David Chaston details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that there is a standoff between the big banks in Australia and the Gillard government, with the government repeating its demands they pass on Tuesday's interest rate cuts and the banks maintaining their deafening silence.
The banks are denying they are profiteering; they are reported to be weighing up the unpopularity of not passing on a cut with the challenge of higher funding costs. New issuance in the bond market by major Australian banks has virtually stopped since October, because stress related to Europe has affected term funding conditions. A key gauge of the cost of long-term bank funding has surged to 1.75 percentage points above the cost of short-term credit, up from 1.37 percentage points in late October, a rise that is more than the rate cut.
If these banks are really facing that in Australia, they must be facing it in New Zealand, and without a OCR cut here today to cushion those costs, we may see pressure to raise rates here one would think - or, those cost rise claims in Australia are just part of the game of chicken some commentators claim is being played. So far, all the majors are standing together.
Meanwhile, the Australian economy posted surprising growth in the third quarter to September. Their economy had strong economic growth on the back of resource projects and strong household spending, up 1% in the quarter, up 2.5% in the year.
On this side of the Tasman, the SFO has laid charges in what they say could be the largest ever white-collar crime in New Zealand's history. Twenty one charges have been laid in the Timaru District Court against five executives of the failed South Canterbury Finance organisation. Temporary suppression orders are in place so we don't know who those executives are at this point. You can follow the issues with Gareth Vaughan here.
In Europe, the 'Merkozy' plan for tighter economic and fiscal integration ambles on, and the sceptics grow about their ability to deliver. Markets have put the issues to one side at the moment, with stocks oil and gold all steady overnight. But there are reported to be a crowd of European sovereign bond auctions scheduled for next week, something the ECB would probably wish to avoid.
Bernard Hickey is in Wellington for today's OCR announcement and will be reporting in at 9am.
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