A review of things you need to know before you go home on Tuesday; some more rate cuts, terms of trade worsens, house listings rise, swap rates lower, NZD firm, & more

A review of things you need to know before you go home on Tuesday; some more rate cuts, terms of trade worsens, house listings rise, swap rates lower, NZD firm, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
None to report today.

TERM DEPOSIT RATE CHANGES
We have had a series of notifications of rate cuts from the Police Credit Union (bonus saver), Rabobank (NoticeSaver), TSB (cash PIE), and FE Investments (6 mth TD).

TRADE PRODUCTIVITY WORSENS AGAIN
After rising strongly in the period December 2016 to December 2017 (where strong is a year-on-year gain exceeding +5%), the pace slackened off in the early quarters of 2018 and now we have just recorded a third consecutive year-on-year quarter of declines. It is hard to know what has caused this weakening, but it just means we now have to sell more volumes at lower prices just to keep our trade performance from causing trouble. A declining terms of trade is another way of saying a worsening of trade productivity.

LISTINGS DATA REVEALS REGIONAL SPLIT
May data from realestate.co.nz shows markets are buoyant in the South Island while the North Island appears largely to be in a holding position with most regions showing asking price falls

NZX A 'WORST PERFORMER'
Wall Street closed down -0.4% today in its first June trading session. Shanghai is going even lower (-1%), matched by Hong Kong (-0.4%) and Tokyo (-0.4%). More locally, the ASX200 was up earlier but has lost it all as the RBA decision gets closer. The NZX50 is falling hard today, down -1.7% so far. A2 Milk is down nearly -7% today as investors take flight over its China exposure.

NEW TAX COMING
The Government is pushing on with its Digital Services Tax plans. It will be a turnover tax, and might end up applying to some New Zealand companies, although they are not the primary initial target. The aim is to target intermediation platforms, which facilitate the sale of goods or services between people (like Uber and eBay); social media platforms like Facebook; content sharing sites like YouTube and Instagram; and search engines and the sale of user data. Local perr-to-peer platforms might get caught in the "intermediation platform" definitions. More generally, this is a crack in the door for turnover taxes however.

VARIABLE DATA
After posting some good rises recently (up +7% in March), April retail sales were flat in Australia and that was an unexpected slowdown. But it isn't all poor numbers in Australia; their current account deficit narrowed (as expected), and their Government surplus rose.

RATE WATCH
All eyes will be on the RBA rate call at 4:30pm NZT today. Markets expect a -25 bps rate cut to 1.25% and at that level it will then be below Australia's 1.3% inflation rate. Update: The RBA went ahead with a -25 bps cut.

SWAP RATES SINK
Local swap rates have fallen another -2 bps across the curve. Boringly, these are now all new all-time lows again. The UST 10yr yield was down to 2.06% when US markets were open, but it has risen back to 2.10% recently. Their 2-10 curve is a 'positive' +23 bps but their negative 1-5 curve is now at -27 bps. The Aussie Govt 10yr is unchanged at 1.49%. The China Govt 10yr is down -5 bps to 3.28%, while the NZ Govt 10 yr is back down another -5 bps to 1.70%. The 90 day bank bill rate is down -3 bps to 1.64%. Since the OCR rate cut, this key indicator rate is down -6 bps.

NZ DOLLAR FIRM
The Kiwi dollar is down a little from this morning but up from Friday, and now at 65.8 USc. On the cross rates we've similarly to 94.5 AUc. Against the euro we are virtually unchanged from Friday at 58.5 euro cents. The TWI-5 is up, now at 70.6.

BITCOIN DOWN HARD
Bitcoin has fallen sharply today and is now at US$7,967 which is more than -6% lower than where it was this morning. This price is charted in the currency set below.

This chart is animated here.

Daily exchange rates

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USD 
NZD
End of day UTC
Source: CoinDesk

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12 Comments

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The issues with the Australian economy are deep-rooted structural ones; that being said, let's see how much of the gap between the average Aussie's sagging earnings and rising cost of living can a series of rate cuts plug.

Successful Aussie entrepreneur, Matt Barrie summarizes the problem with the Australian economy perfectly in a single statement:
"The problem is we don’t do much in this country any more. We dig up dirt and send it overseas, and we have immigration dressed up as education — but manufacturing is falling apart … and the economy is on par with Kazakhstan in terms of economic complexity.”

Somewhere, Albert Edwards is doing a victory lap.
https://www.zerohedge.com/news/2019-06-03/druckemiller-dumps-all-his-sto...

Stuff the savers. Makes gold look attractive ;)

antonymouse,

He might be a billionaire,but so is Buffett-and much much richer-and he hasn't liquidated his equity portfolio. That's just nuts in my view. In my own small way i have been an investor for over 40 years and seen many meltdowns. Throughout,I have concentrated on good quality,dividend orientated stocks and have survived pretty well so far. What makes gold seem attractive? The fact that it offers no yield? The costs involved? You are welcome to it.

I wonder how many potential First Home Buyers around the world have invested their house deposit money in the only things they know? Facebook, Amazon, Apple, Netflix and Google.
Lots of them in the UK jumped on board the Purplebricks train - the on-line Real eatate model that rose from 100p launch price to over 500p per share by last year and is now back to below its list price, burning cash along the way as it tried Australia and failed.
Tesla will probably have been the death of a few housing purchase aspirations too on a merry cash burning journey, not to mention Bitcoin.

https://wolfstreet.com/2019/06/03/fangman-stocks-crushed-by-potential-un...

Housing has always been, and always will be a smart investment in the long term. No Government can let housing fail and survive a term. Worse case scenario if you aren't over exposed you have a roof over your head. That said, I'm not sure about your comment re: bitcoin. True it is a red day today, but as of yesterday, there were only 3 months where you could have bought bitcoin and still being in a loss today. That said again, I was thinking of buying google, facebook etc in Nov / Dec last year, and when I saw the charts they reminded me of bitcoin at its peak - so I stayed away.

lonewolfnz,

I am,in a small way,a property investor and also a long-term equity investor and hands down,equities are better. I get greater diversification with over 30 stocks,much lower costs without rates,insurance or maintenance and higher net yields.
I have had my mortgage free rental property for 19 years in Mt. Maunganui,so it has risen very substantially in value,but net income is more important. i have seen traders over many decades and most don't do that well.

The next domino to fall in NZ's open door migration series, Tauranga:
- In March, listings were down 13 percent and enquiries soared by 75 percent. In April they were down 24 percent while enquiries were up 44 percent.
- The median weekly rent in the city hit a record $525 this April - that's around three-quarters of the median income.
There's only going to be more competition with Waikato University's new campus opening in central Tauranga. There's 600 to 800 new students going in there and nobody has allowed for any accommodation for them.

https://www.newshub.co.nz/home/new-zealand/2019/06/desperate-times-despe...

Wonder how Oz will react when WINZ figures out the only quick fix for a housing shortage is to send the people across the puddle?

Hardly boring that the swaps rates are at another all time low. The downward spiral in bond yields beginning last year is the biggest news there has been in the NZ financial markets this year. This is saying low inflation/ deflation. No wage growth. Poor economic conditions for a decade. Quite the story.

Something for AirNZ?

New KLM Flying V Passenger Aircraft

https://www.youtube.com/watch?v=dNW5M_J9ks4

Bitcoin transactions are ~99% speculators, almost no use as a currency. Unless that changes it will eventually collapse.