A review of things you need to know before you go home on Wednesday; no rate changes, deposit insurance still coming, dairy prices drop, public payrolls jump, swaps firm, NZD soft, & more

A review of things you need to know before you go home on Wednesday; no rate changes, deposit insurance still coming, dairy prices drop, public payrolls jump, swaps firm, NZD soft, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes today.

TERM DEPOSIT RATE CHANGES
None here either. Update: ANZ has cut -5 bps from its eight, and nine month term deposits, and its one year rate as well.

DEPOSIT INSURANCE STILL COMING
Finance Minister Grant Robertson has confirmed that deposit insurance for $50,000 per person per institution will be delivered probably in 2021 after more consultation. And he says the Government will add an RBNZ governance board, and Australian-style bank director and executive accountability controls in an RBNZ Act review.

SHARP TURN LOWER
Dairy prices fell
a sharpish -5.1% today with both WMP and SMP falling more than this. But most analysts see this as merely a bump in the road, and holding to their forecasts that the milk payout will rise for the current season.

MINIMUM PAY UP +6.7% IN APRIL
The Government has announced that the minimum wage will rise to $18.90 per hour on 1 April 2020, another step toward a $20 minimum wage by 2021. This is a rise from $17.70 and a rise of +6.7% for those on the current minimum. The last time this rate rose was on April 1, 2019 when it rose +7.3%. About 242,000 people will get an increase in 2020, It is an increase that will cost employers about $50 mln - and add $50 mln spending power to those involved. The 80% "starting out" and training rates will still apply.

HIRING BOOM
The latest headcount data for the core public service shows that staffing rose +5.7% in the year to June 2019 to 54,304, a rise of +12,536 people (or about +50 each working day). That is more than the +5.0% rise in the 2018 year. Since the current government came to power, the public service has expanded +11.1% over two years. In the previous three yours of the prior government it expanded +3.7%.

HIRING IN THE WIDER GOVERMENT SECTOR
The same data set tells us that staffing in the private sector rose +33,360 or just +1.8% in 2019. For every 30 new private sector jobs the Government has added another tax-payer funded 11. The biggest increase is in the core public service (+5.7%) with rises in education up just +1.1%, in the health sector the rise is +4.5%, in "other" Government entities it is up +4.2% and in State Owned Enterprises, the rise is +3.4%. Local Government staffing rose +4.2%. Every public workforce except education rose much faster than the private sector.

NO IMPROVEMENT IN OUR CURRENT ACCOUNT DEFICIT
The country's annual current account deficit widened slightly from -$10.2 bln in Q2 to -$10.3 bln in the September. In ratio terms, it was unchanged at 3.3% of GDP.

A WORSE INTERNATIONAL LIABILITY POSITION
The same balance of payments data shows that we now owe the world -$172.8 bln, with our liabilities -$468.0 bln and we are owed +$295.2 bln. As a proportion of GDP, the net International Investment Position is 56.3%, up from 52.8% at the same point a year ago. That is a deterioration of -$16.7 bln.

THEY LIKE OUR BONDS
Foreign investors buying New Zealand government bonds drove a +$5.8 bln net inflow of investment capital into New Zealand in the September 2019 quarter, Stats NZ said today. This inflow in the financial account was made up of a +$4.3 bln net inflow of foreign investment in New Zealand and a -$1.6 bln net divestment from New Zealand investment abroad.

TAXES DOMINATE
The largest single component of the discounted petrol price at the pump is tax. In Auckland it now taxes 49.6% (or $1.15/L) of what you pay. In the rest of New Zealand it takes 46.5% (or $1.017/L). By comparison, the crude oil component only takes 41.9% of the price in Auckland, and 44.5% of the price everywhere else. That leaves less than 20c for importing, refining, distribution, marketing, and profit. The Government is keen for you to feel offended by that 20c.

 

LOCAL SWAP RATES HOLD
Wholesales swap rates are marginally firmer again. Today they are up +1 bp across the curve. The 90-day bank bill rate is unchanged at 1.22%. Australian swap rates have made a similar small move up. The Aussie Govt 10yr is up +3 bps at 1.19%. The China Govt 10yr is unchanged at 3.24%. The NZ Govt 10 yr yield is also unchanged at 1.56%. The UST 10yr yield is up +1 bp to 1.88%.

NZ DOLLAR LOWER
The Kiwi dollar is lower at 65.6 USc. Against the Aussie we are up lower too at 95.9 AUc. Against the euro we have slipped to 58.9 euro cents. That means the TWI-5 is now at 70.8.

BITCOIN DROPS FURTHER
Bitcoin has fallen further today, now at US$6,646 and down another -3.5% from this time yesterday. Although that is a +72% rise since the start of 2019 it is also a -28% fall since the beginning of November. The bitcoin price is charted in the currency set below.

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12 Comments

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Highlight new comments in the last hr(s).

" It is an increase (in the Minimum Wage) that will cost employers about $50 mln"
Really? Do we think all those workers currently on $18.90 per hour will be happy about 'taking a cut' to be on the minimum wage? They'll want their 6.7% as well, and so will those on$20.16 and so on...."A rising tide" and all that.

Ah, but "those "rich prick" employers can afford it", presumably is what they think. With one hand they make houses less affordable for the employees and the other they make employment less profitable for the employer. Those unintended consequences of fiddling with a complex system on the very questionable basis that you know how it works. Not to mention increased immigration to flood the market with cheap indentured labour at $2 an hour.

By that logic, NZ's median wage should've gone up alongside minimum wage hikes. The reality is far from it: median wage is up an annualised 2.8% since 2016 while minimum wage is up by roughly twice that rate over the same period. The median wage year to June 2019, in fact, booked its lowest growth since 2009 at 2%, despite minimum wage being pushed up 6.8% (16.5 to 17.7 / hour) in April 2019.

The truth is not many workers earning barely above minimum wage get to negotiate their annual pay rates with an iron fist. The majority in that pay range are unskilled local workers or migrants surviving in NZ on the mercy of their employers.

Canadian central bank now buying government-backed mortgage bonds for the first time ever, but no claim that it's intended to support the housing market in any way.

https://www.zerohedge.com/news/2018-12-13/qe-people-first-time-ever-bank...

Why hasn’t quantitative easing produced inflation? The answer is rather simple: quantitative easing is nothing but an asset swap. It doesn’t change the total amount of government liabilities in circulation. It only changes the form of the government liabilities that must be held by the public. Link- scroll down to 'How to needlessly produce inflation'

Nonetheless, Bank of Canada is scooping up sought after pristine collateral needed to raise cash via repo since unsecured lending met it's demise after 2008. In reality risk free coupon bonds are the new cash not inert central bank reserves.

The TIC data, however, agreeing with Z1, shows that it is otherwise possible the smoldering dollar fire, which is what all the smoke had been in the first place, continues to smolder and may be heating back up again the past several months. Perhaps that’s why US bank holdings of UST’s skyrocketed during Q3, and, apologies to all the talk about a repo-calypse, foreigners continue to lean on repo as the real liquidity lender-of-last-resort.

Why are funding markets really keeping the Fed so busy? If TIC is right, consistent with Z1, it doesn’t have much to do with G-SIB surcharges and the level of bank reserves. It starts much deeper and much further back, and more recently perhaps rolling back over toward those same things.Link

I'm not happy at all that Labour are hiring (directly or indirectly) 11.1% more bureaucrats, it's a waste of my taxes to hire people to tell me what I cannot do. No 1 reason for me not to vote for the left

But, but, but, they know best. After all they are straight out of university, you know.

We'll have to commission an enquiry into your viewpoint there Yvil... at a cost of 2 million over 18 months... to decide whether there are too many bureaucrats.

*after 18 months* - QC found we infact need to double bureaucrats to keep up with population growth

The reality is that they're paying less now for those people as full time staff than the public sector was for many of the same people as highly-paid contractors. Quick the wicket that was under the last government. It was always a pretend efficiency, that hiring freeze that just led to more well-paid contractors.

Not to get in the way of rants, obviously.

Yeah right, nice imaginary story

There was an stunning admission by Boston Fed head Eric Rosengren on Tuesday, when during an audience Q&A after a speech to The Forecasters Club of New York, the voting FOMC member (and chronic dissenter - Rosengren has voted against all three rate cuts made by the Fed this year) the former dove warned that lower rates could encourage excessive risk taking and over-leveraging, which would create great risks during a downturn. More importantly, he confirmed that high asset prices are a direct function of low rates, and thus Fed policy, and it is the Fed that is responsible for not only all prior bubbles, but the biggest one them all: the one right now.

"I do have concerns about that financial stability. I would prefer probably a different level of rates," the Boston Fed President said, confirming that low rates will eventually result in a financial crisis, and that only higher rates can lead to a final outcome that is not apocalyptic. Link