A review of things you need to know before you go home on Thursday; tame housing consents, hot regional commercial consents, a clear winner, rising reserves, swap rates steepen

A review of things you need to know before you go home on Thursday; tame housing consents, hot regional commercial consents, a clear winner, rising reserves, swap rates steepen

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

TODAY'S MORTGAGE RATE CHANGES
No changes announced today, but my guess is that at the close of business tomorrow one and possibly two main banks may announce 'specials' that match BNZ and Westpac. Only a guess though.

TODAY'S DEPOSIT RATE CHANGES
Nelson Building Society today cut rates for 1 and 2 year terms by -5 and -10 bps. But they raised their 9 month rate by +40 bps to an impressive 4.50%.

NOT EVEN CLOSE
New residential building consents were down overall last month, but were up tamely in Auckland and flat in Christchurch. It was yet another month of under-performance in Auckland. (But at least our data is better than the same data out in Australia today which is on a four month slide. Adelaide is really struggling.)

STRONG REGIONS
But the under-performance of the housing sector is in stark contrast to the commercial sector, especially outside of Auckland and Canterbury. The value of consents in June was up an impressive +40% from a year earlier. Some of the biggest growth came from Hamilton and Tauranga, with both cities seeing a jump across a wide range of building types. Activity in Auckland was -18% lower than a year ago, the third year-on-year decline in the last four months.

A GREAT TRACK RECORD
In the six risk categories we analyse over all 82 KiwiSaver funds, ANZ Investment funds are the clear top performer to June 2015 since inception. We identify the funds with the best long term track records and in the top three positions for each category (that's 18 positions), ANZ Investments funds hold nine of them. Even more impressive is that they are a bank. The only other bank making any top-3 position is ASB in the Default funds (although Kiwibank-owned Kiwi Wealth scoops the Conservative category).

HANDS OFF
RBNZ data out today shows that they did not intervene by trading in currency markets in June.

RISING RESERVES
Here's something we don't often report. New Zealand's official overseas reserves are now at NZ$26.5 bln (including other FCY assets), the highest they have been since May 2012 when they reached $28.3 bln. Given that our GDP (nominal) was NZ$239 bln in the year to March, our reserves are now more than 10% of GDP.

TURNERS BUYS SOUTHERN FINANCE
Turners, formerly Dorchester Pacific, has struck an unconditional $5 million deal to buy the Christchurch based Southern Finance, which is a used vehicle financier. Turners says Southern Finance has about $3.3 million of net assets, and goodwill of $1.7 million. The deal's due to settle on Friday, July 31, and be paid FOR with bank borrowings. Turners says Southern Finance should immediately contribute about $750,000 in annual earnings before interest and tax, rising to $1 million after the first year.

WHOLESALE RATES STEEPEN
The steepening trend in wholesale rates really took hold today. Two year swaps are up another +2 bps, five years are up another +4 bps, and ten years are up an impressive +6 bps today. The 90 day bank bill rate is unchanged at 3.08%.

NZ DOLLAR SOFTER
Markets liked what the US Fed announced this morning and the US dollar has risen and this sees the NZ dollar softer and currently at 66.3 USc, also lower against the Aussie at 90.8 AUc, and at 60.5 euro cents. The TWI is at 71.3. Check our real-time charts here.

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9 Comments

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It is already considerably drier than the historical average in large parts of the east of the country according to those soil moisture charts (which of course is exactly what is predicted to happen as climate change marches on). However, superimpose a clearly building El Nino (increasingly scientists are forecasting a 1998 magnitude event) and you have some very unpleasant conditions for farmers for the next 6 months at least....

New Zealand's official overseas reserves are now at NZ$26.5 bln (including other FCY assets), the highest they have been since May 2012 when they reached $28.3 bln.

A fair chunk of this figure is tied up in the USD swap leg associated with RBNZ settlement cash creation and lending out hedged crown deposits. View D10, section 10 and R3, memorandum items.The unexplained balance discrepancy is a matter of ongoing fruitless investigation on my behalf.

Stephen, wonder if you might be interested in this statistical analysis about "magic money" (an attempt to quantify how much offshore capital) in our housing market;

http://publicaddress.net/speaker/house-prices-and-the-magic-money/

The analysis posits that around $300 billion of the $800 billion in Housing Value gains is not explainable by inside-the-economy debt. It uses RBNZ data and so thought you might be able to contribute on some of the questions being raised on that.

Kate, the last graph in your linked article can be, more or less, reconciled by the RBNZ's estimate of foreign debt.

External Debt in New Zealand increased to 247182 NZD Million in the first quarter of 2015 from 243036 NZD Million in the fourth quarter of 2014. Read more

The correct assumption that this debt is cross currency basis swapped and thus designated off balance sheet and not included in the official RBNZ M growth series data releases is suspect in my view because the swapped NZD's should show up in official lending stats. But I don't hold out much chance of getting a coherent official response. I find it's commonly declared "commercially sensitive", hence inexplicable.

More like politically sensitive, I suspect.

Just curious, has this unanswered question been a feature of RBNZ dealings only since around the year 2000 or thereabouts - which is the period the author/statistician of that analysis sees the step-change in the data occurring?

Kate ... The author of that article only uses household debt... He probably should consider TOTAL growth in credit/debt within our economy...
eg... Farmer sells farm to young farmer who borrows heavily.... Farmer invests his Capital in Houses..
eg. Govt debt leads to better profits for a few businesses..... The owners of those businesses invest the profits in Housing...
Credit may enter the economy in a particular sector .... but the problem is that once it is there .... it can flow anywhere... ( one mans debt becomes another mans profit).
I think the guys view is myopic.... even before he starts his intense statistical analysis.

Also... He did mention ...and I agree... using actual $sales values may be a better idea..
The value of one house sets the value of all houses in that street..

My own view is that, like water finding its way to the ocean....., Money finds its' way into land/real estate..... and it seeps in from every corner of an economy...

The analysis was developed as an attempt to shed light on the question of what the impact of foreign direct investment in our residential housing stock has been - given the government tells us they have no idea, so the Labour Party took a stab at it with that controversial bayesian analysis.

Hence I think why household debt was the metric used in this alternate approach.

But I'm not a statistician.

just as well people dont pay rates, interest or insurance on land then isn't it - and that it is all free to land owners straight up.

dp