A review of things you need to know before you go home on Wednesday; some TD cuts, construction pipeline lower, KiwiBuild reset, Fonterra pay freeze, swaps stable, NZD firms, & more

A review of things you need to know before you go home on Wednesday; some TD cuts, construction pipeline lower, KiwiBuild reset, Fonterra pay freeze, swaps stable, NZD firms, & more
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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
Rabobank cut most of its rates. Their new rate card is very flat from six months to 4 years. They have kept a 3% rate for five years. Heretaunga Building Society cut too.

PRESSURE ON AGENTS
Average residential property values declined in the main centres over winter, putting pressure on agents to cut commissions says QV.

KIWIBUILD RESET
Details of the 'new-and-improved' KiwiBuild policies have been announced today.

CONSTRUCTION PIPELINE
MBIE has updated its Construction Pipeline. The total construction value is forecast to peak at $43.5 bln in 2021. Residential building activity is forecast to exceed $12 bln in Auckland in 2024. Nationally, residential construction activity will level out from 2020 at $26 bln. Non-residential building will peak in 2021 at $9 bln and then decline. Infrastructure construction will grow to $8.3 bln in 2024. Most of these levels are lower than the previous assessment

STEADY
Commodity prices are little changed in August from July, with small rises for dairy and small falls for meat. Year-on-year, the overall situation is also very little changed, up less than +1%.

PAY FREEZE
All salaried employees on individual contracts at Fonterra earning more than $100,000 will not be getting annual pay increases in the year ahead. That involves more than 6000 people globally. Fonterra as a payroll of 22,000 people, according to the company's 2018 annual report.

WEAK EXPANSION I
There is more data showing that the Chinese economy is not hurting quite as much as the Americans assume. The independent Caixin survey of services (conducted by American firm Markit) shows their Services Business Activity Index posting 52.1, up from 51.6 in July, signalling the strongest rise in services activity for three months. It is still modest however. Earlier this same survey showed factory activity expanding (50.4). The same firm does the same survey in the US - and that shows factories similar (50.3), although they have yet to report US services in August.

WEAK EXPANSION II
The Aussie economy grew +1.4% in the year to June, according to the 'real' GDP data released today. This is the slowest in ten years, but as analysts were expecting. It was held back by their household sector.

WEAK EXPANSION EVIDENCE
And staying in Australia, new car sales plunged in August, down -10% from the same month a year ago. The industry claims vehicle finance is now much harder to get. That is 17 months of consecutive declines. Even tradie favourite, the Toyota HiLux ute, is in reverse.

SWAP RATES STABLE
Wholesale swap rates are little-changed today but are softer for the longest tenors. The 90-day bank bill rate is down another -1 bp to 1.17%. Australian swap rates are a little softer across the board. The Aussie Govt 10yr is down -1 bp at 0.93%. The China Govt 10yr is unchanged at 3.09%, while the NZ Govt 10 yr is down -2 bps to 1.06%. The UST 10yr yield is down -7 bps to 1.46%.

NZ DOLLAR FIRMS
The Kiwi dollar higher by more than +½c at 63.5 USc. That is up almost a cent from yesterday's lows. Against the Aussie we are little-changed at 93.6 AU cents. Against the euro we are firmer at 57.8 euro cents. That puts the TWI-5 up at 68.9.

BITCOIN FIRM
Bitcoin is higher again today at US$10,527, a rise of +1.8% since this time yesterday. The bitcoin price is charted in the currency set below.

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24 Comments

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Highlight new comments in the last hr(s).

glad to see fonterrable finally acting, now they need to review all positions to make sure the company is right sized and not to bloated with middle management
when you have over 27% of your work force on 100k + something is not right

when you have over 27% of your work force on 3 figures something is not right

On 3 figures?

Sounds like they're migrants being exploited in the hospitality sector, if they're on 3 figures.

fonterrable always get me rattled when I see the returns for the farm, I meant earning over 100k

Yeah, all good, knew what you meant.

Although...with the New Zealand peso worth so little these days and Auckland houses worth so much $100k isn't that high a salary compared to the olden days of affordable housing and a higher dollar.

Plus our ever increasing living costs most notably petrol, which in turn increases all other costs

"the new-and-improved KiwiBuild" …… ..… really ?

Not often we agree..

I think DC might have been a bit sarcastic

Interesting article here from Dr Michael Rehm, Senior Lecturer in Property:
https://www.auckland.ac.nz/en/news/2019/08/30/opinion-michael-rehm-auckl...

There is, however, a long-standing, but unused, statute that is arguably a more just and effective anti-speculation policy tool than the abandoned capital gains tax. The Income Tax Act’s ‘intention test’ is laid out in section CB6 and deals with the acquisition of property for the purpose of making profit through resale. The IRD and Treasury have formally admitted that speculating property investors are gaming the tax system and are opting not to report profits from resale despite capital gains being a genuine motive to purchase. Our analysis developed a novel, evidence-based approach to operationalise the intention test and enable the IRD to enforce the existing law.

I recall an investor here on Interest recently commenting clearly that capital gain was the intent of a recent purchase, and the discussion progressed from there on how one needs to be careful of openly stating such.

Just how much tax evasion is going on among property investors in New Zealand, one wonders?

Almost as big a worry is that there is such a position as Senior Lecturer Property.

Yes exactly. If/when property tanks will there still be people wanting to hear anything that comes out of the mouth of such a person?

Silver ETF (EPTMAG) on ASX has been explosive P7D. Also, the Smartshares NZ Dividend Fund experiencing heavier monentum. I guess money looking for some yield.

New car sales plunge in August, down -10% from the same month a year ago. The industry claims vehicle finance is now much harder to get.

Hmmm.. a slow down confirmation that has company:

In trading today, copper really plunged at the open; HG1 (the front month futures price) slammed as low as $2.46 and what would’ve been the lowest price since October 2016. Even though copper recovered throughout the rest of the day, it would still close down sharply at $2.5125 – and still significant at the lowest price since early 2017.

The official manufacturing PMI fell back to 49.5 last month from 49.7 during July. It was the fourth straight month less than fifty, and the seventh out of the last nine. These sub-50 PMI numbers are becoming equivalent to some of the lowest growth levels in modern industrial China’s history (the IP estimate for July 2019 was effectively the lowest on record). Link

Andrewj, how do you find zerohedge as an independent news source?

Back up the truck re Fonterra.
You forgot to include that they are scrapping all bonuses for the 18-19 year. This is money already earned, so there is going to be some very very seriously pissed workers out there. They couldn't retrospectively deal to Theo's bonuses so why everyone else.
This is going to cause long-term I'll will so just how serious are they problems and do they extend beyond asset writedowns to cashflow?

Scrapping bonuses when the company is hemorrhaging is (should be) standard practice for any large company. Individual employment contracts should have a clause that any payable bonus is subject to satisfactory performance of the overall business. They are probably only reporting the fact because it is going to make the REALLY bitter pill we are are about to receive on the 12th seem slightly fair.

They're only reporting it because it got leaked.
Agree on the contract terms meaning they can do it but what's so bad that's coming in the 12th that they would alienate 22,000 employees.

Expect Layoffs, lots of them!

This article talks about the impact of saving for a deposit/high debt on spending. We are lowering interest rates to boost the economy, but lower interest rates increase house prices and increase house prices increase deposits and debt and increasing deposits and debt decrease spending.

The wealth effect of higher house prices is temporary (one off) and dubious (only real for investors), whereas the burden of higher house prices for future generations is permanent and perpetual.

https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&obj...

You need to think about the wealth effect as it relates to consumer spending. See the car sales example above. The relationship between car sales and house price growth is strong.

https://www.businessinsider.com.au/australia-house-prices-luxury-car-sal...

I don’t doubt that the wealth effect is real. What I’m questioning is whether say the wealth effect from housing over 1 year is +1, two years +2 but over 10 years -5.

Interesting the amount of people in the survey with their head in the sand.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12264698&...

Interesting,yes. Surprising? Sadly no.