90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: NZ$ hits 10 year low vs Aussie as our economies diverge; Australia = Loonie; Sovereign debt worries gnaw away

30th Sep 10, 8:59am by Bernard Hickey

Bernard Hickey details the key news overnigh tin 90 seconds at 9 am in association with Bank of New Zealand, including news the New Zealand dollar hit a 10 year low overnight versus the Australian dollar of 75.98 Australian cents as our economies continue to diverge.

Australia is experiencing its biggest mining boom in over 100 years and is now expected to have to raise interest rates a couple more times before the end of the year to take some of the inflationary heat out. Employers there are experiencing skill shortages.

Meanwhile, New Zealand's economy is struggling to get going again and our Reserve Bank is expected to leave the Official Cash Rate on hold until the end of March at the earliest. This is great news for exporters and for tourism operators marketing to Australians. But it will increase the cost to New Zealanders of imports from Australia.

The Australian dollar also strengthened again versus the US dollar to over 97 USc and hit parity with the Canadian dollar, which is also known as the 'Loonie'.

The US dollar remains weak on continued talk of fresh money printing by the US Federal Reserve, while the worries about European sovereign debt continue to nag away at markets.

The Dow wobbled, but the focus remains on the European debt situation and growing civil unrest in parts of Europe.

Ireland's Finance Minister said Ireland would continue to defend Anglo Irish bank because if it fell it would 'bring down Ireland' with it.

European banks are owed the equivalent of 500% of GDP by Irish banks, forcing the Irish government to spend upwards of 30% of GDP bailing out Anglo Irish bank, which was downgraded to CCC on Wednesday by Standard and Poor's.

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33 Comments

by Wolly | 30th Sep 10, 9:16am 1285791365

So.....Mr Market arrives on the scene and with a swift boot up the Kiwi bum, the dollar collapses.

Next boot will hit the debt holders in the rear end. There is no way the euro mess can escape a mad rush out of bonds...driving up the cost of munny....are you ready for the rapid rise in your mortgage rate?

What will that do for the ponzi scheme?

by Boatman | 30th Sep 10, 9:43am 1285793020

I don't know how long Dr Bollard can lean against the wind and keep interest rates so low . The cost of borrowing by the NZ Govt. and the NZ banking sector has surely got to climb , if for no other reason to compete with the Eurobond rates in which investors are going to be seeking a risk weighted yield. Issuing new debt paper (Printing money) by the West is going to create distortions never seen before .

by steven | 30th Sep 10, 1:59pm 1285808377

I think you are mis-reading the data/information...........

The reality is once approaching 10% its a pretty clear sign that private investors are running a mile....just look at Greece. ie its not that 10% is a "fair" interest rate to risk losing a substantial part of your capital....I suspect that rate is held down artificially by the central banks buying....real investors meanwhile are exiting.......

So in terms of NZ borrowing we are pretty safe...we dont have to compete with that 10% because it isnt "real", meanwhile real investors wnat to put money where thay cant lose it but if possible make some %.....

The so called Eurobonds are junk IMHO its not a "risk weight yield" or whatever you want to call it, its a gamble against a total loss and a risky one IMHO....its as someone says its a giant CDS, ie Greece supports Ireland, Ireland Supports Portugal, Portugal supports Greece...etc....so this isnt a case of one failing and see a % loss but one failing triggering a total 100% loss as all of them default.

regards

by Rob of the North | 30th Sep 10, 9:44am 1285793077

Given that australia is our closest and virtually largest trading arena... what will the implications be for our export trade be when the Oz dollar reaches parity or exceeds the US dollar.....oh, yes...the race to the bottom for the US dollar as gold powers away, as China stores more gold reserves literally by the tonne and waits to pounce with the yuan valuations?

by PI_Rimmer | 30th Sep 10, 9:53am 1285793607

Why would the Chinese want to increase the value of the yuan? That would only reduce the competitiveness of their exports, and encourage low-cost production to move to other developing countries. The Chinese talk a big game about being displeased with the reducing value of the US dollar, but they don't let their currency appreciate relative to it. Also, gold is powering away, _in US dollars_, but when you convert it to NZ/AU/whatever dollars, it hasn't moved nearly as much. Gold is a great hedge for those who have large USD interests, but for the rest of us currency (especially, it seems, Australian dollars) would be more useful at the moment. And you can earn interst on AUD deposits at banks, unlike bullion....

by Rob of the North | 30th Sep 10, 10:21am 1285795289

did i say the chinese would INCREASE or decrease the value of the Yuan?

You're right about having an Oz a/c...i get far better 6mth deposit rates and online oncall rates than i can ever get here...plus i get the carry trade differential if i should repatriate! funds.

do i recall you're a PI , Rimmer?

or not?

by Wolly | 30th Sep 10, 10:26am 1285795567

Me too Rob...makes you wonder why people keep accounts over here at all...

by PI_Rimmer | 30th Sep 10, 10:42am 1285796552

Fair call - you didn't say whether the Chinese would revalue up or down, but in order to do the latter (which would really get the Whitehouse's knickers in a twist) they'd have to buy even more US Treasury securities - the very things they're complaining about. They're a willing accomplice in the deflation of the USD, by buying so much of their debt.

And _finally_ someone gets the joke! Some people will go to any lengths to invest in property, after all.... (And property investment will often leave a foul taste in your mouth...ahem.)

by Rob of the North | 30th Sep 10, 10:48am 1285796935

Ah, c'mon Rimmer...let's give the Real Estate porn lovers a bit of frenzy as Darth Hickey hasn't been feeding them lately!

I hear today that mortgage lending for last month came ( August) in at $NZ183 billion which is the lowest for the month since 1991.

what's your opinion on that and ,indeed, the future of the NZ housing housing market?

( Wow!...I can hear those stiff little fingers hitting the keyboards already..porn time at the fantasy factory..cum and get it!)

by PI_Rimmer | 30th Sep 10, 11:10am 1285798232

I chose my moniker for the irony, as I tend towards the Dark Side as PIs are concerned.

That low mortgage lending doesn't surprise me - there are fundamental limits that are being hit that were going to stop the PI musical chairs before long: once both people in a couple are working to service the mortgage (and thereby need to outsource the kids to daycare) there's not much more you can do other than to take in boarders, and they don't fill in the mortgage application. Also, with the banks no longer (or only in very limited cases) offering mortgages to people with low deposits, that naturally has a strong deleveraging effect at the bottom end of the property triangle - when the first-home buyers can't, then there's a chain of people who's transactions are affected. Moreover, IMHO plenty of PIs, especially the late comers in 2006-07, are rookies who just bought because they got caught up in the hype ('mum and dad' gimps) and didn't do the maths - yes, rentals will be empty at times and _you'll_ have to pay; yes, there are legal obligations you are bound to as a landlord; yes, property values can go down as well as up....

As for the future of NZ housing, I'm guessing prices will stay pretty static for some time. My 2c, at least.

[Man it's hard to type with such a sticky keyboard - always the case, though, after reading some pro-PI stuff like Robert Kiyosaki online....]

by Rob of the North | 30th Sep 10, 5:22pm 1285820566

thanks rimmer-man...love the sticky qwerty quip?

whoosh...straight over the top of their heads.

rock on...

by Kate | 30th Sep 10, 10:03am 1285794183

Mortgage gate - the show goes on and it looks as if an indefinite intermission is about to be called;

http://www.zerohedge.com/article/mortgage-gate-just-got-wierder-counterfeit-court-summons

by Boatman | 30th Sep 10, 10:46am 1285796764

There are rumours doing the rounds that high net worth Kiwi's have been converting their NZ$ to Aus $ and earning higher interest rates in Au$ for some months now . I know that interest earned is taxable here , but wonder if the currency gain is taxable , or is it Capital gain and therefore tax free? . I wonder also whether there is any emperical evidence or Statistics that support the rumour mill , or is it plain rumour ?

by Wolly | 30th Sep 10, 10:57am 1285797475

You have to be trading currency to invite being taxed on any fx gain, otherwise we would all be claiming a tax deduction on all the fx losses!....the interest is taxed. To argue that any and every fx gain should be taxed is to argue for capital gains tax on every bloody thing.

by Sam | 30th Sep 10, 12:19pm 1285802342

I've been getting my money out of NZ and into AUD for years - and as soon as I earn it.

by Rob of the North | 30th Sep 10, 10:50am 1285797046

yes..it is taxable but at a lower rate in witholding tax.

repatriated funds showing a cross rate gain are also taxable...not that i intend to get into that in the near future.

why would you bring it back?

by Gertraud T. | 30th Sep 10, 11:05am 1285797913

Analysts warn of a global currency war as countries attempt to devalue their currency to gain a competitive edge for their exporters.

http://www.youtube.com/watch?v=IMVPLfO-3hM&feature=player_embedded

by Wolly | 30th Sep 10, 11:16am 1285798586

Coooooeeeee the Kiwi$ just took another boot in the bum...

by PI_Rimmer | 30th Sep 10, 11:23am 1285798990

How do you figure that Wolly? I see a range in the last 24-hours of between 0.7347 and 0.7407, so 1%....

by Wolly | 30th Sep 10, 11:30am 1285799414

V the au Rimmee

I hear tell everyone in Reefton is eyeing everyone else...1000 inhabitants trying to suss out who won the $10.6 million.....bet the West Coast banks are keen to get hold of the loot. Probably some old bugger out Whitebaiting.

by Wolly | 30th Sep 10, 11:37am 1285799831

Oh dear oh dear.....

"The number of consents issued for new homes has fallen to its lowest level in more than a year, Statistics New Zealand (SNZ) said today.

The seasonally adjusted number of new housing units, excluding apartments, fell 8.9 per cent during August, well down on the 6 per cent fall recorded in the month prior."

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10677138

errr....so that 15.9% fall in two months and the gst blow yet to hit!

by PI_Rimmer | 30th Sep 10, 11:50am 1285800628

Bugger me!

by Rob of the North | 30th Sep 10, 5:24pm 1285820671

i'll ring bollard and tell him you're ready for him to pop round for a bit of the old OCR on you, Rim-man!

by David George | 30th Sep 10, 12:57pm 1285804644

"consents issued for new homes has fallen to its lowest level in more than a year"

R U out there Tony, what say you?

With your massive housing shortage must be standing room only under the bridges round the place by now

by powerdownkiwi | 30th Sep 10, 1:03pm 1285805019

Wolly - errrr no.

With respect, you never add percentages, they're not linear.

Each one is "of the last one".

That's where most folk go wrong, reporters and economists included.

by Andrewj | 30th Sep 10, 12:18pm 1285802321

Friends in the USA couldn't believe the interest I was earning in Australia, many were going to look into transfering funds over including friends in the UK. The RBA has a tiger by the tail.

"You know, the very powerful and the very stupid have one thing in common, they don't alter their views to fit the facts, they alter the facts to fit their views, which can be uncomfortable, if you happen to be one of the facts that needs altering." -- Doctor Who - Source: The Face of Evil

by David George | 30th Sep 10, 12:33pm 1285803194

I don't understand it either AJ.

Why folk in the US, UK or Japan (countries that are even counterfeiting there own currency) not putting all their savings into banks in Oz, Brazil, India etc. Strong currencies, expanding economies and high interest rates.

I was reading some UK blogs and the pensioners were having a good old bleat about the crap interest rates (0.5% on TD). Why aren't our banks targeting these savers?

by Andrewj | 30th Sep 10, 12:28pm 1285802885

This is the quote I was looking for;

It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.

Mark Twain

by powerdownkiwi | 30th Sep 10, 1:07pm 1285805266

Same man said "I would buy land - they're not making any more of it".

Which rather sugests that some one-track bleaters about cheap land, may be wrong.....

by Andrewj | 30th Sep 10, 12:43pm 1285803804

talk about counterfeiting,

http://www.zerohedge.com/article/mortgage-gate-just-got-wierder-counter…

by David George | 30th Sep 10, 12:51pm 1285804313

Simply staggering AJ. Homes are being foreclosed on by outfits with no legal right to do so.

Contracts mean nothing, the US legal system is now being treated with total disregard. What a mess!

by steven | 30th Sep 10, 1:27pm 1285806458

For the well do banksters who will probably need these in the future.....in order to get to their escape jet....

http://knightxv.net/videos.html

by Wolly | 30th Sep 10, 3:19pm 1285813194

The good news today is the state sector is getting smaller....govt expenditure should be falling...some rocks being tossed into the fiscal hole...borrowing should be going down...that would lead to cheaper credit for govt...which also helps shrink the hole...keep this up and we might see a surplus...that would mean a drop in taxes...peasants having extra cash...they can spend again without borrowing...employment would rise...families could afford a home....................then along came Labour with their toady pet dog 'greenie' to demand the govt stop this awful process...can't have families doing better...who would they vote for!...oh no no no.