What happened Friday

A review of things you need to know before you go home on Friday; building consents still disappoint in Auckland, bank note demand grows fast with housing loans, consumer credit restrained, swaps and NZD unchanged

29th Jan 16, 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, but given the recent fall in wholesale rates, it is a live possibility someone will jump in with a fixed rate offer cut.

TODAY'S DEPOSIT RATE CHANGES
The Police Credit Union cut its bonus saver account interest rate by -10 bps; the new potential is now 3.20%.

BACK TO 2004 LEVELS
Building consent numbers are rising but for Auckland they still well short of what's needed to ease that city's housing shortage. Interestingly, Tauranga issued more consents in 2015 for new housing (technically 'dwellings') that in the whole of the Wellington urban area in the same year. Maybe John Key has a point. Overall, consent levels are back to the high levels we last saw in 2004.

SHADOW ECONOMY GROWING FAST?
The curiosity of a fast growing pool of 'notes and coins' continues. As at December 2015, this is at $5.1 bln, an amazing +8.8% above the equivalent 2014 levels. The fastest growing component is for $50 notes. Given the rise of debit and credit cards, it seems incongruous.

BIG DEBT
76.1% of all housing loans are now on fixed rate terms. That is its highest level since October 2009. In the intervening period, it got down to a low of 36.5% in April 2012. Today, there is 58.3% of all housing loans that have interest rate resets falling due within 12 months. That has turned up again but only back to levels we last saw in October 2014. We now owe $214.4 bln on our mortgages, $211.6 bln with banks.

BIG RESTRAINT
The slowest growing borrowing is in consumer debt, where borrowers owe "just" $15.6 bln. This December 2015 level is only +3.5% higher than the equivalent December 2014 level. Overall we are restraining ourselves in this area, maybe because we are so unrestrained in the housing area. (Or maybe we are all 'paying cash' in the shadow economy? see above.)

BIG PROJECTS
All of today's focus has been on residential building consents, and the undershoot in Auckland. But there is an even bigger story in the non-housing consent numbers. Christchurch commercial building consents are high but now tailing off, and the same data for Auckland is going the other way and taking off. The Auckland commercial boom is just starting. Today's data caps a series of all-time records, even if they are inflation-adjusted.

SMEs TO LOSE OUT
The sharing industry is gaining friends. Uber in New Zealand is working with ASB to give a 15% discount if you use an ASB Visa in your Uber account. This deal lasts until July. It almost certainly won't be the last of its type. Sharing services powered with apps are growing fast, overwhelming traditional models of connecting with users. As banks befriend these trends, that will drive trouble for the old style. Not sure what taxi drivers who have ASB relationships will think. But I doubt ASB will care that much. It will make bucketloads off the Visa transactions and resulting debt. It emphasises that banks find their interests follow their individual clients paying retail, rather than the much smaller SME markets.

KIWIBANK 'STABLE'
Fitch Ratings today affirmed Kiwibank's credit rating as "AA", but downgraded its outlook from 'Positive' to 'Stable'.

A MATURE MARKET
The growth in KiwiSaver membership is now slowing fast, but part of that reason is that almost 2.6 million of us are now in a scheme in one way of another. Given the emploted labour force is about 2.4 mln, you have to say this is a pretty impressive uptake. (Of course, you don't have to be employed, or even in the workforce, to sign up to KiwiSaver.)

DOWN, DOWN, DOWN
Petrol prices at the pump, especially after discounts, are falling fast.

WHOLESALE RATES HOLD
There were virtually no changes today, just a couple of terms recorded a +1 bps rise. The 90 day bank bill rate also held, at 2.70%.

NZ DOLLAR HOLDS
There was no more slippage in the Kiwi dollar today, recalling it fell yesterday post the OCR review and then gained most of it back. It is now at 64.8 USc, at 91.4 AUc, and at 59.3 euro cents. The TWI-5 is still at 70.2. 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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16 Comments

by Donald Ellis | 29th Jan 16, 4:18pm 1454037508

"SHADOW ECONOMY GROWING FAST?"

Sure is according to the IRD

by Andrewj | 29th Jan 16, 4:28pm 1454038111

Because we are taxed too much. I would imagine a lot of immigrants are used to dealing in cash.

by Donald Ellis | 29th Jan 16, 4:49pm 1454039388

Not sure I would agree about the quantum of taxation but clearly those who are active in the black economy have no concerns about depriving the government of revenue. It seems to me that avoiding paying tax says as much about perceived value from public expenditure as anything else. We see public money spent on creating more and more controls over us all without any sign of real problems actually being fixed or lives of most people improving.

It's understandable that some people throw up their hands and opt out of the official system.

by O.Farr-Kinnell | 29th Jan 16, 7:07pm 1454047673

If people were getting Value for Money, I reckon they would be happier contributing. Management= must improve. D--.

by ex agent | 29th Jan 16, 8:01pm 1454050864

Rubbish. People avoid paying tax as they are greedy and want everyone else to keep the country going not them. Do these people who opt out give the money they should be paying to Inland Revenue to a good cause such as providing shelter for others. Hell no. They spend it on themselves.

by Andrewj | 29th Jan 16, 8:18pm 1454051894

Maybe the receivers but the people paying could be driven by other motives.

by O.Farr-Kinnell | 29th Jan 16, 8:32pm 1454052757

Some do sadly. But some buy food for food banks, and as we get older and downsize our lifestyles we hand on handy goods. ie Kitchen, garden, workshop....Handy and treasures to many.

by sharetrader | 29th Jan 16, 10:25pm 1454059525

we now have a high proportion of imported tradesman, not only importing their skills but work practices, cash is king and if you want work done that's how its done

by Stephen Hulme | 29th Jan 16, 4:54pm 1454039658

The curiosity of a fast growing pool of 'notes and coins' continues. As at December 2015, this is at $5.1 bln, an amazing +8.8% above the equivalent 2014 levels.

What's the RBNZ up to? The R3 release confirms a Dec '15 currency in circulating value of $6.113bn

by antonymouse | 29th Jan 16, 5:22pm 1454041330

Paul Goulter: TPP puts profit ahead of quality education

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=115…

by ex agent | 29th Jan 16, 5:28pm 1454041683

Those opting out still use the roads schools hospitals etc. No excuse therefore. They will all apply for national super eventually. The word hypocrites comes to mind.

by MortgageBelt | 29th Jan 16, 8:57pm 1454054269

How about negative interest rates?

http://www.cnbc.com/2016/01/28/bank-of-japan-adopts-negative-interest-r…

by Afewknowthetruth | 30th Jan 16, 12:46pm 1454111163

We knew negative interest rates were coming. It was only a matter of time .

Next steps: increasingly negative rates for countries already employing NIRP; NIRP for those still at ZIRP; ZIRP for those not yet at ZIRP.

There is no way that the global economy can grow its way out of the predicament which is inherent in the system and which has been exacerbated by growth.

by Stephen Hulme | 30th Jan 16, 1:17pm 1454113021

We knew negative interest rates were coming. It was only a matter of time .

Yes indeed - a highly visible form of distilled madness.

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee reaffirms its judgment that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate. The Committee would be concerned if inflation were running persistently above or below this objective. [emphasis added]

Is that the coming of negative rates in the US? It is hard to read it any other way which aligns with reality. If inflation, in the sense of the calculated PCE deflator rate, has truly been nonconforming for nearly four years, that easily qualifies easily for the long run. That would mean, in the FOMC’s formulation, that past monetary policy had indeed failed – specifically the QE’s.

To be consistent with just that statement’s language and intent, then, we have to read it as: the long run inflation target has not been met; monetary policy is responsible for long run inflation, mostly; therefore past monetary policy has failed; the inflation target still must be met to fulfill the mandate; therefore monetary policy is necessary in some different manner.

It doesn’t really matter if there is internal consistency in the seeming logic of it, the whole thing is wrong and disproven outwardly in persistent observation – not the least of which is inflation setting closer to zero than 2% month after month, quarter after quarter, year after year. An unbiased observer might view that as the fact that monetary policy doesn’t really work at all, but the FOMC declares (potentially) yet more necessary as if negative nominal rates are any different than negative real rates (the ephemeral byproducts of QE which aren’t all that different than the inert and idle bank reserves, which are the tangible byproducts of QE). Read more

by positivelywallstreet | 30th Jan 16, 12:58pm 1454111886

Im being lazy and not finding my sources
About 2008 i was trying find out why the G10 were spending their weekends in a huddle.
Among other things I found a report from Chatam House on low growth scenarios.
One was slightly negative interest rates and a 1.7% GDP which they thought would be acceptably unpleasant...my words..
So we are nearly there.

by positivelywallstreet | 30th Jan 16, 1:19pm 1454113168

Here is a Saturday morning read, draw your own conclusions , though you have probably already read it.https://www.chathamhouse.org/sites/files/chathamhouse/public/Research/I…