading ) ?
The credit card companies obviously see a slowdown coming. They have been bombarding customers with special discounts such as fee-free years, free miles and what not.
I guess most people pay off their card debts on or before the interest-free due date like the people I know including myself - this way you get to enjoy special deals, air miles but at no added finance costs.
Depends how much spending you can pass through them. If you can spend $40k a year on them they work out quite nicely thanks.. I like my free flights, travel insurance and other benefits, and the $3 I paid in interest last year (my mistake, I forgot to make one payment in time, thought i'd loaded the payment in internet banking but missed it) seems quite reasonable to me compared to what I get for it.
Actually, credit card debt - in fact all personal debt - is far, far lower per capita in New Zealand that any country we normally benchmark ourselves against; Australia, the US, Canada. It's far lower on that basis than many EU countries too like Ireland, Engalnd, France although perhaps not Germany. We don't really have a personal debt problem, other than a certain section of homeowners owe too much for housing, and often that is misunderstood and miscounted too (eg mixing business liabilities with household ones).
Looking overall the corporate debt is more of a worry.
https://www.youtube.com/watch?v=Z-E_4GqfFvg
only 40%? ouch and that's 60% at what 23% on average pay interest?
"The Government has announced it will pay out the 2007/08 rateable value for all uninsured homes in Christchurch, or buy them at those pre-quake values. The new precedent seems to imply you will get paid out even if you don't bother insuring. Moral hazard"
So not dissimilar to the previous Government paying out South Canterbury Finance bondholders at 100c in the dollar when the market price at the time was 30c and $1 mio was supposed to be the cap? Moral hazard indeed!
As well as the moral hazard, this is sadly a very inequitable policy.
The individual's whose house was destroyed in an earthquake and wasn't insured is compensated.
The individual's whose house was destroyed in a single event fire and wasn't insured is not compensated.
Can't quite see the fairness or logic.
My point - and its been made many times before.
The 'red zone ' was intentionally designated by the National government, for the sole purpose of limiting costs.
Many houses in the RZ had minor damage only.
It was a immoral cheap fix , now backed up by a court decision.
Seriously, what the hell is going on when this government says that they will pay out for the uninsured houses in Christchurch from the earthquakes!!!!
Why should the taxpayer be wearing this?
Not sure how much it will cost, but the country is going to be in deep shite with this lot of unskilled people in charge!
Looks like once again a few have not bothered to appraise themselves of all of the facts, only those that suit their particular agenda.
The reason these people are being paid out is because without the re-zoning of the land they would have been able to have gone on to live in their houses, they may have had some repairs to make but they would have had to cough up for them themselves. What happened was, that choice was removed, no-one prior to the earthquakes would have given the idea that something like that could happen a second thought.
Yes, you need to insure your house, there are no plans to cough up for anyone who doesn't insure in normal circumstances.
I hope you are able to grasp that concept.
We supplied half a km of pipe for a trunk sewer job being drilled under the Avon river a couple of years back. The pipe string was being welded behind a house with an old dude still living there, only inhabitant in the area.
Yes services were lacking but that’s a council issue not a Central Government issue.
Correct. The red zone offer was not compulsory. Maintaining services to the RZ areas was not economically feasible for the council. The proposition put by those who elected to go without insurance cover and take their chances, is that it was this council decision that destroyed their equity not the insurable peril of EQ damage.
Which is only partly true. The reality is that most houses in the red zone DID suffer significant physical damage as well and many of these uninsured homeowners would not have been able to afford the repairs, especially given they were no longer feeling the love from their banks. They were largely stuffed anyway due to their decision not to insure, whether the council had reinstated services or not. Lotto lucky dip prize cheque heading this way !
And spare a thought tonight for RZ folk who were deemed 'repairable' by EQC and insurers, who did not at that time fully understand the complexities of RZ land and the consequent high cost of fixing damage. Many of these people felt compelled to accept settlements based on repair estimates that would prove to be inadequate with hindsight, settling at market value through a combination of insurer/EQC contributions, topped up by the government. Instead of the replacement value they might have got. A few probably looking sideways tonight at their celebrating, imprudent former neighbours.
Thanks PockAces you restored a bit of faith in the standard of punter here.
It's got zero to do with insurance, except in one former Minister's head which he some convinced msm of. It's every thing to do with compulsory aquisition and the extinguishing of property rights and the need to compensate for said loss. Insurance is irrelevant to the argument.
worth reading the whole article
https://policyexchange.org.uk/wp-content/uploads/2018/07/Brexit-and-the…
https://www.theguardian.com/business/2017/sep/18/uk-debt-crisis-credit-…
and back at you... does the whole system crumble if we don't sell debt early and pile in on the young? Keep them focussed for the good of the financial system..... The revolution may have begun already!
Politicians haven't realised the risks and danger they are facing. They should all be made to read 'Savage continent".
https://www.amazon.com/Savage-Continent-Europe-Aftermath-World/dp/12500…
Two countries that have seen fit to change housing from the fostering of homes supply for locals to an investment vehicle for those born at the right time, and education from an investment to a way to profit off the young. Sobering how much these articles apply to NZ.
The moral hazard is the collapse of the real estate market. I keep trying to tall you all that the financial system does not go backwards. Prices are set at the margin, if you wipe out the wealth of thousands of people then it will set a cascade of falling prices that can't be allowed to happen. Housing is risky (contrary to popular belief), so the council rezone is not an argument that would stand with any rigour in the court. If it could be allowed to stand then the opposite, gains made by rezoning, would be taxable at a rate of 100%. The decision is zero to do with fairness, and everything to do with propping up the system.
Housing is a necessity, if its value relates to the earnings of those who would live in them, it is not especially risky, what is risky is the sheer nonsense that has been going on with our housing for years.If it tumbles, it will be because there is nothing to prop up the nonsense prices anymore.
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