A review of things you need to know before you go home on Friday; no rate changes, housing market hibernating; PMI barely holding on; improved R&D incentives, swaps jump, NZD firm, & more

A review of things you need to know before you go home on Friday; no rate changes, housing market hibernating; PMI barely holding on; improved R&D incentives, swaps jump, NZD firm, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes reported today. But we think there may be some on Monday. Stay tuned.

TERM DEPOSIT RATE CHANGES
None here either. And we sense some Monday changes here as well.

LOWEST JUNE SINCE 2010
The housing market continues to hibernate over winter, with sales volumes at five year lows and prices flat in Auckland and inching higher elsewhere. The Auckland median price is now $850,000 and that is the same as it was in August 2016. In the recent past we have had two flat price periods, April 1996 to May 2001, and April 2007 to January 2012. Both were about five years, allowing incomes to rise and affordability to recover. If this flat period follows the same pattern, that suggests we have at least another two years in the doldrums in Auckland. But the patterns are different in other centres.

'NOSTRILS JUST ABOVE THE WATERLINE'
Manufacturers are feeling very uncertain these days, even if the New Zealand PMI is still in an expansionary phase. One of the components keeping it up is a rise in inventories, and that can't do any heavy lifting for long. The employment component has turned very negative, the lowest since August 2016 and the second lowest since April 2013. Orders might be still coming in but managers don't expect that to last so are cutting back on jobs. The QSBO signaled the same. It is a worrying sign.

ANOTHER EXPLANATION?
For the sixth consecutive month, international guests spent fewer nights in hotels, motels, backpackers, and holiday parks compared with the same month a year ago. Only a rise in domestic travelers kept the totals from falling. But Statistics NZ is also raising another possibility for the weak numbers - more travelers, especially international travelers, are staying in accommodation like AirBnB that don't fully get captured by this data. The formal accommodation industry is recording an occupancy rate of 37.0% in May, and that was down from the same period a year ago. But before we read too much into these numbers, remember the May to September period is the New Zealand low season.

BROADER R&D INCENTIVES
The Government is broadening its R&D tax credit incentive. It is making these credits 'refundable' so that startup businesses don't actually have to make a profit to share in the benefits that profitable companies can access. There is a limit however; up to $225,000 or the amount of tax they collect from employees and pay on to the IRD, whichever is lower.

WE LIKE BEATING THEM AT SPORT, AND VISITING
A few months ago, visitors from China to Australia eased out those from New Zealand to Australia as their number one source. But recently, the tide is swinging back toward more Kiwis visiting. In May, our visits rose more than +9% compared with the same month a year ago. From China, the growth has slipped to just over +5%. Interestingly, visitors from the UK to Australia are declining on this basis, down -5%. Japan (+8%) and the US (+17%) are coming on fast but numbers from both are far behind the New Zealand and China levels (it is not often New Zealand and China volumes get compared this closely).

FACTS NO-ON CARES ABOUT
There is more data out that debunks the popular meme that inequality is rising. We have reported previously that NZ's GINI scores have been stable for yonks. Now Australian data is showing something similar. Both income and wealth measures have changed only very marginally in the past decade, and not at all in the past four years, and well with a margin of error. But just like in New Zealand, these facts won't stop opinionated people 'just knowing' that inequality is getting worse. These days anecdotes always seem to trump proper analysis, in fact they drive political movements even. Believing anecdotes and "feelings" over facts is the great failure of modern education. Facts are treated with suspicion, but 'feelings' are validated in virtuosity.

AUSSIE MILLIONAIRES
The same Aussie data shows that the average net worth for all households was AU$1 mln in fiscal 2018, up slightly from AU$963,800 in fiscal 2016, and up a massive +37% in real terms compared with 2005–06. It is not all evenly distributed of course, but the distribution is not getting worse (see item above).

SWAP RATES JUMP
Local swap rates have jumped and steepened today, following international signals. The two year is up +3 bps, the five year is up +5 bps and the ten yer is up +8 bps. The UST 10yr yield is much firmer today, up +9 bps and now at 2.13%. Their 2-10 curve is up to a 'positive' +28 bps while their negative 1-5 curve is now down to -11 bps. The Aussie Govt 10yr is up +10 bps and now at 1.44%. The China Govt 10yr is up +2 bps to 3.20%, while the NZ Govt 10 yr is up +8 bps to 1.64%. The 90 day bank bill rate down -1 bp to 1.59%.

NZ DOLLAR FIRMER
The Kiwi dollar keeps on firming and is now at 66.8 USc. We are holding against the Aussie dollar at 95.5 AUc. Against the euro we are weaker at 59.3 euro cents. That puts the TWI-5 up to 71.6.

BITCOIN DOWN
Bitcoin is down to US$11,372 and a fall of -5.2% from this time yesterday. Today's volatility is +/- 4½%.This price is charted in the currency set below.

This chart is animated here.

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Highlight new comments in the last hr(s).

Bombshell Claim: Scientists Find "Man-made Climate Change Doesn't Exist In Practice"

https://www.zerohedge.com/news/2019-07-11/scientists-finland-japan-man-m...

For a lecture by Henrik Svensmark on the galactic cosmic rays affect :
https://www.youtube.com/watch?v=8AdAV3Va9Mg

Hi antonymouse
So you really are gullible enough to believe everything that you read on the internet.
I read the article and found it not credible. The only supporting references in the "scientific paper" on which the article is based all had one thing in common - the writer of the article co-authored all supporting references.
Search the University's website and your so called "scientist" is a lecturer who has only published one paper - not the extensive list as claimed in the supporting article - and that sole article was in 2014. Oh, and by the way, he is merely a "lecturer".
Scientists in "Finland, Japan . . . . " is just as baseless support as advertisers' "9 out of 10 doctors" claim.

Hi printer8
No of course I don't believe everything on the internet.
Neither do I believe everything the IPCC tells me, it's after all a political organisation and they stand behind that ridiculous "hockeystick" temperature graph of Michael Mann which is proven wrong.

Your claim that Svensmark has only written one paper is wrong, he's written quite a few.
https://www.dtu.dk/english/service/phonebook/person?id=38287&tab=2&qt=dt...
Did you watch that video?

He is not the only scientist who disagrees with AGW, there are thousands
http://www.petitionproject.org/

FYI I did study climatology.

Hey antonymouse, I independently of your post discovered that article. To those people who haven't had a background in the climate models to do with solar cycles and earth's geomagnetism, it will appear to be an outlier, however this particular article got good coverage as Zerohedge spread the word and that's why we are talking about it. But there is a lot of research done into the effect of the sun on earth's climate and also these high energy cosmic inputs (not from the sun). It's a bit of a rabbithole, but so is the politicized Anthropogenic Climate Change argument. So everyone should do their reading and figure it out for themselves. To be honest the way the universe interacts with earth's field and climate is at a science level beautiful and interesting. It's just that it conflicts with the 'facts' down here on earth where humans think they know it all.

Hi antinomouse
Well if you don’t believe in everything that you read why not check the credibility of something before you post. I am not really interested in what you claim you may have studied as spreading such unsubstantiated articles like this ruins your credibility. If you have studied a science as you claim, you will be very familiar with the rigorous proof required and the article certainly falls well short of any required standard of acceptance.

One look into the comment section (brace yourself) of most zerohedge articles will leave you "woke" to its target audience. Some of the articles are worth a passing read, but you need a tablespoon sized helping of salt for most of it.

David
I draw your attention that zerohedge (by their own admission as reported by Bloomberg) are upset that Facebook has banned sharing links to their site on the basis of fake news.
Clearly the credibility of interest.co is at risk if it is allowed here.

Haha. Facebook that bastion of all things true and reasonable on the net.
The climate change argument is so stupid, unscientific even. Fact is we can't keep using fossil fuels infinitely, and offsetting is a crock.
End of story.

"If this flat period follows the same pattern, that suggests we have at least another two years in the doldrums in Auckland."
To me this is a fair assumption based on the information in graphs. In fact graphs show in interest.co article that volumes sold and median days to sell are still better than the two periods indicated.
Spring will tell but continuing high levels of immigration and low (and likely falling) mortgage interest rates will provide support. No evidence as yet, nearly three years after the Auckland peak, of a significant bubble burst as claimed (but not substantiated) by DGMs.

Googled NZ Gini scores, and dissapointed to see they've been discontinued. Makes it much harder to objectively judge the outcomes of current administration.

HI David

Where are you getting the REINZ press release from?
I mentioned it earlier but it’s now 4.45pm and the 12 July press release from REINZ on their site still links to a ‘copy and paste’ of the June report for May data. I do hope that they aren’t just copy pasting the median Auckland data as well!

https://www.reinz.co.nz/public-archive-2019

The issue of AirBnB and the removal of rental/housing stock addressed recently in both Canada and Ireland.

https://www.irishtimes.com/news/ireland/irish-news/murphy-rules-out-grac...

One of those people that think inequality is rising and cares more for feelings that facts is the PM.

Which one of our joint PMs ... Winsome Peter's or Julie Anne Genter ?

“allowing incomes to rise and affordability to recover”

Although in a general sense if rising income is not reflected in rising productivity then at some point won’t non-tradeable inflation be impacted – and equally, surely the RBNZ won’t remain asleep at the wheel forever in that inflationary environment and interest costs will rise (from historically very low levels) and negatively impact affordability.

Or is it really that easy to get out of a bubble these days.

"These days anecdotes always seem to trump proper analysis. Believing anecdotes and "feelings" over facts is the great failure of modern education. Facts are treated with suspicion, but 'feelings' are validated in virtuosity.

Oh how true, the comments section on Interest is a prime example

Sometimes people genuinely believe what they claim due to ignorance caused by a lack of experience or education - it's generally not a malign process because they know not what they claim.

I was young once. And I was poor. But I'm old now.

... life just moves from one level of abundance and joy , to another , for you : dear friend . ..

At least you're not clutching your Zimmer frame , in the local Ryman village .... surrounded by toothless angry dribbling crones ....

... the staff are creepy in those places , aren't they !

"FACTS NO-ON CARES ABOUT"
Point taken, but GINI is a macro measure.
NZ has continued to slid down the gdp/capita ranks since the 1950's.
With a constant GINI then the poor are sliding further into poverty.
To counteract the falling gdp/capita ranking it would be better to see the GINI improving.
Also as a macro measure it masks food banks, people living in garages etc.