90 seconds at 9 am: NZD falls

90 seconds at 9 am: US grows strongly in Q4, banks easing standards; US TPP stand hits a snag; dairy prices rise, swap rates and NZD falls; NZ$1 = US$0.813 TWI = 77.1

31st Jan 14, 7:28am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 8 am, including news there have been notable adjustments to NZ exchange and interest rates overnight.

But first, the flash GDP growth indicator for the US is out this morning and that shows the American economy grew at a very respectable 3.2% pa in the fourth quarter of 2013. That was however lower than the 4.1% it grew in the third quarter. And that was despite a weather-related fall-off in pending home sales in December and a rise in jobless claims last week.

Wall Street rallied on the growth data as did the US currency. Gold fell back. Oil is higher, getting back to levels last seen just before Christmas.

In a warning, the US Comptroller of the Currency says American banks in are easing underwriting standards for commercial and retail loans, as they seek growth in a highly competitive environment.

And staying in the US, the Administration's ability to negotiate the TPP free trade deal hit a major hurdle last night when a senior Congressional Democrat leader said he opposed giving the President 'fast track' authority.

Elsewhere, German unemployment fell more than expected, and in Australia new home sales have recorded their first yearly rise since 2008.

However, the real things you need to know today are that following yesterday's OCR review, swap rates are lower and our currency is also lower.

And the latest USDA Oceania dairy price indicators were also out overnight, and these are higher in US dollars especially for Butter and Skim Milk Powder, and higher still in NZD. In fact, WMP, SMP and Cheese are all at or over NZ$6,000/tonne and Butter is at its highest price in local currency since June 2011.

The NZ dollar starts today quite a bit lower at 81.3 USc, 92.6 AUc and the TWI is at 77.1. These are our currency's lowest levels since November.

If you want to catch up with all the changes yesterday, we have an update here.

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

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18 Comments

by dh | 31st Jan 14, 8:49am 1391111387

I was just waking up this morning, but did I seriously hear the government saying that Labour noting that Auckland house prices were more expensive the Melbourne was unfair because it was due to the exchange rate rise? I hope I misheard, because it is not like we are at parity with Australia (yet), so the sheer fatuousness of the remark surprises me, particular given how strong the governments actions have been in lowering the currency.

by Boatman | 31st Jan 14, 9:40am 1391114406

This house price comparison with Melbourne is an academic excercise .

Melbourne does not have the arbitrary boundry limitations that Auckland has.

Nor do they our rate of inward migration pushing up demand for housing

And most importantly , Melbourne does not a city council and local authority thats rorts developers for subdivisnion costs adding $100,000 to $200,000 to the selling price of a newly subdivided section .

by bob | 31st Jan 14, 10:05am 1391115934

You should probably spend some time browsing Melbourne planning maps at http://planningschemes.dpcd.vic.gov.au/ and planning documents before making such claims.

by Boatman | 31st Jan 14, 2:24pm 1391131458

Thanks for the link , it re-inforces my view around fees , their property reports are mostly free , ours are darned expensive.

Every time we turn around Auckland city council is shaking us down for a ludicrous fee , the same property information they are selling over and over again , and we just pay .

by bob | 31st Jan 14, 4:10pm 1391137848

How about your views on Melbourne not having urban limits? Victoria has construction complexities we don't - like powerful unions. Auckland developers have lost lots of money over there from thinking it's as simple as Auckland but bigger.

by waymad | 31st Jan 14, 10:16am 1391116561

Oh, marinemale, you have awoken the Sleeping Dragon of the Plannerista, the Mighty Robert.

Tremble before his Awesomeness, oh tiny citizen!

And check yer properties for newly issued Caveats, Planning designations or other Town and Country Planning Act shenanigans....

by bob | 31st Jan 14, 10:48am 1391118494

Yup. Absurd claims deserve comment before they start mutating into facts.

by iconoclast | 31st Jan 14, 10:51am 1391118677

You are almost right, so long as you do the simple thing, like dont subdivide, do build a straight forward single level house with a pitched roof with plenty of set back, max 60% footprint, not overheight, fees are nominal

As soon as you try and go outside the "simple" you are subject to town planning approval. you have to put a sign on your property that it is subject to a town planning application, the local citizenry have the right to examine said plans at council offices, they can object, council can decline, you can appeal

And that's when your nightmares begin. You end up at VCAT (victorian civil administration appeals tribunal) no lawyers allowed .. you are on your own .. very expensive .. can run for 2 to 3 years .. and lose .. you can't build

Have seen any number of projects where builders buy a property and end up at VCAT and 2 years later walk away and put the property back on the market as it was

by Boatman | 31st Jan 14, 9:42am 1391114521

Its about time the NZ$ fell a bit , but will it stay there?

Its still a bit too high against the Aus$ for comfort for exporters

by Boatman | 31st Jan 14, 2:33pm 1391131983

Thank you ZZ , you have articulated the argument very well .

Comparing Melbourne with Auckland is like comparing apples with Gum trees .

It ignores all sorts of variables of the costs of living , such as rates of Taxation , levels of employment , disposable income , medical costs , fuel and transport, education and wages rates .

The comparison is dumb driven by emotion , and has no bearing or relevance to our situation .

Our situation is what it is , thats it ..... deal with it

by King of the whiners | 31st Jan 14, 10:03am 1391115780

The woes of the energy sector (from the Financial Times):

http://www.ft.com/intl/cms/s/0/5e923e3a-51d3-11e3-8c42-00144feabdc0.htm…

''Over the past decade, the oil and gas industry’s upstream investments have registered an astronomical increase, but these ever higher levels of capital expenditure have yielded ever smaller increases in the global oil supply. Even these have only been made possible by record high oil prices. This should be a reality check for those now hyping a new age of global oil abundance''. ''All of which means the 2013 WEO has the oil industry’s upstream capex rising by nearly 180 per cent since 2000, but the global oil supply (adjusted for energy content) by only 14 per cent. The most straightforward interpretation of this data is that the economics of oil have become completely dislocated from historic norms since 2000 (and especially since 2005), with the industry investing at exponentially higher rates for increasingly small incremental yields of energy.'' I wonder what will happen to capex once interest rates rise? Nothing to see here. Move along.

by waymad | 31st Jan 14, 10:37am 1391117856

A NZ perspective on this.

We are heading for a Happy Coincidence:

Tiwia Point shuts down 2017 ish
Dislocation of 4.5K jobs in Southland
But the South has 300 years of transport-fuel-equivalent in its lignites
Lignites are electrically mined e.g. Germany, where 26% of electricity is generated from lignite. (insert photo of distraught Die Grünen members, here)
Use the 20% of NZ electricity consumed by Tiwai to mine the Southland lignites
Use the lignites for transport fuel (Fischer-Tropsch) as a transition measure.
Expertise in GTL tech is widespread, Innovation risk is low.
Mining, processing and distributing the many outputs, uses Tiwai's newly released staff. Employment galore in both construction and operation phases.
Whole thing is a transition measure (we don't need to gobble the lot: moderation in all things).

What's not to like?

by steven | 31st Jan 14, 11:06am 1391119585

"like" well the fact that the math/economics doesnt work to start with. or your logic.

ie EROEI.

Lets say yes OK we can electrically mine it.. It still hase to be transported and converted and we'll be using the very worst grade of coal...its barely coal.

Lignite conversion using various processes. Even if we ignore the impact of AGW using lignite which is the worst grade of coal, Worse doesnt give us an 8 to 1 ratio for our modern economy. So at say at best 2 to 1 we have to rob that energy deficit off something else.

Processes have in the past use good grades of coal and have not been economic. So maybe have a look around the world and see how many places are actually using lignite and making "mone"y even at this present petrol cost? At the same time of course its not "money" its EROEI you need to look for, thats the rob peter to pay paul bit.

If you want to make bio-fuel, I'd suggest there are probably more economic ways to do it without touching the lignite.

Oh and lignite has a huge slag output so mountains of slag, great for our green image that.

regards

by Casual Observer | 31st Jan 14, 11:43am 1391121786

steven, I would suggest that this sort of pollution does more to harm our 'clean, green' image than slag heaps in a part of the country infrequently visited by tourists would.

At a meeting this week, councillors expressed concern at the number of spills into water from Queenstown Lakes District Council sewerage pipes.

There had been 11 unauthorised spills into Lake Wakatipu in the past 13 months.

And not a prosecution in sight. ;-)

http://www.odt.co.nz/news/queenstown-lakes/289948/no-exceptions-sewage-…

by Casual Observer | 31st Jan 14, 11:33am 1391121226

California Dairy having water problems. Dairy prices could stay high for a while.

The drought in California, the top US agricultural producer at US$44.7 billion (NZ$54.9b), is depriving the state of water needed to produce everything from milk, beef and wine to some of the nation's largest fruit and vegetable crops, including avocados, strawberries and almonds. Lost revenue in 2014 from farming and related businesses such as trucking and processing could reach US$5 billion (NZ$6.1b), according to estimates by the 300-member California Farm Water Coalition, an industry group.

http://www.stuff.co.nz/business/farming/dairy/9667454/Farms-go-thirsty-…

by Andrewj | 31st Jan 14, 12:59pm 1391126365

It rained yesterday and more due tomorrow. Next week is supposed to be wet and there is finally some snow on the hills.

by dh | 31st Jan 14, 1:21pm 1391127686

It is not at the extent the (politically very powerful) Homeowner Associations have to limit watering their lawns (these are powerful enough in many places to fine people for not maintiaining their lawns properly). An average standalone family home in California uses 115000 gallons (435322 litres) a year on lawn care. For comparison total average water use by an Auckland household is around 290000 litres a year (inside and outside combined).

That's what happens when you insist on your god given right to grow lawns in desert country.

by iconoclast | 31st Jan 14, 6:09pm 1391144990

Sydney Real Estate Agents kiss and tell - they're not shy

Chinese buyers don't want your house, they want the land

By Florence Chong

Forget about off-the-plan apartments. What cashed-up overseas Chinese buyers really want is a house in Australia, and more precisely, the land on which the house sits. For the right house in the right suburb, they are outbidding Australian buyers by $100,000 to $200,000 – and sometimes more – to secure the property.

They are importing inflation to their country of choice. "We saw this house on a Saturday afternoon and when we went to make an offer on the Monday morning, it was already sold - $200,000 more than the asking price ($1 million)

Joseph Ngo, branch manager of LJ Hooker Glen Waverley agent in Melbourne, says it is not unusual for his agency to sell homes in sought-after Melbourne suburbs for $100,000-$200,000 above the expected sale price. "I recently sold a home for $2.3 million - $500,000 over the asking price,"

The true power of the Chinese buyer is represented by more than 63 million people whose wealth and incomes provide them with the ability to purchase international property says Taylor, who points out that 90 million Chinese search for property online every month. More than 60 per cent pay in cash.

Read the full article here ..

http://www.businessspectator.com.au/article/2014/1/31/property/chinese-…