What happened Tuesday

A review of things you need to know before you go home on Tuesday; a few rate changes, affordability improves, e-scooters cost taxpayers, Southern Response winding up, swaps higher, NZD higher, & more

22nd Oct 19, 3:59pm by David Chaston

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
The Co-operative Bank has cut -10 bps from its 3 month TD and all rates from 12 months and longer. Heretaunga Building Society TDs and call account have have rates cut.

AFFORDABILITY IMPROVES
The largest pocket of unaffordable housing in New Zealand is in Auckland, but now housing in most of the SuperCity is now affordable for first home buyers in all districts except the North Shore. Comprehensive home loan affordability data for September was released today. Of the 43 regions, cities, and urban sectors we track in detail, only two (Auckland's North Shore and Queenstown) are now unaffordable.

PRIVATE BENEFIT, PUBLIC COSTS
Injuries from electric scooters in the Auckland region cost the health system upwards of $1.3 mln in less than a year, a study from the University of Auckland shows. Of the 770 victims injured, 246 presented to Auckland City Hospital’s Emergency Department, with 75 of those requiring admission and inpatient care. Forty-nine people required at least one operation and 105 specialist follow-up care. Just over half were male (56%). Auckland City gets a license fee of about $150,000 from e-scooter operators, enabling the taxpayer to pay more than ten times that to support the consequences.

WRAPPING UP
The Government will transfer the remaining Southern Response insurance claims to EQC. Less than 300 claims are involved now, the remnant of the 48,600 claims lodged with Southern Response. It is unlikely claimants will be happy about the move given that neither public service organisations covered themselves in glory processing Christchurch Earthquake claims.

SUPER FUND GIVES UP ON TRYING TO GET PORTUGUESE LOSS BACK
The New Zealand Super Fund says it has ended its legal action against the Bank of Portugal, through which it had been seeking to recover its US$150 million investment in Banco Espirito Santo (BES). This comes after the UK Supreme Court last year denied an appeal on jurisdiction taken against the Portuguese bank Novo Banco, a recent decision of the BES liquidation committee to subordinate the Fund’s claim and a pragmatic assessment of the costs and benefits to the Fund of continuing. The Super Fund's BES investment was written down to zero in its 2015 accounts, representing a reduction in returns of 0.69%.

REVITALISED
Rabobank is reporting that New Zealand kiwifruit is finding an expanding market in California, and able to hold good price premiums over local suppliers and imports from Chile and Italy. They say that both gold and organic variants are helping, even though they say that the organic fad in California has faded.

URBAN MYTH BUSTED
Farm land prices are not rising and haven't been for at least a decade. Clearly farmers are not 'farming for capital gains', no matter what farm type you review.

RAINFALL NORMAL
The latest updates of Auckland's water storage has the system lakes 90% full, compared with an historical normal of 91%. Nationally, the hydro lakes are also near normal storage levels for this time of year. It is approaching four years since we last had a dry patch and six years since the last drought.

ELECTION RESULTS
In the rest of the world, there are elections in Canada. Early results suggest Prime Minister Trudeau will get back in, despite some ethics allegations. In Israel, incumbent Prime Minister Netanyahu looks like he can'r lead another government. He too was dogged by serious ethics accusations, in fact far more serious than Trudeau's.

SWAP RATES RISE FURTHER
Wholesale swap rates are still rising and steepening. The two year is up another +2 bps today, the five year is up +3 bps, and the ten year is up another +4 bps, all very similar increases as yesterday. For the first time in more than a month, swap rates for all tenors are at 1% or higher. The 90-day bank bill rate regained yesterday's dip, now back at 1.05%. Australian swap rates are little-changed today. The Aussie Govt 10yr is up +5 bps to 1.19%. The China Govt 10yr is up +2 bps at 3.23%. The NZ Govt 10 yr is up a very chunky +8 bps at 1.34%. The UST 10yr yield is up +5 bps at 1.80% although all of that rise happened last night.

NZ DOLLAR FIRMER
The Kiwi dollar is also up further today and now just on 64.3 USc. Against the Aussie we are also firmer at 93.5 AU cents. Against the euro we are up at 57.7 euro cents. That means the TWI-5 has risen to 69.3 and a new six week high. As BNZ says, a potential Brexit deal and de-escalation of the trade war has breathed some life into the Kiwi dollar.

BITCOIN SOFTER
Bitcoin is soft today at US$8,187 and a small slip on the day. The bitcoin price is charted in the currency set below.

This chart is animated here.

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

Daily swap rates

Select chart tabs

Source: NZFMA

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

10 Comments

by printer8 | 22nd Oct 19, 4:02pm 1571713335

Trust that staff of interest.co and those who post and living in Auckland are not inconvenienced by Sky City fire.

by polygonalvector | 22nd Oct 19, 4:17pm 1571714241

Kiwi $ floating upwards...

Seems Mr Orr's proactive OCR move only provided a temporary dampener - I would expect that he and the RBNZ committee will be very likely to continue to flog a dead horse and reduce rates further to try and weaken.

I would have thought that they would have realized by now that NZ simply floats upon the waves - clearly here more positive looking global events are overruling whatever effect OCR cuts may (or may not) have had.

by youngdumbandbroke | 22nd Oct 19, 4:29pm 1571714940

NZ is really at the mercy of global economics no matter what way an economist or banker packages it.

by Audaxes | 22nd Oct 19, 6:23pm 1571721787

Kiwi $ floating upwards...

I guess we have to graciously accept anything that looks like an improvement.

So reliant have markets become on monetary expansion that the default assumption is that an economy will always be rescued from recession by an easing of monetary policy, and furthermore that monetary inflation will prevent it from being any more than mild and short. We see this in the performance of stock market indices, which reflect perpetual optimism.

There is a further problem. Other than a rise in bankruptcies, unemployment and negative indications from business surveys, there may be no statistical evidence of a slump. The reason this is almost certainly the case is we are dealing with a combination of funny money and statistics which are simply not fit for measuring anything. The money and credit are backed by nothing, and when expanded by the banking system simply dilutes the quantity of existing money, which if continued is bound to end up impoverishing everyone with cash balances and whose wages and profits do not increase at least as fast as the surge in the quantity of money.

Indeed, the official purpose of the expansion of money and credit is to somehow persuade economic actors that things are better than they really are, and to stimulate those animal spirits. You’d think that with this policy now being continually in operation that people would have become aware of the dilution fraud. But as Keynes, the architect of it all said, not one man in a million understands money, and in this he has been proved right. Link

by Fritz | 22nd Oct 19, 5:15pm 1571717701

Will be interesting to see what impact the big fire has on the convention centre progress.
Having seen some of the behaviours in and around several big development sites in recent times, I'm sad to say this doesn't surprise me.

by Dgm | 22nd Oct 19, 5:32pm 1571718775

They would need to start afresh..

by Fritz | 22nd Oct 19, 5:44pm 1571719459

let's see.
The incompetence in the construction and development sector in this country is quite staggering

by waymad | 22nd Oct 19, 7:49pm 1571726977

The SR-to-EQC transfer was baked into the cake on day 1. While, as DC notes, "It is unlikely claimants will be happy about the move", it is simply one public organisation handing off to another. Given that the remaining claims are likely to be the most knotty, most highly litigated, or most expensive, there's no happy ending for any of 'em, and it's all tax-revenue-funded.......so careful wotcha wish for.

by solardb | 22nd Oct 19, 10:13pm 1571735582

Pretty sure we had a major drought last summer/Autumn? Or do you mean 8 years since we had a drought at this time of year ?

by streetwise | 22nd Oct 19, 11:12pm 1571739135

I trust the Superfund employee/s who doled out $150 million of taxpayers' money to a Portuguese bank of all places has fallen on his sword. They would have been better off lending it to President Mugabe. Portugal is a very strange country...remember that infant girl, the daughter of two English doctors who were on holiday in Portugal, who disappeared without trace. A very strange place. How on earth did we end up lending money to a Portuguese Bank...it looks either incompetent or suspicious to me.