What happened Tuesday

A review of things you need to know before you go home on Tuesday; some more rate changes, consumers downbeat, NZSF shines, agriculture viewed positively, Fonterra sets date, swaps and NZD decline, & more

17th Sep 19, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
NZCU Baywide reduced their fixed home loan rates by between -20 bps and -26 bps.

TERM DEPOSIT RATE CHANGES
Liberty Financial cut -40 bps from almost all their term deposit offers. Liberty Financial is a unique finance company because it has an investment grade credit rating. Most of its offers are still over 3% and some over 4%.

DOWNBEAT
The Westpac MM quarterly consumer confidence review for September paints a sombre picture continuing its downwards trend into subdued levels. While households are more optimistic about their personal financial situation, they have become increasingly downbeat about the economic outlook more generally. Despite the fall in borrowing rates in recent months, households are reluctant to spend and are instead focused on paying down debt, the survey found. These results are broadly in line with the rival ANZ-Roy Morgan monthly survey, just lower.

ANZ NZ BORROWS CHEAP 10-YEAR MONEY
ANZ NZ has borrowed €500 mln (about NZ$867 mln) through a 10-year fixed rate, senior unsecured bond issue. The bond was issued at 0.60% over the 10-year Euro swap mid-rate, meaning the yield to the investor was just 0.45% per annum.

TAX ADVISER A TAX CHEAT
A Manawatu woman has been jailed for two and a half years for keeping her employees PAYE and ignoring her own tax advice. For more than a decade, Nicola “Nicky” Dargie considered herself “qualified by experience” and presented debt management workshops in Manawatu advocating the need to manage taxes with IRD as part of proper financial control.

PILING ON POINTS IN SECOND HALF
The NZ Superfund returned +7% (before being taxed) in the year to June 2019. After a weak first half, the second half of the year produced strong results. In addition, the fund received a $1 bln contribution from the Government, and along with the rising returns now exceeds $43 bln in value. The NZSF sets an impressive benchmark as a long term investor.

FXBTG FINANCIAL FIGHTS FMA IN COURT
FXBTG Financial Ltd, a company that featured in this March interest.co.nz story, has taken the Financial Markets Authority to court. FXBTG appealed the FMA’s direction to have it de-registered from the Financial Service Providers' Register in the High Court at Wellington on Monday. The judge’s decision was reserved. Interest.co.nz found three warnings from overseas regulators about FXBTG, which remains a NZ registered company.

RUGBY TRUMPS TRUMP
Our Prime Minister is traveling to Japan later this week to watch rugby (and do some background trade deal work). She then goes to New York to meet Donald Trump (and visit the UN).

EASIER TO GET TEMPORARY MIGRANT WORKERS
The Government is changing the way temporary work visas are issued and employers (especially those in the regions) are cheering. It is to become an employer-led process.

AMONG THE TIDDLERS
The dominance of the USD in international trade and financial transactions was highlighted again by a BIS report that sows it with a 44.2% share. The big three are the USD, the EUR (16.2%) and the JPY (8.4%) in that order. It's a long way back to the rest and among those, the AUD is now number five (3.4%) and the NZD is number ten (1.1%). The Chinese yuan is also a tiddler with a 2.1% share, and other data shows it isn't growing.

AGRICULTURE VIEWED POSITIVELY BY KIWIS
New Zealanders generally have a positive view of the rural sector. New research done early August shows Fishing with a 47% positive/16% negative view, Dairy with a 51% positive/20% negative. All other sectors (sheep&beef, forestry, horticulture) had even more positive scores. No data was available to show how these changed.

FONTERRA SETS A NEW DATE
Fonterra advises the new date for reporting its audited financial results for the financial year ended 31 July 2019 will be 26 September 2019. Details of the Co-operative’s new strategy will also be released on this date.

TAX CUTS TO THE RESCUE?
In Australia, it could be that the earlier suggestion that tax cuts aren't being spent, isn't correct. The August update to the CBA Household Spending Intentions series suggests that those tax cuts may in fact be starting to generate higher consumption.

MORE AUSSIE CUTS POSSIBLE
The release of the RBA minutes today from their earlier September meeting confirmed that they "would ease monetary policy further if needed".

SWAP RATES DECLINE
Wholesale swap rates are lower today, down -3 bps for two years, down -5 bps for three years, and down -6 bps for ten years. The 90-day bank bill rate is unchanged at 1.14%. Australian swap rates are also unchanged. The Aussie Govt 10yr is down -8 bps at 1.15%. The China Govt 10yr is down -3 bps at 3.10%, while the NZ Govt 10 yr is down -4 bps to 1.33%. The UST 10yr yield is at 1.82% down -8 bps from this time yesterday.

NZ DOLLAR WEAKER
The Kiwi dollar is lower again at just on 63.3 USc. Against the Aussie we are still weak at 92.5 AU cents. Against the euro we have fallen to 57.5 euro cents. That puts the TWI-5 down at 68.6.

BITCOIN FLAT
Bitcoin is at US$10,249 and continuing to meander in a tight range just above the US$10,000 level. The bitcoin price is charted in the currency set below.

This chart is animated here.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

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21 Comments

by Fritz | 17th Sep 19, 4:23pm 1568694199

'Despite the fall in borrowing rates in recent months, households are reluctant to spend and are instead focused on paying down debt, the survey found.'

Which in and of itself is a good thing. But....ultimately the key outcome sought for the OCR cuts - stimulating spending and increasing inflation - may be a flop.

by youngdumbandbroke | 17th Sep 19, 4:37pm 1568695040

With the ocr already this low and no increase in spending, its looking like the economy is stalling...

by Advisor | 17th Sep 19, 5:16pm 1568697361

True. Hourly wage for the median worker grew 2% while living costs for lower income demographics grew at a much faster rate than that.

by bw | 17th Sep 19, 4:39pm 1568695159

I'll suggest again that "the key outcome sought for the OCR cuts - stimulating spending and increasing inflation" was never the primary intention. The OCR cut (and the ones that are coming) is about "keeping The System afloat"; especially distressed corporate borrowers. 26th Sept look like a day that low rates might be required!

by Fritz | 17th Sep 19, 5:41pm 1568698908

Yeah, well I guess the remit for the MPS has a degree of broadness. 'Efficiency and soundness of the financial system' is part of their remit, so you may be quite right about 'keeping the system afloat'.

by Pragmatist | 17th Sep 19, 7:08pm 1568704088

From the survey:

Spend it or save it?
Each quarter we ask households what they would do with an unexpected cash windfall. This quarter, we saw two very big changes:
– First, the number of households who said they would spend it has plummeted, dropping to its lowest level in 20 years.
– At the same time, the proportion of households who said they would use a cash windfall to repay debt has rocketed higher, back to levels we last saw in 2009.
Those results were echoed across all income and age groups.

Are you listening Mr Orr? Cutting the OCR isn't going to get people spending, just stuffing cash under the mattress.
Have we reached the point where the general public are (possibly unconciously) connecting the dots and twigging to the fact that something is wrong?

by Fritz | 17th Sep 19, 5:37pm 1568698673

It may be that all the messages - from the RB, bank economists etc etc - are starting to seep in.

by JimboJones | 17th Sep 19, 7:42pm 1568706154

It will work to some extent. Our mortgage repayments will go down by $50 a fortnight when our fixed rate ends - we will save some but I’m sure we will also spend some.

by VeryInterested | 17th Sep 19, 7:37pm 1568705822

Doesn’t seem to be working in Europe either.
“Since the introduction of NEGATIVE INTEREST RATES EU Banks have lost 2/5th of their market Value while US Banks have gained the same. “Source Bloomberg”

by JimboJones | 17th Sep 19, 7:46pm 1568706373

But how can you tell if it’s working? Perhaps Europe would be in massive depression if their interest rates were higher?

by Kezza R | 17th Sep 19, 8:30pm 1568709027

Strike'perhaps'.

by positivelywallstreet | 17th Sep 19, 5:21pm 1568697680

I was amused by Dairying and Fishing being positively received but other agriculture sectors are even better.
That could be rewritten.
My experience of satisfaction surveys was if we weren’t above 80% satisfaction the performance was terrible...and we knew it.

by Wrong John | 17th Sep 19, 5:32pm 1568698329

Well, if the big corporates start falling over I'm sure Jacinda will set up a committee & sort it out. She's good like that. Trump wants lower rates so he can borrow more money off the Fed to run the country.
Everyone just keeps borrowing to buy more & more stuff, with a lot of it unnecessarily in hindsight. Your garage is probably full of it. Your 4 bedroom house than only uses one bedroom is also part of it. Stick to what you need, not want you want, you'll be fine.

by powerdownkiwi | 17th Sep 19, 7:49pm 1568706578

B b b b but I need more.

And my house is worth more, so I deserve it.

You pretty much nailed it - amazing how little you can live on, and how much fun it can be.

by youngdumbandbroke | 18th Sep 19, 9:19am 1568755144

Mrs and I actually had a discussion about the house thing. Our house is a 3 bdr, 2 bath, garage etc. And we only use 1 bed, 1 bath, kitchen and garage. In future, we are going to look at a shed with a small living space attached

by Audaxes | 17th Sep 19, 6:17pm 1568701078

The release of the RBA minutes today from their earlier September meeting confirmed that they "would ease monetary policy further if needed".

Name time since 2008 that easing wasn't needed in the minds of central bankers.

by lastlegs | 17th Sep 19, 8:07pm 1568707640

the steep cut spooked the herd,they smell danger.

by Boatman | 17th Sep 19, 9:07pm 1568711255

I wish I was 20 instead of 60 (ish) with interest rates as low as this I would be borrowing up a storm . Problem is no one is keen to give me a 30 yr Mortgage to buy another commercial property .

by powerdownkiwi | 17th Sep 19, 9:31pm 1568712686

Your age-group got the dream run - actually, it might have been better to be a little older - you're going to see the collapse unfold (are seeing, if you have the right kind of eyes and a bit of bravery).

20-year-olds today have the right to be extremely p.ssed. Handed a depleted, polluted, degraded, overpopulated earth just as antibiotics lose their inevitable fight with evolution. You have witnessed peak longevity, peak pretty much everything. Who/what do you think is going to be trading what, from where to whom, to give you returns on said edifice? Why do you think interest-rates are trending below zero and QE did nothing? We've never been here before, certainly never globally.

Believe me, they will envy your generation - and perhaps not so fondly.

Borrowing was really stealing from the future. Had to end when the future was depleted to the point it couldn't underwrite anymore.

by youngdumbandbroke | 18th Sep 19, 9:16am 1568754999

True. I envy this generation. They had it all and left none for the future

by Yvil | 18th Sep 19, 1:01am 1568725263

I don't think you have tried Boatman, if your finances stack up, the banks will lend you money to invest in commercial property even if you're 60. Why do you talk about a 30 year term? If it's for investing, why would you want to repay the loan, interest only forever, when you pass on, your kids can sell the property if they don't know how to handle it.