What happened Tuesday

A review of things you need to know before you go home on Tuesday; more housing choice, QV price records, commodity prices jump, swap rates up +3 bps, NZD slips then recovers

3rd Nov 15, 4:00pm by David Chaston

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

TODAY'S MORTGAGE RATE CHANGES
There are no changes to report today.

TODAY'S DEPOSIT RATE CHANGES
Today, only NZCU Baywide made a change, reducing term deposit rates.

MORE CHOICE
House buyers getting more choice as new listings rise and average asking prices fall on realestate.co.nz. In Auckland, there are less than 10 weeks of listing inventory available at current sale rates, nationally there are 16 weeks available. In Canterbury it is 17.5 weeks and Wellington 10 weeks.

ANOTHER NZ WIN
New Zealand led the developed world with equity market gains in October gaining +13.3% on the month, followed by Germany (+10.1%), and Japan (+9.3%). This data is from S&P. 2015 to date we don't look so hot however, with equities here down -10.4%.

BACK-TO-BACK
The ANZ Commodity Price Index rose +6.9% in October - the second consecutive monthly increase. "The lift in the overall index was again driven by rebounding dairy prices. However, non-dairy prices declined for the sixth consecutive month. The strengthening NZD trimmed local currency gains, with the NZD index up +2.9% but it’s still up nonetheless," said ANZ.

THE $918,153 STRATOSPHERE
Housing values keep rising, pushed up by migration and low interest rates, says QV. Nationally, house prices in were +14% higher in October than a year earlier - the fastest pace of growth in almost a decade. Such rapid growth is becoming normal, led by Auckland, up +24% year-on-year in October. House price inflation in Hamilton, Waikato, and Tauranga is also at double digit rates.

BUYING LOCAL
Tainui-owned Go Bus has awarded a $13 mln contract to Christchurch-based Design Line for 29 new buses as replacements in their Dunedin, Hawkes Bay and Christchurch fleets.

REMOVING BLOCKAGES
The Government will allow councils to transfer functions and responsibilities between regional councils and territorial authorities. “We want to give local government a broader range of structures to choose from, helping councils focus on region-wide economic growth and making sensible decisions about infrastructure development beyond one council’s boundaries," said Paula Bennett.

DIFFERENT STANDARDS
Today, Auckland has recorded 'good' air pollution levels (AQI = 13). Auckland is reputed to be the worst in New Zealand for air quality. On the other hand Shanghai is reporting 'moderate' air pollution (AQI = 130). Yesterday Shanghai AQI hit 160. WDKHLWA.

WHOLESALE RATES RISE
Wholesale swap rates rose +3 bps across the curve today, but the 90 day bank bill rate is unchanged at 2.95%. These markets may be influenced by decisions in half an hour by the RBA (at 4:30 NZ time). Update: no change at 2.0%.

NZ DOLLAR HOLDS
Today our dollar slipped for most of today from where it was at this time yesterday but has now recovered almost all that sag. It is now at 67.7 USc, at 94.4 AUc and 61.4 euro cents. The TWI-5 is still at 72.8. Check our real-time charts here.

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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2 Comments

by David Chaston | 3rd Nov 15, 4:05pm 1446519958

This comment appeared in The Australian yesterday. How relevant is it in the New Zealand SME-banking environment ?

As an owner of a number of businesses across a range of sectors (including manufacturing) I can provide some perspective on the efficacy of interest rate reductions on our propensity and willingness to invest — in short, it has little or no impact.

By far the biggest determinant is sentiment, or attitude to risk in other words. And by far the biggest factor in this is the attitude of the banks — not just whether they say yes or no to a deal, but the perception of how they might respond or act if something were not to go quite to plan.

It is really quite clear that the banks are not really keen or interested in business, particularly the SME space. They pay lip service to it and purport to be active and keen, but the reality is that they are doing this because it is expected of them, and to show their true colours would be very bad PR. So they instead play the game of being present, but not really being active in the SME space.

All my businesses are sound, profitable and cash-generative. Despite this, I get the distinct impression that if I said to my bank that I was moving elsewhere they would act disappointed, but corporately they would be glad — as it would free up their capital to lend on property.

In a real sense I don’t blame the banks, they are just acting rationally in order to get the best returns.

The Reserve Bank only really has a single tool — interest rates — with which to try to control the economy/growth/inflation. The effectiveness of this tool has been blunted almost to the point of being useless (other than fuelling or retarding the property market).

So it’s really down to the government and the banking regulators to intervene to modify the economic rationale under which banks operate. In the absence of this, the SME sector will have to continue to operate ultra-defensively because we just don’t know what’s round the corner, but we do know that the banks may not be our friend if what is round the corner turns out to be difficult.

by Roger Witherspoon | 3rd Nov 15, 5:09pm 1446523795

The trouble is, when times get hard it's the banks that are bankrupt. However, it is totally taboo to even mention the very slightest possibility that the most leveraged businesses are not quite as resplendent as they like to appear. So what actually happens is a lot of concern about your business, not their's. Loans that were non recourse because they are under 50% leveraged suddenly need a personal guarantee. Reviews become more frequent and loan lengths shorter, approval must be given from on high for all new loans. Sometimes they just don't want new business. All because the parent is in reality probably a basket case on life support, although you would never know apart from these signs.

They are not all like that at the same time, hopefully.