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A review of things you need to know before you go home on Wednesday; more workers, smaller trade surplus, Aussie deflation, RBNZ's dampeners fail, more froth, swaps and NZD slip

A review of things you need to know before you go home on Wednesday; more workers, smaller trade surplus, Aussie deflation, RBNZ's dampeners fail, more froth, swaps and NZD slip

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

TODAY'S MORTGAGE RATE CHANGES
No changes to report today.

TODAY'S DEPOSIT RATE CHANGES
The Nelson Building Society has cut its two and three year offer rates by -15 bps.

LABOUR FORCE GROWING QUICKLY
In the three months to March 2016 our working age population rose by +25,600. (That is, the 15 and older population.) Not only is that the fastest quarter-on-quarter growth ever, the year-on-year growth is also a record high, as is the growth rate (+2.5% and eclipsing the +2.3% rate we saw in 2003). There are now 3,684,200 people aged over 15. But the over 70s are also a fast-growing group and presumably almost all of them have stopped actively working. There were 421,600 of them as at December (data not yet available for March 2016) and they are all included in the StatsNZ "working age population".

'A MATERIAL MISS' I
BNZ: "There were surprises galore in NZ’s merchandise trade figures for March. Not least was the monthly trade surplus coming in at +$117 mln. This was smaller than the consensus of opinion looking for a surplus of +$401 mln or +$475 mln (depending on your poll of choice). Either way, it is a material miss." Last year the March surplus was +$661 mln.

A MATERIAL MISS II
Australia has recorded its first quarter of deflation since 2008. A -0.2% dip in consumer prices brought the annual rate down to +1.3%, well shy of the RBA’s 2-3% target. The data caused the AUD to drop sharply, and the NZD suffered some collateral damage. The reason the AUD dropped is that it presumably increased the chance of an RBA rate cut. But the NZD fall may have reduced the chance in New Zealand. Only 17 hours to wait to know now.

MILES AHEAD
Despite today's Aussie CPI data, things are generally cheaper in NZ (despite a well-embedded urban myth otherwise). Our long-run weekly monitoring of grocery prices shows that. And today it was revealed that cars are about 30% less expensive here than across the ditch. Its getting the locals antsy in Aus.

HAPPIER CONSUMERS
Chinese consumer sentiment eased slightly in April, although improvements across a range of spending gauges in the survey point to a better outlook for retail sales and consumption expenditure in general. The Westpac MNI China Consumer Sentiment Indicator decreased 0.3% on the month to 117.8 in April from 118.1 in March, managing to hold on to most of March’s sharp rebound. Confidence has increased 2.5% since the start of the year, although it still sits below the series average of 119.9.

LOWER RATES BUT NO LESS INTEREST
Data out today from the RBNZ shows that while mortgage interest rates have fallen over the past year, the higher amounts being borrowed over that time means that essentially that borrowers are paying the same $ amount of interest. In the March 2015 quarter borrowers paid $2.871 bln in interest on $194.3 bln in housing debt. In the March 2016 quarter borrowers paid $2.832 bln in interest on $209.5 bln of housing debt. (If you wanted to know, the weighted average interest rate moved from 5.91% a year ago, to 5.40% this year. Many borrowers are paying much more than carded rates.)

INVESTORS IGNORE THE RBNZ
Related data shows that the RBNZ's attempts to dampen rampant housing investment have failed. Investors are a fast growing part of the housing markets, unaffected by the RBNZ moves.

FROTHIER FROTH
And, as if to reinforce the point, a new company has popped up to take advantage of that trend. You can now buy a stake in a fund that is buying residential investment property. Part of their pitch is that first home buyers could use these [unlisted] shares as a way for their deposit savings to 'stay up with the market'.

WHOLESALE RATES SLIP
One day before the RBNZ rate review wholesale rates here have fallen -1 bps for terms one to five years. They are unchanged for longer terms. This direction diverges from the benchmark UST rates on Wall Street earlier today which rose +3 bps. NZ swap rates are here. The 90-day bank bill rate is unchanged today at 2.33%.

NZ DOLLAR SAGS IN THE ZONE
The NZ dollar took a small fall today as collateral after the Aussie CPI surprise. The NZD is now at 68.7 USc, at 90.1 AUc and 60.8 euro cents. The TWI-5 is at 71.8. Check our real-time charts here.

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17 Comments

and westpac has stopped lending to all foreign investors and tightening on other investors
http://www.stuff.co.nz/business/money/79367707/westpac-stops-lending-to-...

In Australia

yes but including there ausie subsideries so only a matter of time before they include there NZ ones.
ANZ have already rolled this out

According to Statistics NZ, the unemployment rate for 15-24 year olds is around 15 per cent .
This year, over 60,000 young NZers are out of work.
In some provincial areas the youth unemployment rate is over 20%.
Many low skilled or starter jobs are now taken by the over 65s, & international students and/or immigrants.
This is called the 'displacement effect".

yes not all is well in the land of the long white cloud and the cracks are starting to show

Yeah but when

Sorry, but that is the usual misleading treatment of 'youth unemployment'. You must take account of those in this age group who are in 'employment, education, and training'.

Of course, those young people (15-19) who quit school and don't do any training are going to have a hard time finding employment. The 'unemployed' 15-19 year olds was 34,500 out of the whole age group of 316,500. More than 52% of this group are in school or training. By simply focusing on the 22% 'unemployment rate' you are overlooking most young people.

The situation is similar in the 20-24 group, the one where training and university students dominate. The reported jobless rate for this group is 8.7%, again data that ignores the 80,000 who are in education or training.

These adjustments need to be understood. That is why when you get to the 25-29 year olds suddenly the jobless rate normalises (5.3% in the December 2015 quarter).

You can't self-select for low experience, low skill, untrained and just say "we have a youth unemployment problem" and never wonder why that does not show up when they grow up.

South Auckland has rates of over 27%.
Sure there are many reasons for this - some in and out of tertiary - some families cannot afford to support their tertiary age children.
Also tech shift where quals are needed even for a basic job entry.
The other way to look at the issue is to analyse the current low skill workforce.
http://www.stuff.co.nz/auckland/local-news/north-harbour-news/68092223/U...

The perverse part of the 'youth unemployment' issue is that the more successful society is in keeping them in education, training and employment the higher the youth unemployment rate will become. That is because a jobless rate only relates to the NEETS. And they are a self-selected core, until you are left with the hardest-to-place. If you are very successful in getting 15 to 19 year olds in some sort of training scheme, those left could be a very small group with a sky-high jobless rate. It's not the rate you should focus on (although it does make a cheap headline), it is the absolute number of NEETS, which should be declining (which is what we have at present).

Yes, the problem core group is probably the old budding blue collar young workers who struggle to find a pathway.
Some good things happening in the Trades Academies, and a resurgence so in trades training.
On another front,
Many full time tertiary students struggle financially & try to work fulltime as well as fulltime study.
Then there is the issue of student debt, particularly for 1 or 2 year programmes that really just help young grads get into a starter job.

The NZD has risen over 1.4% today against the Aussie. Being our second largest trading partner it gives the RBNZ far more reason to cut not less .

And the New Zealand dollar dropped over the weekend against the GBP and USD - just because there are these fluctuations doesn't mean provide any ammunition for a change in the OCR (and looking at one currency in isolation).

The AUD makes up 21.99 percent of the TWI. Its our second largest trading partner . If Australia cuts because of deflation, what do you think will happen to the NZD . Its not a fluctuation . The CPI affects most reserve banks in how they address interest rate settings. NZD is up 15 percent against GBP in past 6 months although it accounts for little of the TWI. Yes strange things happen over ANZAC weekends

'the monthly trade surplus coming in at +$117 mln. This was smaller than the consensus of opinion looking for a surplus of +$401 mln or +$475 mln .....Last year the March surplus was +$661 mln.'

Hmmm!

Meat, animal skins, wool, milk, fruit, wine etc. all peak in the summer to autumn period, and moving logs is more difficult in the winter, so trade figures tend to deteriorate dramatically from this time of the year on.

However, over the winter Kiwis keep buying cars, fuel, clothing, imported food and trinkets. And the wealthier ones head somewhere warmer.

Therefore, more borrowing to keep the ship afloat.

Falling dairy pushes biggest trade deficit since 2009
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1162...

Foreign wholesale lenders will not hesitate to raise their funding costs to New Zealand banks - I guess domestic savers, who actually deferred consumption, will be thrown under the rate cut bus, yet again.

I reckon that deflation is on the horizon for Aussies .
The Chc rebuild , builders wages and building materials are the only costs that are going up , and when (not if) the wheels coming off our Auckland housing market , then we will also see deflation everywhere

Days to the General Election: 23
See Party Policies here. Party Lists here.