Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report.
TERM DEPOSIT RATE CHANGES
None here either.
A DIP IN THE ROAD
The ANZ Truckometer indexes both fell in September. The Heavy Traffic Index fell -2.6% m/m to be up just +0.4% in the September quarter. The Light Traffic Index fell -0.7% m/m (+1% q/q). ANZ commented: "We now have complete data for Q3. The monthly fall in the Heavy Traffic Index means the Truckometer is now suggesting the risks around GDP growth in the quarter are skewed towards a weaker outturn."
TICKING UP
The ANZ Monthly Inflation Gauge rose in September and is now +2.9% higher than a year ago. Seasonal price rises and ongoing housing-related price pressures are keeping this Gauge ticking upward. Separately but related, David Hargreaves reviews whether we are now facing stagflation.
CROWN ACCOUNTS IMPRESS
The Government released its financial statements today for the full year to June 2018. They show a OBEGAL surplus of +$5.4 bln (higher than last year), a full surplus of +$8.4 bln (lower than last year), and a net-debt-to-GDP ratio of 19.9% (down from 21.7% last year). All these measures won't surprise any ratings agency analyst and come after a long prosperous period dating back to 2013. Our review is here. Revenue from taxes on wages grew +7.3%, GST grew +6.7% and corporate tax revenue was up +6.2%. These are all notable because nominal GDP grew 'only' +5.5% in the period. So taxes collected are all growing faster than the economy. A couple of other items that aren't widely reported: taxes on interest earned rose +4.0% to $1.5 bln and came in under budget. Fuel levies and taxes actually fell marginally, less than -1%, when an increase was budgeted. If that is a proxy for the amount of fuels used in the economy, the fuel efficiency of the economy is improving faster than economic growth. And finally, tariffs of all other goods only amounted to $172 mln in the full year. Given we imported $53.5 bln of non-fuel goods in the year, that means our average tariff rate is just 0.3%, virtually nothing.
INDUSTRY CAPTURE?
The FMA is focusing new efforts on the growth of fees in the KiwiSaver funds industry. Amid growing frustration they are planning a data-driven analytical review of fees.
SWAP RATES SLIP
Swap rates are down -1 bps today for most terms. This follows the UST 10yr up slightly at 3.24% with the UST 2-10 curve pushing up to +36 bps. The Aussie Govt 10yr is at 2.77% (down -1 bp), the China Govt 10yr is at 3.66% (up +1 bp), while the NZ Govt 10 yr is at 2.67%, and unchanged. The 90 day bank bill rate is holding at 1.88%.
BITCOIN UNCHANGED
The bitcoin price is now at US$6,617 and up less than +1%.
NZD FIRMER
The NZD is firmer today, now at 64.6 USc. On the cross rates we are little changed at 91.1 AUc, and firmer 56.2 euro cents. The TWI-5 is up to 68.8.
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11 Comments
Revenue from taxes on wages grew +7.3%, GST grew +6.7% and corporate tax revenue was up +6.2%. These are all notable because nominal GDP grew 'only' +5.5% in the period. So taxes collected are all growing faster than the economy.
That may have something to do with bracket creep; the median earner in NZ is now charged PAYE at 30% on a portion of their wages because tax slabs haven't been amended in accordance with rising inflation.
There's a lag in processing company accounts, paying tax and then the 5% increase that IRD puts on the next year's tax. Of course every business must be growing by at least 5% even though things are slowing down and cash flow is diverted to tax payments until accounts are processed and corrections applied. The statistics will always be delayed.
While I'm mostly focusing on what's blowing up in other country's economies the potential for stagflation here is interesting. I'm wondering how people are going to cope with the terrible environment it will create. Including what will happen once the interest rates start climbing.
Poor old NZD no mates – current snapshot shows down against every major currency – including the CNY.
At the moment a NZD weakness story.
Thank you Mr Orr:
"We expect to keep the OCR at this level (1.75%) through 2019 and into 2020, longer than we projected in our May statement.”
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