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A review of things you need to know before you go home on Wednesday; many TD cuts, dairy prices hold, smaller current account deficit, debt load rises, job levels held, swaps firm, NZD lower, & more

A review of things you need to know before you go home on Wednesday; many TD cuts, dairy prices hold, smaller current account deficit, debt load rises, job levels held, swaps firm, NZD lower, & more
ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
No changes announced so far today.

TERM DEPOSIT RATE CHANGES
Heartland Bank, Co-operative Bank, SBS Bank and BNZ all cut term deposit rates.

DAIRY PRICES HOLD
There was another dairy auction and this one was positive, up +1.8% in US dollars from the prior auction and the most since the start of the year. In New Zealand dollars, prices are virtually unchanged. Volumes sold are rising. WMP (+2.2%) and SMP (+3.1%) led the way. But this auction's positive outcome is unlikely to change any farm gate milk price forecast.

SMALLER DEFICIT
The country's annual current account deficit for the year to March was -$8.5 bln, less than the -$10.8 bln the year before. That was -2.7% of GDP (down from -3.6% last year and -3% as at the December quarter), and in line with economists' forecasts. Weaker import levels and much lower international travel is behind the improvement.

ASSESSING OUR OVERSEAS DEBT LOAD
The level of gross indebtedness to the rest of the world, and measured by the liabilities in our International Investment Position (IIP), is now $487.5 bln which is 11% more than a year ago, largely boosted by the falling exchange rate which devalued -11% in the same period. On a per capita basis, we owe $97,800 for every person and this indebtedness represents 143% of GDP. But is you net these gross liabilities off against our overseas assets, the picture is far more sanguine. Our net IIP is -$182 bln or $36,520 per capita and less than 60% of GDP. Ten years ago it was 80% on a net IIP basis, 158% on a gross liabilities basis.

RECORD PUBLIC DEBT
The RBNZ is reporting that the level of gross Government debt was $100.8 bln as at the end of May. This is the first time ever it has exceeded $100 bln. But separate monitoring shows it has subsequently risen to $101.1 bln as at today or 32.5% of GDP.

LOWER RETAIL SALES MOVED ONLINE DRAMATICALLY
The Marketview report on online sales in May shows dramatic changes. It was another huge month, up +50.1% year-on-year. For domestic purchases it was up +93% while international transactions were down -9% on that basis. These shifts happened while overall retail spending fell -13%.

JOB TRACKING
From employer IRD filings (and so one month in arrears), Stats NZ reports that in the week before the alert level 4 lockdown began and non-essential businesses closed, there were over 2.216 million paid jobs. This fell to 2.108 million in the last week of alert level 4, before rising back to almost 2.199 million jobs in the week ending 17 May 2020. That all suggests so far few Kiwis have actually lost their employment - at least while the subsidies are in place. (It does not measure pay levels.)

AUSTRALIA UPDATE
Infections are rising in Australia too. In Australia, there have been 7370 cases (+23 since this time yesterday), 102 deaths (unchanged) and a recovery rate of just over 93% (up). Cases seem to be rising faster than the officials can update their data. A fourth Victorian school has ben locked down.

GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 8,153,200 and up another +138,000 from this time yesterday. This is still rising at a faster pace than recently. (And a reminder, when this tally exceeds 10 mln, we plan to give up reporting the number daily.) American cases rose by +23,000 since yesterday to 2,136,000. They are just not getting on top of their outbreak. US deaths now exceed 117,000 rising by 1000 per day. Global deaths now exceed 441,000, rising by about 4000 per day. Beijing is closing schools again too.

CONCLUSION JUMP
China has banned imports of fresh salmon.

TRADE PULLBACK
Japanese exports fell -28% in May from a year ago, imports were down -26%, both all-time record declines.

EQUITY MARKET UPDATES
Last night equity markets were energised by promises of more very large stimulus. European markets rose for than +3%, Wall Street was up +1.9%. It is kind of like a feeding frenzy. But today, Shanghai isn't buying; it is down -0.3% at the open. Hong Kong and Tokyo are also lower as well. The ASX200 started today up, but is now falling. The NZX50 Capital Index however didn't get the local memo, it has followed Europe up and is heading for a +2.3% gain today.

SWAP RATES UPDATE
Swap rates probably rose again at the long end today, but unlikely at the short end. We don't have wholesale swap rates movement details yet but we will update this later in the day if they show a significant movement. The 90-day bank bill rate is still at 0.27%. The Aussie Govt 10yr has dipped -2 bps to 0.91%. The China Govt 10yr is little-changed at 2.87%. The NZ Govt 10yr yield is  firmer, up +2 bps at 0.85% in a rising trend. The UST 10yr is down -4 bps since this time yesterday at 0.73%.

NZ DOLLAR LOWER
The Kiwi dollar is lower that at this time yesterday to 64.4 USc. Against the Aussie we are firmer at 93.8 AUc. Against the euro we are softer at 57.1 euro cents. That means the TWI-5 has slipped to 69.2.

BITCOIN STABLE
The price of Bitcoin is unchanged today at US$9,444. The bitcoin price is charted in the currency set below.

This soil moisture chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

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End of day UTC
Source: CoinDesk

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20 Comments

Very interesting call.

“The U.S. economy has been afflicted with some significant macro imbalances for a long time, namely a very low domestic savings rate and a chronic current account deficit,” the former Morgan Stanley Asia chairman told CNBC’s “Trading Nation” on Monday. “The dollar is going to fall very, very sharply.”

His forecast calls for a 35% drop against other major currencies.

https://www.cnbc.com/2020/06/15/dollar-crash-is-almost-inevitable-asia-…

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it was the turn of BNZ to drop their TD rates in the race to see which bank scrapes the bottom of the barrel first,they are matching the rates paid in australia by some neo banks and they have insurance up to 250K and reduced foreign exchange fees on their debit cards.

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Re: global update

For what it’s worth, I am interested in this section. I appreciate the quick summary on whether global and US cases are rising at a faster rate or not. If you’re doing away with the numbers, can you continue with those “this is at a faster rate than yesterday” statements?

I’m not so interested in the numbers but I am paying attention to signs the US is getting the outbreak under control.

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I appreciate this section too. Quick global summary is great as ous Aus summary. Where Australia goes will determine where NZ goes in the long run I suspect. Yesterday's 2 cases in NZ were no surprise to me, the more people crossing the border the greater the probability the virus will reenter NZ - it's called human error and it's pretty hard to eliminate that.

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Just stop all flights. Would have to be a big human error then.
I guess it still could get in by sea but much less likely.

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180,000$ for consultants for the 572K government playground. Unbelievable we keep paying taxes.

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It is a bloody joke. Heads should roll over that.

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Only thing they roll is money.

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$572K. That's 1/45th of a Flag Referendum right there.

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572K is only 1/207th of the annual landlord handout (accommodation supplement).

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When you stuff the country with immigrants of course the cost of accommodation goes up. Other factors push it up too. I have met very few landlords that don't seek as much rent as they can.
So what would you do about people not being able to afford the rent?? Let them sleep in cars? Rent controls?

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Well, if we were letting the market decide then we'd take the subsidy away and see what happens. Call me crazy but I think rents would probably not go up.

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I think we know what would happen. Most beneficiaries and quite a few working poor would be out on the street. With their kids. And how does that story end.

I actually agree with you that of course AS pushes up rents, but the horse has bolted. Its going to take a crash in house prices with years of carnage before the costs of accommodation become affordable for those at the bottom of the pyramid without taxpayer help.

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They need to work hard as simple is that.
I came here with nothing and having a house because i worked hard and never took accomodation benefit.

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Come on dude. Not everyone has those opportunities. Many can only get minimum wage jobs that can't even provide 40 hours.
Hell, if you live in Auckland even a 50 hour a week minimum wage job isnt going to get you a place.
Plus good luck getting an entry level job currently.
Or getting a good job when you are living in a car.
Your attitude sucks.

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Joel Kotkin, the Urban Futures guy, explores the deep and aged roots of what he terms today's 'Serf's Up!' rebellions....RTWT.

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Great link thanks waymad. I've been thinking we might have been moving towards some form of revolt/revolution but this sums it up/articulates it quite well. Agree on most fronts.

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Don't ya love all this free money?!

Pacific Edge Stock Leaps Over 70% on NZX!
But....
-It has a return on equity of –130.21%, which indicates that the company has a history of being unprofitable.
-In addition, the company has reported an after-tax net loss of $18.9 million for the year ended March 31.
-This makes Pacific Edge a speculative investment with a potentially volatile share price. The future horizon is attractive — but can the company’s fundamentals support that wide-eyed optimism?

Discerning investors should approach this stock with caution.

https://www.wealthmorning.com/2020/06/17/631956/medical-breakthrough-pa…

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The exuberance of stock markets can be attributable to only 2 things

1) The global economy is rebounding rapidly
2) The world is drunk on liquidity from QE or money printing

I cannot think of any other rational explanation , ..............other than a tongue -in cheek- thought ..............because Casinos are closed , punters are getting their fix on the stock market .

I laughed when I read the piece about Warren Buffet "losing his marbles "in the Herald .........he might be old, but his time tested philosophies are likely to be correct in the long run .

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