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.
No chart with that title exists.
14 Comments
Very relevant comments to NZ too:
http://www.guardian.co.uk/commentisfree/2011/dec/04/will-hutton-george-…
The only names change required.
Chris Martenson talking about uranium and shale gas....and its limitations....
http://www.youtube.com/watch?v=LfyC918MJF4&feature=related
regards
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.
A game? - I think not for those (read retail depositors) at the sharp end of bailing out profligate fools.
Hmm. Call me a tired old cynic if you must, but if there was any likelihood of embarrassing the Nats the SFO would not be prosecuting anyone, in my opinion. Remember, they made zero disclosures regarding the English family's very murky connections to SCF. Even our "impartial investigative journalists" were either too frightened to dig there, or are too loyal to the Nats to risk exposing anything.
"This is a balance sheet recession, not the garden variety in which the standard solution of central bank rate cutting might appear help. Few seems to have figured this out yet."
err............ isn't that exactly what Alan has been doing?
"Europe's Ass Backwards Plan to Stimulate Lending"
http://globaleconomicanalysis.blogspot.com/
We have a similar problem Wolly, just slightly different shape:
http://www.johnwalley.co.nz/167-new_government_needs_to_walk_t.aspx
"The same policy framework that encouraged asset bubbles and stalled growth in export sectors from 2005 onwards still exists and it is vital that this changes. It is worth noting that New Zealand’s trade balance has turned negative again in the past few months and global growth is expected to soften as difficulties in Europe and the USA reflect into the Asian economies.
As the world hit the early stage of the crisis we were fortunate to have all time record commodity prices that staved off a meltdown in the rural sector, as the second round affects hit markets through Europe and the USA expect life to get even tougher; note the recent significant downgrades of growth forecasts in the UK.
The same old, same old approach has not done much for the real economy; if Government promises on closing the deficit and real economy growth are to mean anything, now is time to deliver.
Real economy growth will be the indicator of economic success through the term of this Government."
See the dismal chart.
Crack open a bottle....Blago go to jail..haha...
"The twice-elected Democrat, who came to power on a promise to sweep corruption from his state's politics, is the second consecutive Illinois governor to be sentenced to prison and the fourth to be jailed in the last 40 years.
His Republican predecessor, George Ryan, is still serving his six and a half year sentence, also for corruption."
harrrrrrrrrrrrrrrhahahaaahahaahaaaaaaa
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.