US budget deficit grows; China trade surplus slumps; Greece prepares to default; NZ Steel on the ropes; Aussie budget stress; NZ$1 = 74.4 US¢, TWI = 80.1

US budget deficit grows; China trade surplus slumps; Greece prepares to default; NZ Steel on the ropes; Aussie budget stress; NZ$1 = 74.4 US¢, TWI = 80.1

Here's my summary of the key issues from overnight that affect New Zealand, with news of doubts about the viability of the Glenbrook steel mill.

But first, the US ended the month of March with a Federal budget deficit of $52.9 bln, on track to be -2.7% of GDP and lower than the previous year. Spending rose, but a feature was that tax revenues rose to record levels on an accelerating economy.

China's export sales slumped 15% in March, a shock outcome that deepens concern about sputtering Chinese economic growth. The shock fall hammered the Australian and New Zealand dollars though expectations of fresh economic stimulus from Beijing helped Asian stocks higher.

The FT reported today that Greece is preparing to default on its next IMF payment. “We have come to the end of the road. If the Europeans won’t release bailout cash, there is no alternative [to a default],” one government official is reported to have said. Following the report, the Greek government denied it was their plan.

In Australia, Aussie analysts are questioning the viability of the NZ steel-making facility. BlueScope Steel is burning cash in its Glenbrook iron sands business says Credit Suisse and the operation could lose up to $40 million in 2015-16 if iron ore prices don't recover.

The collapsing iron ore price is making a major mess of the Australian Federal budget. Extra large deficits are coming because there is no political will to cut back spending.

In New York, the UST 10yr yield is unchanged overnight at 1.95%. Local swap rates will likely follow the New York lead.

The US oil price is also unchanged today at US$52/barrel and Brent crude to $58 a barrel. Output in the US shale fields is becoming volatile.

The gold price however has fallen and is now at US$1,199/oz.

The New Zealand dollar will start today much lower on the reaction to the poor Chinese trade data. It is at 74.4 US¢ a whole 1c lower than this time yesterday, still very high against the Aussie at 98.2 AU¢, and the TWI is just on 80.1. 

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

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47 Comments

Where would we be without corrugated iron?  Glenbrook is an asset of strategic national importance.  Thats what you get for selling it to the Aussies.

I went to get some corrugated iron for a shed and the man in the factory told me the best stuff he has is out of India.

Or China or Poland , and even Brazil are supplying corrugated iron

... corrugated iron is a Kiwi icon and a strategic asset ... and as such, the next Labour government will nationalize the steel-mill .... and take us back to the good old days of the 1960's when the government owned and ran everything , and the cost of living was so much cheaper and everything was better and simpler .... ahem ..... hee heee heeeeeeee !!!
 
Anyone else see that NZ Aluminium Smelters is rattling the donations tin once again ... seeking cheaper electricity , or another government subsidy ... or else !!! .....
 
... the " or else " being a reiteration of their threat to shut down the Tiwai Point smelter near Bluff ...

corrugated iron is an icon
 
yes, the mainstay of affordable housing - good for building a humpy
 
https://www.youtube.com/watch?v=aC-A6SP3EsQ

The old iron was a great material but the new steel does not match up.  About the only similarity is the corrugations.  
The new stuff is so thin most of the strength will be in the colour.  Without the paint it would be like gladwrap. 

the zinc-aluminium is generally a better value than the galv-iron.  the zinc is too thin for the low pitch houses
 

http://www.wsj.com/articles/fortescue-metals-faces-a-cash-crunch-1429005311
Not much strength in the New Force in Heavy Metals.
Weighed down with debt...speculating, I think it is called.
 

.. they are big numbers on this iron ore producer's financial statement ... damn big numbers ... from their half year report to December 31 2014 , revenue was $ 4.8 billion , down from $ 5.9 billion the h/y Dec 2013 ...
 
... net profit of $ 331 million ( $ 1723 m. ) .... cashflow $ 905 m. ( $ 3646 m. ) ...
 
... total assets $ 21.5 billion ( $ 22.7 b. ) and total liabilities of $ 13.9 billion ( $ 15.1 b. ) ...
 
FMG is still servicing their debt at these price levels for iron ore .... just !
 
... one wonders how many dairy farmers in NZ are facing a similar credit crunch ...

well with no competition (from steel) and one of the few huge industries on these shores, and none likely to be starting up with current political parties, why shouldn't they be doing so.

Soon NZers won't even have enough rights to bootstrap their own economy

Glenbrook was producing a superior product and making a profit while it was a SOE.  Privatisation saw an inferior product and the company run into the ground.  Just like the trains and here is a no brainer for you, exactly what will happen to our power companies.

... " here is a no brainer for you , exactly what will happen to our power companies. " ...
 
Do you care what will happen to them ?
 
... unless you're a shareholder , you'd most likely flip the buggers the bird !
 
Betcha they don't drop the price of electricity to consumers , even with an oversupply after Tiwai Point closes ....
 
... can you see the 4 million " birds " being flipped right now ..... ha ha de haaaaaaaaaa !!!!

of course they did, the company wasn't built up by people who care, and the owners had no investment in the community, long-term product or the staff, so they just looted the guts out of it - if it was still legal to fire sale the hard assets of the company you can bet they would have done that too.

Stupid thing is that our government lets them do it, and lets them OIO into it.  How can a reputable NZ based competitor survive and pay decent wages when they're competing against that.  Fisher and Paykel found the same thing in Dunedin - between competitors they were deliberately undercutting their market with product made with cross-subsidies for lower prices, governmnet added costs, and constant pressure to produce a lower quality product to reduce the cost of production the owners finally threw in the towel... not good for Dunners or Mosgiel but who cares as long as Auckland house prices are good.

If it keeps losing 40million a year'The Hawk may be able to repurchase it at a reduced price.

If the deficit grows enough, we might be able to borrow the money and revert it back into a State Run Enterprise.

Re Greece : they should get on a default and then manage the consequences . They can never ever repay the money they have borrowed.
Their problem is no different to the scores of countries to which this has happened before   .
There will be 5 years of pain , but the sooner its over the better
As for European Banks , well they have had ample time to write down their loans to Greece and its Bond holders who will take a haircut .

I am not so sure its that easy.  All the EU banks are owed huge amounts by the Greeks and that in turn flows back into pensions etc.  If the greeks default I'd wonder on the EU banking system freezing overnight as no one will lend to each other, that then flows to the USA and in turn us. I dont think the banks have written down their loans, that means booking losses, got some proof?
 

House prices up, meanwhile Fonterra units continue to fall - $5.33.  https://www.nzx.com/markets/NZSX/securities/FSF
 
How low will they go?  Will they equal payout of $4.70?
 
What effect will this have on Fonterra's credit rating if it continues to stay low?  

Hello Netflix / Amazon / Micro$oft / Google (Substitute any big company here)... we have oooodles of Green electricty here in NZ going cheap....
Wanna build a data centre?
We know you are hunting for Renewable electricity...
Servers can be anywhere!
It's not rocket science!

lag, we are 200ms away from everyone.

Not from NZ
Singapore is 200ms away from NZ and thats where M$oft were hosting the Asia centre.
NZ Companies then had to pay for the Inl8 traffic to serve sites up in NZ!
 
NZ / AUS could easilly be hosted here in NZ.

Microsoft has recently opened a Sydney-based data centre to serve Austalasia

Yup, i can really see it working for M$oft, setting up a data centre for every 4M people.  No point centralling datacentres is there?  They'll only need 2000 or so.

OMG
When did everyone leave OZ?
I though they were coming back but thats incredible!
I run a number of servers out of Canada!
Lag is important for SOME stuff... like Gaming; not so much for business applications..
 

Todays news:
http://itbrief.co.nz/story/revera-and-vmware-bring-greater-cloud-offerin...
You CANNOT get enough of good bandwith (with low lag) supplied locally.
Even in Christchiurch... CCC and the 'Law and Order presinct" all are going virtual desktop allegedly.
More MORE MMMOOORRRREEE SERVERS!!!!
Why woulkd anyone WANT to run their own IT?
...
“As a vCloud Air Network Premier Service Provider Partner, Revera delivers fast and easy access to public cloud and best in class in-country cloud services.”
Archibald says connecting to VMware vCloud Air through Revera’s Homeland Cloud would appeal to local businesses with trans-Tasman infrastructure requirements.
“Flexibility is key, and customers can decide on which side of the Tasman they want to activate core infrastructure and DR services,” he says.

You can virtualise the desktops, except it costs, savings are not big as MS still demands its pounf of flesh whether its a thin client or thick, ditto adobe etc. 
You would run your own IT when you have enough infrastructure hardware to employ enough ppl cheaper than cloud services costs. Plus cloud services is pretty much the hardware, any software needs cost you the same.  So yeah sure 4 servers, cloud, 40 servers? maybe 400? AWS etc is damn expensive.
 
 

look into playing that game when thin clients and ... wow its been so long I've forgotten the name of the rear end server, virtual desktops, evrything on the server. Dept of Constipation uses/used it.
 Just wasn't practical.  the data costs too high in NZ.  the pound of flesh per client and constant upgrade of many licences.  Far better solutions could be done on localised servers.  The only ones making anything was telco, m$oft, and the sales people on commission.

I have, at home, over 10 drouputs of internet a DAY and Chorus says that is within tolerance... Er.. ADSL is an Always ON connection!
I think running anything mission critical in NZ is not going to happen... with Telecom/Chorus anyhow.
 

ADSL is just sucky, cable way better.  Role on fibre....
 

Just put on the UFB on in house in feilding.  I'll now be able to complain twice as fast...

NZ traffic with 4million ppl is miniscule, hence yes their Office 365 is run from there. I wouldnt be surprised if there are tax advantages as well.
 
 

1-2million netflix users puny?

You are saying 1/2 of NZ uses netflix?
 
 

Why wouldnt they (eventually).
Just has to wait for NZ to upgrade from 3rd World attitiude to providing unstable internet.
Real compeition would help.
 

Takes competition, my cable is rock solid and fast, but roll on fibre, the "take it or leave it" will disappear fast.
 
 

" we have oooodles of Green electricty here in NZ going cheap...."
 
Maybe green but certainly NOT cheap vs. 1 cent per kwh in 1974, 4-6 cents per kwh in Oregon.  Our costs at 26-29 cents are obscene and will get worse thanks to asset sales.

Are you kidding Asset Sales of monopolies are good for the country.

Good for the 1%.

I assume you are being facetious, but on the off chance you are not, how has the country benefitted from selling the power companies?
By the by, my gas supplier- Genesis- put up my gas price in December by ~13% in a time of close to nil inflation. No real reason given. Just because they could.
 

One of the chaps doing the fibre for the recent house purch, he has imported PV panels and batteries,   he also uses an electronic switch.

Day time, he runs the house on 3kW panels, through an imported 8kW inverter. when he goes to bed he flicks the house over to grid.   He has electric freezer and fridge and hot water, but uses a LPG 9kg bottle for his stovetop gas rings.

He said he should have put in the solar hot water capable cylinder when he upgraded but he went with a wetback and fireplace as he had access to cheap firewood from a friends farm.

He says his average power bill is around $50 a month.
Install of the PV system was under $5k as he imported and install everything himself (that he could legally do).

I actually have 15KW of Solar Panels...
Being offline and supplying enough power from batteries for Elec cooker etc. would be very hard... thats a lot of pwer to pull through an inverter!
I feed the grid, but use what I need first.
 

plus network charges in NZ, from what I can see in the US they pay 12cents a kwh incl network so we are x3!

Well some of my neighbours are still on a waiting list for broadband, good for you if you have access to ultra fast broadband that you don't need or use, but a chunk of the population is stuck on dialup.  Can I blame Nationals neglect of the regions for this as well?

ADSL2+ Yes
Ultra 2019+ (Yea Right!)
I said; you are mad to update the cabinet with Fibre and not do FTTD (Fibre To The Door); but they responded (arrogantly) - we make the really old copper work..
Since then probably in region of 50+ calls and 15+ callouts... 100's of line analyse setups and tear downs... MOSTLY to no avail as expected. Must cost them $1000's
In UK they will work on ADSL Live as it's a critical system (even for domestic houses) here they just cut through and turn off whenever they feel like it.
Amatures!
 

They DO have options.
Satelite...
But ALL are laggy unless they can pick up something like Whoosh
 
http://www.woosh.com/half-price-broadband/broadband-and-phone-line

Why is it Nationals problem? why should a private company do BB if its cant make money? why should the tax payer subsidise a few users?