90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Momentous week ahead for NZ$ as US Fed prepares to print; Jobs figures due in US and NZ; Aussie rate hike possible

1st Nov 10, 9:10am by Bernard Hickey

Bernard Hickey details the key news over the weekend and for the week ahead in 90 seconds at 9 am in association with Bank of New Zealand, including a look ahead to a momentous week for the New Zealand dollar and global financial markets.

On Tuesday the Melbourne Cup will be run and the Reserve Bank of Australia is expected to release its decision on the Official Cash Rate.

Markets see a 20% chance of a another hike in the Australian cash rate to 4.75% from 4.5%, although recent inflation and housing data, along with the strong Australian dollar, suggest the Reserve Bank can afford to leave it on hold again. This trend lower in interest rate expectations in Australia is helping to weaken the Aussie dollar vs the New Zealand dollar. \

The NZ dollar rose to 78 Aussie cents over the weekend, which helped to boost the Trade Weighted Index to a three month high.

On Tuesday night American voters will vote in Congressional mid-term elections that could change the political landscape in the world's biggest economy.

On Thursday morning the US Federal Reserve is expected to announced a second round of quantitative easing or money printing of between US$500 billion and US$1 trillion. Expectations about this move to weaken the US dollar, the world's reserve currency, has caused ructions on global currency markets.

Also on Thursday morning New Zealand will see the Household Labour Force Survey, which is expected to show unemployment steady around 6.8%, although this has been a very volatile series.

On Friday night a big week will be capped off by US employment data, which is expected to show the US unemployment rate stubbornly high at around 10%.

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9 Comments

by andyh | 1st Nov 10, 9:21am 1288556503

Yalza! Housing inventory here in NZ is going through the roof!

http://www.interest.co.nz/charts/real-estate/houses-sale

In a week or so by this measure it will be above the recent inventory peak of late 2008.

Soaring inventory - has to be good for the housing market eh Olly?

by David George | 1st Nov 10, 9:32am 1288557131

Certainly a big swing there Andy, from 82 on the index in October last year to 101 now. Any idea why this would be so. Sellers more confident?

That's a big change, 25%, so they'll be up against some stiff competition unless the number of active buyers has gone up accordingly.

by andyh | 1st Nov 10, 9:45am 1288557910

KD - Its the seasonal glut of listings I would imagine - problem is there are precious few buyers around to soak up inventory. In the period 2002-2007 the upswing in listings would be met by an upswing in demand so inventory would not climb anywhere near as sharply.

Not this year!

Worth watching mortgagee listings too - they look to be heading for a new peak. I reckon this is a second nastier wave - the first was malinvestments (Blue Chip, idiotic wanabee landlords). This second wave (which will be bigger) is folk who put up their houses as security against loans for their businesses etc. As businesses fall down (and we are seeing A LOT of that here in Nelson) the banks come knocking for the house which was the basis on which the loan to fund the business was made.

by Bernard Hickey | 1st Nov 10, 10:16am 1288559805

Andyh

Something is happening. But need to be a bit cautious. TradeMe listings have risen in the past because they took on another agency chain, rather than a real increase, but we also saw a smaller rise in Realestate.co.nz listings in the last week. Realestate has all the agents listings, so something is going on.

cheers

Bernard

by Chris_J | 1st Nov 10, 12:18pm 1288567120

Considering Harcourts is in the process of dumping 16,500 listings on trademe, your graphs have become completely meaningless.

Chart realestate.co.nz alone and you will be able to deduce what is happening with listings.

In ChCh the number of advertised listings (in periodicals) more than halved after the earthquake and is still well down on August 2010, so well below normal for this time of year. Certainly no excess of supply properties, and those advertised are selling with good interest so not really a turning point either up or down - yet. A further down leg in prices is looking less likely but so is an upswing in the near term. I wouldn't pin my hopes on a 15% fall from the late 2007 peak, opportunities to re-enter the market will diminish with time.

by David George | 1st Nov 10, 9:42am 1288557766

Debt and more debt, student loans this time.

"Nearly 900,000 people have taken student loans since the scheme started, and more than two-thirds have not fully repaid the money back.

A Ministry of Education report says only $6.4 billion of the $13.9 billion borrowed since students started getting loans in 1992 has been paid back."

And get this:

"International students coming to New Zealand, studying on loans and then leaving the country after graduating had also not helped,"

Is this a joke? So foreign students can come here, get a qualification on tick then just clear off leaving a huge hole in the Government accounts. Sorry I forgot, that debt is now a Government asset, so that's alright then.

by steven | 1st Nov 10, 9:53am 1288558413

International students can get loans?

How many are paying back a small amount because they cant get the job they expected to see based on getting more quals? In particular how many un-employed have WINZ sent on courses because it gets them off WINZ's books, whether they have skills/ability in that area or not? eg When I did a IT course I was sharing it wth ppl who used to make nuts and bolts, or had left school with nothing.and here they were being expected to work in IT....seemed crazy....

Another Q, how many women have decided to have children while they can and hence are not earning enough to pay back yet?

regards

by steven | 1st Nov 10, 9:54am 1288558461

If you look back along the chart, it actually has ups and downs...so my first thought is while this isnt good, its doesnt look that bad taken in conext of all the chart data....yet....however if the banks are indeed keeping mortgagee sales off the books then it should be higher/worse...

Anyway as long as interest rates stay low I would think this will stay a wait and see market, sellers will either not put houses up for sale, or let them sit there....so that could last 2 years....

regards

by Boatman | 1st Nov 10, 12:07pm 1288566477

Its going to be interesting how the Bond and Sharemarkets in the US react to this printing and how it washes up here in NZ .

Right now investors in the US$ are staring down an abyss. The yield on US Treasuries is almost Zero and worse.... the actual value of those US$ is about to get watered down . Who on earth in their right mind would buy US$ ?

This could push Mining Commodities and Gold through the roof , and make the Aussies even wealthier.

Pity those idiots who marched up Queen Street to prevent NZ from exploiting its mineral wealth . We'll end up paupers in our own land which will be owned by foreigners one day yet .