What happened Wednesday

A review of things you need to know before you go home on Wednesday; ANZ launches hot rate, NZ 7th best, Q1 no building fluke, Rents bounce up, Akl house prices fall, swap rates steepen

3rd Sep 14, 4:00pm by David Chaston

For Wednesday, September 3, 2014. <a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

Here are the key things you need to know before you leave work today.

TODAY'S MORTGAGE RATE CHANGES
ANZ jumped into the home loan market today with a 5.75% one year fixed mortgage rate 'special' which is a best-in-market rate. They also decreased their three year rate, but that was nothing unique.

TODAY'S DEPOSIT RATE CHANGES
There were no changes today. But look out for our comparison between home loan and term deposit rates in both NZ and Australia. You are better off as a Kiwi saver.

BUILDING LEVELS HIGH
Q2 construction levels completed came in solidly, holding at the levels that jumped up in Q1 and proved they weren't a fluke. Auckland activity is underpinning the data. Housing is strong. Total building activity was in line with expectations. It is unlikely to negatively impact the Q2 GDP figure out in two weeks.

YOU HAPPY WITH 7TH BEST?
New Zealand is the seventh best place in the world to be born. This is the second time The Economist has run this review. Back in 1988 we were the 18th best. That's progress. But Australia beat us hands down, it seems.

WHEN WILL IT TURN?
The key news today was the continuing fall in dairy prices. Farmers need to budget accordingly. Both Fonterra and Treasury - among others - are assuming prices will fall for the next few months and then rise in Q4. We'll see. Those forecasters will have a nervous wait.

RENTS RISE
Median rents rose in August, according to MBIE data released today. The overall median weekly rent is now $340/week, up $10, although it is lower than the $350/week level in June. Three bedroom houses in Auckland rose $20/week and are now up to $560/week. In Wellington the rise was $10 in August to $480/week. In Christchurch they are at $450/week, up from an unusual fall in July, but back to the same level as June. The charts give the real story.

AUCKLAND HOUSE PRICES DOWN IN AUGUST
Barfoot's median selling price dropped by $15,000 in August, with sales volumes down 7.5%, as the market goes into wait and see mode. Barfoots says the 'Spring lift some weeks off'.

NOT FALLING YET
Gross Government securities on issue in July hit $77.5 bln, in RBNZ data released today.

WHOLESALE RATES
Swap rates rose in a steepening manner following the Wall Street rises overnight. The 90 day bank bill rate was unchanged at 3.70%.

OUR CURRENCY
Check our real-time charts here. The NZ dollar is slowly but steadily falling against the US dollar and is now at 83.0 USc, now at 89.5 AUc and the TWI is at 78.8.

You can now see an animation of this chart. Click on it, or click here.

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41 Comments

by King of the whiners | 3rd Sep 14, 4:41pm 1409719260

Well I never. Someone at the Herald 'gets it'.

http://www.nzherald.co.nz/business-editors-picks/news/article.cfm?c_id=…

by DFTBA | 3rd Sep 14, 5:00pm 1409720450

Fully agree wih the last 2 paragraphs.

by Kate | 3rd Sep 14, 11:33pm 1409743998

Yes I thought that was a standout article. Interesting it's from a tech writer - not a political journo.

by iconoclast | 4th Sep 14, 12:44am 1409748282

A bit of trivia for you

Preamble

A serious drama has been unfolding in the state of NSW concerning corruption being uncovered by NSW ICAC. ICAC (Independent Commission against Corruption) is an independent body that investigates government bodies (local and central) and employees including parliamentarians

An ICAC is a permanent continuous "Royal Commission"

NSW ICAC was set up in the 1980's, claimed one scalp, the then premier (equivalent to NZ's PM) of NSW. Then it went dormant for nearly 20 years until a geophysicist lodged an anonymous enquiry with the Australian Stock Exchange wanting an explanation as to how a listed company could acquire a government issued Licence to Explore for Coal for $1 million and the following week seek to raise additional capital valuing that same licence at $500 million.

The repercussions of that innocent enquiry have been huge. The tentacles have spread out claiming scalp after scalp of MP's of the current Liberal (National) government (who are in their first term in power after 20 years in opposition) have lost 10 MP's who have either voluntarily resigned, or stood aside or been forced out. 16% of the elected right-wing MP's gone in just 10 months

They just couldn't wait to get there hands into the "pots-of-gold" that comes with power

What is interesting

The hearings are conducted in public. For the last 2 years they have been the only game in town as MP after MP resigns. The only newspaper reporting these misdeeds is Fairfax Media (Stuff in NZ). Newscorp (Murdoch Press) the dominant media news-outlet never report on the goings of ICAC. Overt Censorship.

What is further interesting is that none of this has been commented on in the NZ press

Queensland has an ICAC in the form of a CMC

Victoria has an IBAC, is in its first year, conducts hearings in private and has yet to report

South Australia has been under pressure to set up an ICAC

Here is a report from the SA.ICAC commissioner on its first year of operations

public-servant-faces-likely-icac-corruption-charges

That interview-report is a worthwhile read - compare that to NZ Auditor General Office

Read the statement of purpose of NSW ICAC

http://www.icac.nsw.gov.au/

Members of the public and public officials are encouraged to report suspected corrupt conduct to the ICAC.

New Zealand needs an ICAC

by Kate | 4th Sep 14, 9:28am 1409779702

Good post - fully agree.

by Brendon | 4th Sep 14, 11:07am 1409785665

Good post. Not sure if an ICAC is enough for NZ.

There is big differences between the political structure of NZ and Australia. Australia has a Constitution, a Senate and State governments independent(ish) of Central government.

What this means is that no one player holds all the cards in Australia. Here in NZ the PM holds all the cards and the integrity of public institutions including a new body like a NZ ICAC completely depend on the integrity of the PM.

The PM can choose to stack such institutions with compliant crony's and the institution will serve the PM not the public.

What NZ needs is checks and balances on the PMs patronage powers.

I am really surprised the smaller party's have used MMP to check both Labour and National governments legislative powers but they have not done the same to the executive's patronage powers.

P.S I have been saying since before 'Dirty Politics' that NZ needs a Speaker elected by unanimous vote in Parliament and for them to be given the power to appoint those in charge of important public institutions.

by Colin Riden | 4th Sep 14, 11:28am 1409786922

Here in NZ the PM holds all the cards and the integrity of public institutions including a new body like a NZ ICAC completely depend on the integrity of the PM.

Would that also apply to an existing institution like the Office of the Auditor General?

by Brendon | 4th Sep 14, 11:41am 1409787662

Possibly. This is the problem of 'Dirty Politics', the taint gets everywhere.

While the suspicion of cronyism and undue influence exists then all public servants are suspect. Many innocent, hardworking and dedicated people will get tarred by the same brush.

If nothing is done about it, like debased currency the good will lose value by the bad.

by Kumbel | 4th Sep 14, 11:57am 1409788676

We have a number of independent institutions such

Auditor-General
Ombudsman
Remuneration Authority
Commissioner for the Environment
etc etc

In some cases these institutions are supervised by a board (which can be stacked) and in others by being a parliamentary role that reports to a select committee (which at least gets some opposition MP's involved).

The problem, as Kate has pointed out previously, is that the easy way to make sure they don't do too much is to starve them of funding.

by Brendon | 4th Sep 14, 12:12pm 1409789566

All of those 'independent' institutions appointments are done by recommendation from the Officers of Parliament select committee. This committee is chaired by the Speaker of the House. The current Speaker of the House is partisan only receiving votes from the Government MPs for his appointment.

There is no constitutional gaurantee that the Speaker will be neutral.

by Brendon | 4th Sep 14, 12:29pm 1409790589

I am not suggesting these appointments are done in such a way that the PM can dictate exact outcomes. More that the type of people appointed are those not to rock the boat....

If they do develope boat rocking tendencies then there is always smear campaigns..... The status quo has many ways to protect itself.

Read Gordon McLauchlan; 'Why are our politicians sleepwalking?' in the NZHerald to get a fuller understanding of this issue.

by Kumbel | 4th Sep 14, 1:02pm 1409792577

Quis custodiet custodes ipsos?

the eternal problem

by Brendon | 4th Sep 14, 1:32pm 1409794341

I am glad your classical education wasn't wasted : )

In my case Mr Google had to educate me that the latin translation is "Who will gaurd the gaurds themselves".

I would argue that pluralism is the best way for "gaurds to gaurd themselves".

by Kumbel | 4th Sep 14, 1:39pm 1409794754

You haven't canvassed the judiciary as a suitable home for an ICAC?

by Brendon | 4th Sep 14, 2:09pm 1409796551

Maybe, but again politicians are sleep walking re the issue of Judicial independence? Who appoints the Supreme Court Judge?

Can we still appeal to the Privy Council? Not sure, was it that Helen Clark abolished that possibility and then John Key did what/reinstate it?

Why can't Kiwis provide their own independent institutions?

by Colin Riden | 4th Sep 14, 2:33pm 1409798002

Why can't Kiwis provide their own independent institutions?

Because - as Richard Prebble used to be fond of saying - parliament is the highest court in the land. As you said earlier:

Here in NZ the PM holds all the cards and the integrity of public institutions including a new body like a NZ ICAC completely depend on the integrity of the PM.

My lay understanding is that Helen Clark did away with appeals to the Privy Council and replaced it with our Supreme Court. From in my view some misguided sense of nationhood and possibly without understanding the above two paragraphs.

Appeals to the Privy Council now only exist for convictions prior to the establishment of the Supreme Court.

by cowboy | 4th Sep 14, 2:27pm 1409797639

starve them of funding, and wrap them in masses of red tape (like the OIO changes)

by Colin Riden | 4th Sep 14, 12:05pm 1409789108

I think the negative impacts of cronyism and undue influence are worse than you suggest. They can lead to central and local government making very poor investments. And who would want to set up a business here when it may in future be disadvantaged by government cronies.

by steven | 4th Sep 14, 12:36pm 1409791014

Yep, I agree.

I think it was Georgina Beyer who complained that she was being unfairly treated as Most MPs when they retired from politics got "invited" onto Boards of Directors etc but she had not.

Well "honey" few of you should be IMHO. Spending a few terms wandering around the House is no qualification to run a business, just as running a business is no automatic qualification to be an MP.

regards

by Brendon | 4th Sep 14, 1:02pm 1409792530

Colin I try to use calm language because that is the type of person I am and because I don't want people to think I am a nut job.

I have posted in recent days that I think the integity of our democracy is more valuable to us Kiwis than (trees), cows, water or land.

It is really important for us all but especially businesses that public institutions serve the public not some vested interest with secretitive connections to Ministers and public servants.

This is not a new battle. The conflict between royal patronage and the 'rule of law' was a big driver of the English civil war. Business mainly took the side the 'rule of law'.

by cowboy | 4th Sep 14, 2:24pm 1409797489

I dont use calm language because I have found that is the langugage and behaviour of con-men and those whose living is paid from compulsory levies from other peoples work. "calm language" is the tool of the sophist, whereas language of discernment, passion and accuracy (and truth) tends to be harsh, loud, and screamed over the barricades.

As such I _know_ just what happens to "democracy" when those sophists jobs, families or reputations are on the line.

And that's why we have to differentiate between (small) business and corporate empires (the new royal rulers) and privileged custodians who turn out to be well heeled servants of the latter.

And I guarantee you that your democracy isn't more important to you than you and your families bellies and shelter. And for democracy to function then the secret deals and hush-ups need to have their scabs ripped right off. It is claimed the secrecy is for fair dealings and so corporates don't out maneuver the laws-in-progress, but frankly, that's a load of old cobblers - it's not working and it can be seen not working. Drag it out into the light, make rules that protect against misuse if needed.

by iconoclast | 4th Sep 14, 11:37am 1409787420

Hong Kong has an ICAC

Last week HK-ICAC found Jack Chen and May Wang to be money launderers and in response the NZ authorities continued the freeze on their assets

It appears that Hong Kong ICAC is doing the work for NZ

NZ does not have the institutions to do its own work

by Brendon | 4th Sep 14, 11:44am 1409787899

Iconoclast, so much is happening I am having trouble keeping up, can you remind me(us) who Jack Chen and May Wang are?

by Kate | 4th Sep 14, 11:59am 1409788755

Folks behind the failed OIO application to purchase the Crafar Farms. Already had purchased a swag of NZ assets including AKL residential real estate, including the unfinished Hochin mansion.

by Colin Riden | 3rd Sep 14, 5:00pm 1409720448

Both Fonterra and Treasury - among others - are assuming prices will fall for the next few months and then rise in Q4.

That is an interesting statement David. Can you please provide some support for Fonterra and/or Treasury 'assuming prices will fall for the next few months'.

by Henry_Tull | 4th Sep 14, 9:07am 1409778455

and rather than black box, offer these and others [bank economists] to show their workings

one line for WMP over time

one line for FX (NZD/USD) over time

for example does every one see fx to 0.75 by Xmas?

by Andrewj | 4th Sep 14, 9:28am 1409779733

you would need a live chicken and a sharp knife.

by Colin Riden | 3rd Sep 14, 7:51pm 1409730705

You must know where to find, or have access to, much better information than I have. All I found appeared contradictory:

Residential building activity was unchanged.

Growth continues in the residential building volume trend; however, it is still 7.0 percent lower than the series high in the June 2004 quarter.

by King of the whiners | 3rd Sep 14, 11:12pm 1409742729

From an NBR comment (re: Katherine Rich leaks).

1. Rich was a 3 term National MP.

2. Rich took up the position of Chief Executive of the New Zealand Food & Grocery Council in March 2009, following appointment in November 2008. This is the mouthpiece of the biggest NZ food and drink concerns.

3.She was appointed to the board of the Health Promotion Agency in 2011/2012. This is a CROWN ENTITY.

https://www.national.org.nz/news/news/media-releases/detail/2012/06/22/…

At around this time grave doubts were expressed about the appointment:

http://www.radionz.co.nz/news/election-2011/91518/national-defends-appo…

4.John Key and National claimed that the appointment of of the head of an influential lobby group for the food industry to a health promotion agency was not a conflict of interest.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10815422

5. Emails leaked to political writer Nicky Hager claim that Rich, in her role as Chief Executive of the Food & Grocery Council, has while on the board of the Health Promotion Agency (THE AFOREMENTIONED CROWN AGENCY) fed prominent blogger, Cameron Slater, with posts that denigrate individuals in academia and the media who report on news or support health initiatives inimical to the interests of the food, alcohol, tobacco and soft drink industries. The posts have been published as if by Slater himself on his blog Whale Oil Beef Hooked as recently as February 2014 (from her wiki page).

6.It would appear that Mr Key has it wrong about that conflict of interest? In spades.

7. And to confirm how inept our media are - on TVNZ1 6 o'clock news tonite, when the reporter was asked whether todays revelations (about Rich) embroiled the government further he replied no, as they merely concerned industry lobby groups. Oh really??

by Kate | 3rd Sep 14, 11:43pm 1409744616

It just gets worse. This one will really make your stomach turn;

http://networkonnet.wordpress.com/2014/09/03/the-ministry-of-education-…

The article concludes:

I call on the incoming government (if it is National and NZ First – then NZ First as part of that government) to declare the ministry of education a potential crime scene, and warn that potential evidence is not to be tampered with or destroyed. And if deep collusion has occurred and basic human rights have, indeed, been transgressed, I look forward to the day when a test case for damages to individuals is undertaken, substantial damages awarded – and with that done, a process of truth and reconciliation following.

To think that just ordinary New Zealand citizens have had to put up with this kind of slander via that Whailoil website is simply unconscienable. But to think that more than one Minister of the Crown might be complicit - well words fail me.

by steven | 4th Sep 14, 12:44pm 1409791490

How many NZers will pay attention however?

How many will still blindly vote as "normal"?

How many will say the other side is as bad (and may yet be proven right)?

In terms of slander, frankly I consider whaleoil a far right wing website with mostly like minded simpletons in tow. So I find it hard to believe open minded ppl would pay even the slightest bit of regard to his ramblings.

"more than one Minister of the Crown"

Even one is too many.

seething is a good word....

"be filled with intense but unexpressed anger"

regards

by cowboy | 3rd Sep 14, 11:11pm 1409742677

curious about something irrelevant to this article.

NZD:USD is dropping at the moment.

yet

GBP:NZD is also dropping.

If the NZD was dropping shouldn't the latter be rising?

by cowboy | 4th Sep 14, 2:47pm 1409798825

the NZD cant rise against one and drop against another simultaneously - that's agains tthe rules of mathematics. the NZD is a singular figure.

For the GBP:NZD to be drop, while the NZD:USD is dropping would require either the USD to rise solidly (and the NZD to be less rising) AND at the same time the GBP to rise even slower or drop.

OR the GBP is dropping even faster than the plummet of the NZD, which is really serious news for GBP. Serious enough that I'd be surprised that whatever is caused it isn't on the UK news.

Now what be happening - is the GBP is dropping slightly faster than the NZD, while the USD is rising considerably faster than NZD..... but the important thing is with the two pairs appearing travel in the same direction (the ---:NZD and the NZD:---) it means that the NZD is relatively stationary in the market position....... despite looking like it's dropping...

... Am I correct?

by cowboy | 4th Sep 14, 8:50pm 1409820628

please re-read my original question.

I know how currency pairs (ratios) work.

What I'm looking for is the value of the NZD. Not a pair.

A look at much of the trade would have us believe the value of the NZD is dropping quite considerably.

But look at the reciporcated pairs

NZD/usd

gbp/NZD

note the deliberate choice of a pair with a fixed NZD and a shifting NZD pip-wise.

Normally I monitor NZD/USD and EUR/USD to make sure my NZD trades aren't too affected by USD (that USD not a USD pair) policies. ie If I see the NZD/USD pair rise, and I also see the EUR/USD pair rise, then I know that it's the USD (solo) dropping for some reason (perhaps lower than expected non-farm payroll data). Likewise if both pairs drop similar amounts at similar times it might be because the Fed/US government is talking about interest rate hikes.

But with a reciprocated pair if the NZD (solo) goes up, then the NZD/--- will drop, and the ---/NZD will rise.

If a reciprocated pair or pairs BOTH go in the same direction, then either one leg is dropping like a stone, or one is dropping/rising slowly and the other leg is rocketing; either way it means the common currency is between the two. In this case however the NZD pairs look like they're plummeting on one, and rocketing on the other... so either Great Britian is going bankrupt at a great rate of knots.... Or the US has just done something to cause a huge jump..... but most importantly ...if I'm reading it right... the NZD (solo) isn't changing much at all, and GBP is dropping while the USD is picking up fast enough to make it look as if we're dropping.

the importance of this is IF the NZD is dropping, is it fundamental political outfall? so temporary. Is it the Fonterra/bank-recalculate-of-payout news still rippling though which is a permanent drop? Is it a drop showing a trend in lack of consumer confidence (which means good news, like a OCR/bank interest rate drop, will give an immediate jump confidence)? But if the NZD (solo) is actually mostly stable, and its other players moving, then that is a worry for our trade position...which means our export income is still going to find a challenge. Those are the fundamentals I'm trying to work out which ones are "in play".... and I was checking if I'm reading it right, because it very much looks like the NZD (solo) is pretty much same value as it was a month ago.... (which means resistance will be a little stronger, and support likely to be hard but brittle...)

by iconoclast | 5th Sep 14, 12:01am 1409832098

You can get a better isolated fix on what the USD is doing on it's own with the DX instrument on the NYBOT - that's the code "DX" - it drives all the other pairs

It's the US Dollar INDEX

It is an INDEX and has an associated FUTURE

by cowboy | 5th Sep 14, 7:12am 1409857935

Thanks for that.

What I'm look for is reasons for the little jumps and drops we're seeing at the moment. I suspect that the NZD is actaully moving little, and the jumps we're seeing is the Stops Roger described as being hit. They're not cascading as he predicted, but the size and frequency during the day, and the occasional run, I'm wondering might be speculators resetting their NZD /USD (due to movement caused by USD changes). IF I'm right there's a good chance there are a lot of technical "bettors" and their patterns, and size of their stops should show up in the data, if I can isolate out the factors.

by cowboy | 5th Sep 14, 2:38pm 1409884684

I'm watching on one minute candles, so I have simultaneous fail vs USD, and yet _simultaneous_ 1 minute real-time rising vs GBP. If they were just small or gradual drops/rises it wouldn't be an issue.

Overnight trade could be many things, thats like 480 candles worth of travel :)

And usually the overnight NZD rises because of carry profits (IMO) it's moderately stable and it looks like the amateurs and pros find it ok to "park" there (if anywhere). I woud assume that the USD index rise, is linked to speculative pressure from the (then) upcoming ECB announcement. likewise I'm suspected that GBP normally has good correlation with it's close EUR neighbours is probably caught in the drag.

by iconoclast | 5th Sep 14, 2:54pm 1409885660

Oh dear

How long have you been a member of the congregation of the Church-of-the-Squiggly-Line?

by cowboy | 8th Sep 14, 11:56am 1410134184

about 2 years now. I have sinned twice, but done penance.

Second time was after you warned me/us of the Bank of Japan's printing, and you recommended I pick one exchange open and stick to a single pair (or two) when I asked for advice.

by steven | 4th Sep 14, 12:46pm 1409791602

I would have thought if "investors" feared a Labour win 2weeks from now that the NZD should drop against both so would seem consistant to me.

regards

by cowboy | 4th Sep 14, 2:51pm 1409799060

In such a case, and that's what I was watching for, then one would go up and one would go down. and the NZD:USD is NZD on the savings side.... while on GBP:NZD the NZD is on the borrowing side. That's why I choose those pairs, as they reciprocate each other.

Also useful if I want to tap Sell carry trade positions, but I do have to watch for linkage between GBP:USD (the synthetic pair) influences, which is why I steered clear of the EUR pairs.