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A review of things you need to know before you go home on Wednesday; more TD trimming, record BOP surplus, rosier PREFU, dairy prices up, fewer houses built, farms sell well, NZD firm, & more

A review of things you need to know before you go home on Wednesday; more TD trimming, record BOP surplus, rosier PREFU, dairy prices up, fewer houses built, farms sell well, NZD firm, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
None to report today.

TERM DEPOSIT RATE CHANGES
Nelson Building Society (NBS) cut its TD rates today. Update: Both BNZ and the Cooperative Bank also reduced rates late in the day.

RECORD BOP SURPLUS IN JUNE
The June balance of payments result was released today, and markets are basically ignoring it even though it is very good. But it is notable because the current account deficit continues to shrink and now stands at just -1.9% of GDP for the year to June 2020. Some analysts forecast this deficit to narrow even further. It was last this low in 2010 briefly in the GFC, and prior to that, this is the lowest since 2002.

PRE-ELECTION FISCAL UPDATE
Treasury released its update on the state of the Government books today and they showed then rosier than expected in the short-term, but more economic 'scarring' in the medium-term. Housing market activity is the 'bright spot'.

DAIRY PRICES RISE
The latest dairy auction was a positive one, with prices up +3.6% in US dollars, up +4.3% in New Zealand dollars. Leading the rises were SMP and cheddar cheese. These results are consistent with a milk price of $6.50 for the current season says ASB.

AUCKLAND COUNCIL BORROWS $500 MLN
Auckland Council is borrowing $500 million via an issue of 30-year green bonds. The fixed rate, secured, unsubordinated bonds will pay interest of 2.95% per annum. The proceeds will be used in line with Auckland Council’s Sustainable Finance Framework.

FEWER HOUSES COMPLETED
There was a big drop in the number of new homes completed in Auckland in July, But it is too early to say if the drop in July was the start of a trend or a normal monthly variation.

FARMS SELL WELL
Farm sales were strong in August, with 136 sales made in the month, far above the 96 in August 2019 and well above the 102 average for the past four years. Prices were higher as well.

LIFESTYLE BLOCKS SELL EVEN BETTER
Lifestyle blocks sold even faster in August with 942 transactions in the month, and also well above the 555 in August 2019 and 617 in August 2018. Prices averages +7.1% higher than a year ago.

STARK CHANGE
Apart from a few right-wing populists on the extreme, few people in the US's allies now support the US public policy positions according to a new multi-country poll. The rise in distrust in the US is very stark. The 'no-confidence' levels are down at the already low China levels.

GOLD PRICE RISES
In Asian markets, the gold price has risen on top of the London and New York rises, up +US$5/oz from the earlier New York close to US$1958. But that was -US$6 lower than this time yesterday.

EQUITIES UPDATE
On Wall Street, the S&P500 eased off some the big early gains later in the trading session but still ended up +0.5%. Shanghai and Hong Kong have both opened flat and Tokyo is up only +0.1%. The ASX200 is up +0.8% in early afternoon trade while the NZX50 Capital Index is up +0.4% near the close.

SWAP RATES LITTLE-CHANGED
We don’t have the final data for today yet and if it is significant we will update it here. The 90 day bank bill rate is unchanged at 0.30%. The Australian Govt ten year benchmark rate is unchanged at 0.95%. The China Govt ten year bond is down -3 bps at 3.16%. The New Zealand Govt ten year is now at 0.61% and also little-changed. The US Govt ten year is unchanged at 0.67%.

NZD FIRM
The Kiwi dollar is still firming and is now at 67.3 USc as the USD softens. Against the Aussie we are little-changed at 91.9 AUc. Against the euro we are firm at 56.8 euro cents. That means our TWI-5 is now at 70.2.

BITCOIN UNCHANGED
Bitcoin is flat today at US$10,729.

This soil moisture chart is animated here.

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

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33 Comments

The ASX200 is trading higher in response to the jockeying in anticipation of expiry of September SFE200 futures and ASX200 index derivatives tomorrow at the open

This is Tucker Carlson talking to the Chinese Virologist. If what she says is true then it's going to be very interesting.
https://www.youtube.com/watch?v=qFlqXPl_hZQ&t=330s

Roger Ailes, who transformed cable news and then American politics by building the Fox News Channel into a ratings powerhouse claimed to make the news, not report it.

If so, this version of events is good as any- American Pravda: Our Coronavirus Catastrophe as Biowarfare Blowback?

as far as I know the lab in Wuhan was an international one, with funding from Canada USA etc.

Andrewj,
This is what Newsweek has to say about this person and her claims.
https://www.newsweek.com/fact-check-does-new-study-give-evidence-that-co...
It would seem that caution is appropriate before giving weight to her claims.
KeithW

so back to not believing anyone again,

Adam Curtis
https://www.youtube.com/watch?v=cT0bzehQgO8

unfortunately we will never know the truth for two major reasons
it originated in china so facts and checking of facts would be extremally difficult if not impossible
and they destroyed the wet market so the supposed source point has been removed from any chance of scientific examination
my personal belief is it did escape from a lab that was studying the virus , most likely by accident.
we now know even those that have good PPE and procedures have still become infected all over the world in the health profession
from what i have read the origin of the virus was a mine thousands of miles away and it was discovered years ago, maybe that is wrong it just seems more probable than a sudden mutation, a jumping of species and perfect conditions for infection
they only thing we do know is since it originated in china we will never know the absolute truth
https://www.thetimes.co.uk/article/seven-year-covid-trail-revealed-l5vxt...

This is the same Newsweek who said that Hillary Clinton was president of the USA. Best not to use them as a fact authority.

As another piece that doesn't fit the narrative, whether true, or not, we know how this might play out. 'My' facts, meet 'your' facts, and may the strongest narrative win. In a post-truth world, facts and truth as we once understood them mean something else.

It would be an interesting piece of research to dig a little deeper (not just about the claims themselves, which she's been trying to make a while now, and hopefully that will be done comprehensively) and to analyse the proportion of experts who rubbish her claims without deeply evaluating them, and the number of journalists who do so because they 'know' it's false, without first seeking expert, unbiased, analysis enabling fact-based evaluation, either way. (I like to think the first ratio at least might be stronger).

This one is all the more interesting because it also fits an alternative narrative. The same exercise would thus be doubly instructive about the state of our science and journalism communities, to also map the respective ratios of experts and journalists who latch onto it as proof of 'their' facts likewise, also without fully evaluating its evidential basis objectively either way. Interesting times...

The 'no-confidence' levels are down at the already low China levels.

Did anyone ask the Chinese?

Maybe my summary was unclear. The polling was in the 13 countries listed, a list that includes Canada, Australia, Japan and South Korea, but not New Zealand. Trust in China's leaders in those countries was about as low as for the US and Russia, all exceptionally low.

To answer your question - no China wasn't one of the 13 countries surveyed. Neither was China. The 13 countries are wealthy, democratic nations.
There's some interesting results in that survey. Such as the extent to which Japanese and South Korean respondents viewed China's response to covid so poorly (traditional animosities?).
Aussies thought their own country had managed it well (94%), and 71% of Swedes thought their country had handled it well.

Just watch all newly arrived kiwis turn right back round and leave now house prices are accelerating away. Nobody likes being taken for a fool and its obvious the greedy incumbents want their pound of flesh.

14
up

Its not just that mate:

- Housing expensive to own.
- Housing expensive to rent.
- Lower quality of housing.
- Lower incomes.
- NZers are more attractive in the Australia job market than the NZ job market.
- Colder, damper, windier climate.
- Substandard public transport.
- FOOD IS SO MUCH MORE EXPENSIVE

Thats just off the top of my head, but from my end its a no brainer. I was saving 10k a year when in NZ, but about 5x of that in Australia.

11
up

But came running back to good old NZ when it looked bad. Fair weather sailors.

Or just coming back to be with family during the great "uncertain times" of 2020.

Fair call.
Also they had been meaning to head back soon anyway and this was a great excuse and its ot panning out so well.

Perhaps they wanted to come back and buy a decently priced home near their elderly parents because obviously the NZ house prices were way overvalued previously but the global pandemic was 10000% guaranteed to lower the prices. Then Jacinda stepped in to protect the investor class with 10+ properties, making them worth 20 million instead of just a piddly 15 million.

The overwhelming majority stayed put mate.

Rent is cheaper, food is cheaper and the govt jobkeeper is higher than NZs. Add to that the early access to superannuation and its a no brainer. Of the people I do know that went back to NZ, most of them are couples that were planning on returning (to start a family) anyway, but this pandemic bought things forward a bit.

Having lived in Austrslia for a few years until 2014, totally agree with that.
I like Australia, but prefer NZ. But on cost of living grounds, which is pretty important for most people, there's no contest...

Geepers. A long list and not much of it can be argued with.

The only upside I can think of from this house-buying frenzy is more supply coming online from new builds but that'll be a trickle compared to the current market appetite, many thanks to our dysfunctional consenting and building regulations.
Access to finance for new builds shouldn't be a problem with most developers cashing in on the price surge even before breaking ground. This means the financing risks are simply being transferred from developers to buyers.

That is the biggest tragedy of all. despite increasing house prices and crazy debt to enable it, we have not increased our housing supply by much.

If NZ gets COvid spreading more in the community, I would expect to see less people wanting to return. Also as the rest of the world recovers, or learns to live with the virus, or there is a vaccine, I expect to see many people that returned, leaving again. But it could be a good year away. Also depends if there is actually a vaccine or not. A vaccine could be good for house prices, in terms of bringing them back down. But rising unemployment IMO may be a bigger factor. High house prices are not good for the country on many levels, but banks seem to love it, as it means they can lend more per house. If rates rise, then someone is really going to cash in, as monthly interest rates rise.

Interesting interview with Jeff Rubin, author of The Expendables: How the Middle Class Got Screwed by Globalisation, discussing the declining middle class, the fall in manufacturing jobs and the rise in precarious service sector jobs, the use of immigration to suppress wage growth, and how Covid 19 has exposed the fragility of global supply chains.

https://www.rnz.co.nz/national/programmes/afternoons/audio/2018764272/th...

"Bright Spot" indeed.

One day the majority of (politically alert) new zealanders will fall into the category of not owning property, and thus not accepting the narrative any more that increasing house prices are a benefit to us all.

But we are slow learners, so I'm picking no course change until 2040.

Right - I read a statistic the other day that close to half of NZ children live in rented accommodation. How is it a bright spot that for nearly half our children, life is about to get worse? Already high rents are likely to go higher. Many of them will have to stay in (often very poor quality) rented accommodation for a lot longer, and move a lot more frequently (with all the disruption to schooling and family life that entails). The fact that this being presented as a 'bright spot' is appalling.

Agree. Might be a tad sooner though, maybe 2032 - 2035

UK records inflation at just 0.2%. Bank of England will need to really step on the throttle here to avoid deflation: https://www.bloomberg.com/news/articles/2020-09-16/u-k-inflation-rate-dr...

I know! Lower the price of the cost embedded in all items - the cost of money. That will spur on Inflation! (sarc/off)
One day, those that are running this policy madness might realise what they have been doing all along - ensuring that Deflation is a certainty.

I know of people in their 60s and 70s who sold their rental properties a few years back, but are now reluctantly buying back in because they cant get a 3 or 4% term deposit.This is a shame for FHBs and people who want houses to LIVE in, but RBNZ must have known this would happen. Maybe housing speculators and investors should not be eligible for the private home loan rates (this will never happen of course)

That's my boat exactly. Why let the Aussie banks screw us over with our deposits, when we can get a few renters, pay others to look after them, and still get a decent return. Plus the tax free capital gain and resultant rental reviews every now and again.

WE have been fairly lucky with our term deposit rates up until now. But what happens to banks if a significant number of people start withdrawing their money due to the low term deposit rates?

A lot of houses may need a lot of money spending on them in the future, especially if a building warranty of fitness is introduced. But even if people are buying rentals as an investment, it seems that many may just be relying on the capital gain, as rent may not even cover all costs. Being a landlord can be hard work for someone retied, compared to a term deposit at the bank. Especially if they aren't using a property manager, which can suck away a lot of the money. A lot of hassle with being a accidental landlord.

Days to the General Election: 19
See Party Policies here. Party Lists here.