A review of things you need to know before you go home on Tuesday; commodity prices stop falling, Aussie data bruises, crude prices drop suddenly, big USPP deal, youth jobs pledge

A review of things you need to know before you go home on Tuesday; commodity prices stop falling, Aussie data bruises, crude prices drop suddenly, big USPP deal, youth jobs pledge
For Tuesday, November 4, 2014. Image sourced from Shutterstock.com

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

There are no changes today, although Kiwibank announced a better deal for borrowers with fixed-rate mortgages to pay down their loan. They had previously allowed a payment of 5% of the current reducing balance each year, and will change it to 5% of the original loan balance. This policy change will start as of November 18. Kiwibank's changes bring it into line with some of their rivals, but will be better than others.

Asset Finance have tweaked some term deposit rates. They have raised their one year rate to 7.00%, and have lowered all longer rates. For example their new two year rate is 7.50% and their five year rate has become 8.40%. Asset Finance has a credit rating of 'B'.

The banks' combined core funding ratio for September was 85.5%, an unremarkable result, according to RBNZ data released today.

The ANZ commodity price index was down -0.8% in October in international (mainly US$) prices, but +2.4% higher in NZ dollar terms. Kiwifruit led the increases, lifting +8% in the month, to a record high. Also noteworthy were lifts for skim and whole milk powder, cheese, and butter, which rose between +0.4 and +0.7% in the month, although prices are significantly lower than earlier in the year. Log prices rose +0.2%. Pelts, beef, aluminium and wool all fell.

New car and new commercial vehicles are rising strongly. In October, the annual level reached a new all-time record, exceeding 125,000 vehicles. We will get the used import data in a few days and that is likely to be strong too, with every chance these will equal the new vehicle annual rate.

In Australia today, their trade deficit more than doubled in September from August. This was well below expectations. Retail sales came in slightly better than expected. And yesterday we should have noted that Aussie building approvals were very weak, falling -13% when the experts were expecting a basically flat-lined result.

Crude oil prices have taken a real dive today. The Saudi's decided to meet the market in the US by cutting prices in the face of much higher US domestic production. This will reverberate around the world.

Precinct Properties announced today that it will borrow US$75 mln (about NZ$100 mln) for 10 and 12 year terms in the United States Private Placement market. If the 3 month bank bill rate stays the same as it is today when the funds are drawn in mid January, they will have borrowed at about 5.9% pa.

Auckland is focusing on youth unemployment. Fletcher Building has become Auckland Council’s first Youth Employment Pledge partner, joining the council in the Youth Employment Movement, which aims to assist the 23,000 young people in Auckland who are not in employment, training or education. The company says "Fletcher Building needs good people and we are passionate about working with people at the beginning of their career. We are committed to diversity and value the contribution young people can make to an organisation like ours."


Visa says transaction volumes using its payWave contactless payments trebled in September from the same month a year earlier to three million. About 16,000 contactless payments terminals are now in use in New Zealand, Visa says, with Pakn'Save, New World and McDonalds the latest retailers to adopt the technology. PayWave launched in New Zealand in 2011.

Domestic swap rates rose today but only by +1 bp for the one and two year terms. Rises in UST benchmarks are not flowing through to the NZ markets. The 90 day bank bill rate was unchanged at 3.67%.

Check our real-time charts here. The NZD is slipped slightly lower today. It is now at 77.3 USc, at 89.0 AUc, and the TWI is at 76.3.

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

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How dare Auckland Council waste our rates money, this is not core services, they should cancel the Youth Employment Pledge programe and give me my 0.5 cents of rates money back!

I would have thought it was outside of the scope of their normal functions too. Especially given the noise we have had from Act/National over the last 6 years about "back to basics".
So while the four well-beings have been repealed the purpose of local government is now:
"to meet the current and future needs of communities for good-quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses." (LGA2002 s10 (1)(b))
Those three words "local public services" give councils licence to anything they want. Sorry I think you will just have to wear it.

Sorry that was meant to be sarcasm.  I am quite happy for AC to spend half a cent or so of my rates bill trying to address the huge youth unemployment problem.  Money well invested.

Sorry, should have noticed.
But I was seriously interested. You see it was only two years ago that Nick Smith as Minister of Local Government was promising to "do something about rates". At the time he fulminated about duplication of services between central and local government. In real life there is virtually no overlap. Roading interfaces are well managed. Ironically social housing is the one area where there is an un-coordinated overlap. The other is social services like this one. 
As usual, for all the bluster, Smith didn't actually do anything about it. The 2012 amendment to the Local Government Act effectively didn't change anything. And we appear to have forgotten how we were going eliminate wasteful duplication.

Yes actually overlap, or rather duplication, of functions is a worthy concern.

Commodity (dairy) prices. As the Northern Hemisphere winter comes on, dairy production slows and china chews its way through their stockpiles, values will rise. Just a shame NZ does not have a dozen more Tatuas, Westlands in place of the Ugly monopoly, fontera.
Oil. watch for the yanks pending sell- off  of some of their strategic reserves and the effect that will have on barrel price. 

As Reuters reports, for the first time in almost two decades, energy-exporting countries are set to pull their "petrodollars" out of world markets this year, citing a study by BNP Paribas (more details below). Basically, the Petrodollar, long serving as the US leverage to encourage and facilitate USD recycling, and a steady reinvestment in US-denominated assets by the Oil exporting nations, and thus a means to steadily increase the nominal price of all USD-priced assets, just drove itself into irrelevance.
A consequence of this year's dramatic drop in oil prices, the shift is likely to cause global market liquidity to fall, the study showed.
This decline follows years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling. Read more

Peak Oil put off for another year  - and maybe the year after that.
Go back and read the posts on this issue masquerading as informed comment some years ago - good for a laugh !

Meanwhile the real world effect of expensive energy continues its march unabated, a decline in the rate of growth of the population. Only idiots look at raw output rather than net supply.

Or ignore energy efficiency gains. Poor confused luddites.
"Compared to 1970 when the first Earth Day was celebrated and 14,400 BTUs of energy were required for every dollar of output, the energy efficiency of the US economy has more than doubled – we use less than half that amount of energy today for every dollar of output. Thanks to innovation and advances in technology, the US is able to produce ever-increasing amounts of real output with continually decreasing amounts of energy per dollar of GDP."

Actually no, a luddute rejects machines and hence engineering and science and math.  This therefore is far more appropriate to your outlook.
In terms of efficiency I wonder how much of that US gain is really instruments of mass financial destruction hidden in that "output" which actually is GDP.  
Another oopsie on your part?
No actually yet another twist of context in effect generating a lie it looks like.
"From 1992 to 2012, energy use per dollar of GDP declined on average by 1.9% per year, in large part because of shifts within the economy from manufactured goods to the service sectors, which use relatively less energy per dollar of GDP. The dollar-value increase in the service sectors (in constant dollar terms) was almost 12 times the corresponding increase for the industrial sector over the same period. As a result, the share of total shipments accounted for by the industrial sector fell from 30% in 1992 to 22% in 2012 (including a slight increase from 2009 to 2012"
As it says, much of the USAs manufacturing that uses energy is now done in china, hence that energy use probably isnt accounted for.  That isnt an improvemnt as such though Im sure there has been some.
Just cant help yourself is sowing mis-information can you.
Of course even they dont get it in their projections,
"Industrial sector energy intensity, measured as delivered energy per dollar of industrial sector shipments, rises above its 2005 level initially owing to the 2007-09 recession but ultimately decreases 25% below its 2005 level in 2040."
So if we get 30 years of recession it wont drop...it will get worse, ergo the entire methodology is questionable.

Misinformation indeed, swapping an easily measureble real world outcome of peak energy and swapping it for ficititious measures. Good on you for your analysis Steven.