What happened Friday

A review of things you need to know before you go home on Friday; more home loan rate cuts, bigger credit card debt, sharing with our new best friends, Arvida gets its money

21st Nov 14, 4:00pm by David Chaston

For Friday, November 21, 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
Both BNZ and Kiwibank reduced fixed rates today. Kiwibank reinstated its $2,000 cash incentive.

TODAY'S DEPOSIT RATE CHANGES
No term deposit rate changes today.

POWDER WEAKNESS
Today's USDA report on Oceania prices had whole milk powder price down marginally, although that puts them at their lowest level since July 2009. Skim milk powder prices were reported to be down much more steeply. Cheese and butter prices were essentially unchanged which is where they have been since early September.

IRRATIONAL EXUBERANCE
Credit cards balances in October reached a record $6.28 bln, a +5.7% increase and the highest growth rate since November 2008. More than two thirds of this debt is interest bearing. Card transactions are up +.62%. Approved credit limits are now $20.6 bln, another new record. Hard to see that this will end well for the card holders adding this debt at such a fast level. (But the banks love you now.)

SHARING OUR RESEARCH
One important outcome from the NZ-China agreements entered into while President Xi Jinping is in the country is that our Universities and other science establishments have signed up to work with Chinese universities and industrials on ag tech transfers and research. Lincoln is sharing dairy knowledge with Yili Industrial, Auckland University's UniServices is to work with Yashili International on kiwifruit and other biotech issues, and Plant & Food Research is teaming up with a Sichuan research lab also on kiwifruit issues.

PROFITING FROM THE AGED AND INFIRM
Retirement village group Arvida Group's IPO has raised $80 mln, and is priced at 95c/share. That will give the company a market cap of $214 mln. The shares will trade on the NZX from December 18.

WHOLESALE RATES
Swap rates were down a touch, about -1 bp across the board from yesterday. The 90 day bank bill rate was also down -1 bp and is now at 3.66%.

OUR CURRENCY HOLDS
Check our real-time charts here. The NZ dollar is a little firmer today. Against the US dollar it is now at 78.8 USc, at 91.3 AUc, and the TWI is at 78.25.

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

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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12 Comments

by MortgageBelt | 21st Nov 14, 8:57pm 1416556639

So, is anyone predicting interest rate hikes over the next year?

Some qualitative research scanning the last 5 years of bank economists and commentators predictions of rate hikes, compared to the actual rate cuts, flat liners, and deflationary pressures would be useful.

Loan rates, fixed, have been decreasing all of 2014 despite the RBNZ fatally flawed little adventure with 4 tentative hikes.

by steven | 22nd Nov 14, 7:56am 1416596208

Now, now, DC wont show up his advertisers and columnists errors of errrr repeated ~~judgement~~ dogma.

;]

The thing now on interest is be bold, get the predictions for what is going to happen for the next 5 years.

Historically,

http://www.rbnz.govt.nz/monetary_policy/ocr/

I seem to recall the RBNZ thought 4.75% OCR by 2016? 2017? currently their guess is 4.5%?

How about we'll be lucky to see 4%? with <3% the most likely OCR in 2017? Assuming of course the RB has the balls to admit its cooked our economy and drops the OCR rather than hold and damage it further which I doubt. Then there is the external factors and as always human factors which seem to negate a lot of things, in the short term.

It still surprises me that our master of the Universe didnt accept a wee bit of inflation (4~5%) in order to see us really out of this. Context of course, past peak oil we wont (and hence the OCR) really ever recover (so 20~30 years of 1% OCR) . Gee I wish I was a fly on the wall at the RB at times, must be fasinating looking at how they see the long term.

regards

PS anyone know how to do strikethrough? I tried HTML and it isnt saving/displaying it

by Roelof | 22nd Nov 14, 9:08am 1416600518

I'm curious to know why 4-5% inflation in consumer prices is going to .." get us out of this". ??

by Stephen Hulme | 22nd Nov 14, 8:53am 1416599600

Loan rates, fixed, have been decreasing all of 2014 despite the RBNZ fatally flawed little adventure with 4 tentative hikes.

Are you of the opinion that less won't lead to more? - look on

I suggest you should be the subject of domestic extremism surveillance given that the preferences of your rantings will more than likely take NZ into the realm of total economic collapse - witness what Japanese citizens are enduring with record low interest rates- read more.

by Mike B | 22nd Nov 14, 9:45am 1416602755

Stephen H - raising interest rates is NOT a fix it is a patch.

You are arguing that it is OK for everyone to get into debt. Then, when they get into sufficient debt bankrupt them with higher interest rates.

An economy needs money to run. Under our present system the only way to get that money is through debt. The problem is we control that debt level with interest rates.

The system works by allowing the level of debt to grow. Then when they feel it is getting too high they raise interest rates. That's called "Boom and Bust economics" and it is what you are advocating.

I, and many others, advocate better lending controls in the first place. But governments wont do it because they are scared of the banks reaction.

Imagine you own a dam. You keep overfilling the dam to the point it is near bursting.

To stop the dam bursting you open the flood gates and flood the village bellow. Then you close the flood gates and start filling up the dam again to near bursting.

It would be better to have controls on how much water you are allowed in the dam rather that keep flooding the village below?

by Andrewj | 22nd Nov 14, 10:41am 1416606091

When you borrow money you are borrowing consumption off the future. Now you want your sandwich but you have already eaten it.

http://www.zerohedge.com/news/2014-11-20/hugh-hendry-live-2-qe-worked-r…

by Mike B | 23rd Nov 14, 11:49am 1416696573

Andrewj - i fully agree with you. My argument is the way they control debt.

When you put interest rates real low, then entice people to borrow and get into debt then put up interest rates and destroy the borrowers you are EVIL. As i have said many times That is entrapment. Why do we alow our government to suport such disgusting entrapment policies.

The way our system works you have to have some debt otherwise you have no money supply and no economy. Therefore, if we wish to continue with this foolish system, then there should be controls on our money supply. It should not be allowed to see saw up and down just to please bank investors.

by MortgageBelt | 22nd Nov 14, 10:18am 1416604724

Lol, that's funny. I'm sure we are being watched by various powers.

Im not saying that ZIRP is the best way, I'm just saying that in a global environment of ZIRP and QE that NZ cannot operate a monetary policy completely out of kilter with this.

Getting back to my proposed research:

2009: commentators predicting 9% interest rates coming soon. Reality OCR drops

2010: economists predict back to normal soon, advise borrowers to fix: Reality., Borrowers regret fixing at relatively high rates

2011: Rbnz hikes twice, then cuts & earthquake etc .

Repeat repeat repeat.

interest rates are not going to be hiked in any sustained or to any significant level again. Ever.

Or at least not for a long long long long time. Or until a full reset, or war etc. ...

by Stephen Hulme | 22nd Nov 14, 8:27am 1416598020

Hmmmm - begs the question are China's enemies ours?

by Mike B | 22nd Nov 14, 9:14am 1416600886

Credit card debt

"Approved credit limits are now $20.6 bln"

Thats about $5k for every man, woman and child in the country.

If the average family size is 3 then that is $15k per household - WOW

by Stephen Hulme | 22nd Nov 14, 11:25pm 1416651922

WOW indeed!!!!!!

Just another symptom of global central bank initiated financial credit bubble mania or something more sinister? Read more

by Mike B | 23rd Nov 14, 11:55am 1416696923

nzcoolie - It makes even more sence to cut up your credit card like i did years ago.

I only have a debit card and if i can not afford it i dont buy it.