What happened Wednesday

A review of things you need to know before you go home on Wednesday; six key housing stories, booming tourism, fewer livestock, swap rates rise, NZD higher

11th May 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
Heretaunga Building Society cut their one and two year mortgage rates today.

TODAY'S DEPOSIT RATE CHANGES
Heretaunga Building Society cut both their 3 month and 1 year TD rates by -10 bps.

CONFIDENCE UP
It has been a day of intense housing news. First up the ASB Housing Confidence survey showed that confidence is rising everywhere - except in Auckland.

'NO LAND TAX'
Next, the Housing minister used yesterday's LINZ buyer survey data to rule out a "land tax for foreigners".

NO NEW MACRO-PRU TOOLS
Then the RBNZ released its latest Financial Stability Review, in which it noted that both the dairy sector and the housing sector pose increased risks for the New Zealand financial system. But other than talk generally about possible future actions, it did not announce any new initiatives to deal with either risks.

'SORT OUT SUPPLY'
But the RBNZ did "tell the Government" to make some meaningful progress on housing supply issues.

HIGH PRICES, HIGH VOLUMES
Then the REINZ published its April data, showing median house prices declined in some centres, including Auckland, Hamilton and Wellington. The REINZ called the lack of new housing supply a 'chronic problem'. House sales activity overall boomed in April, with volumes up +18% from a year earlier to their highest monthly level since 2007 (seasonally adjusted). This year’s early Easter, in March rather than April, might have exaggerated the market’s strength. However, taking March and April sales volumes together still shows the strongest two-month result since 2007, apart from the market’s peak in the September quarter last year.

STILL LENDING FAST
And finally on the housing front, the RBNZ released data that showed mortgage approvals last week jumped. They are back to recording a +14% gain in value over the equivalent period last year. In volume terms they are up +4.5%.

THE POWER OF A UNIQUE PRODUCT
Meanwhile, in the real economy, the tourism sector is having a fantastic run. March 'guest nights' were up a startling +12.3% above the same month a year ago. The overall average occupancy rate was the highest for a March than it has ever been. And that is despite the "high dollar". It is enabling local operators to ration-by-price, ensuring get the best return for the New Zealand experience. The tables have turned in our favour.

LOWER LIVESTOCK LOAD
And meanwhile in the rural economy, livestock numbers continue to fall. The number of dairy cattle in New Zealand fell to 6.5 million in 2015, Statistics New Zealand said today. This is the first decline after nine years of consecutive increases. The results also show that New Zealand had 29.1 million sheep, 3.5 million beef cattle, and 900,000 deer at 30 June 2015. Sheep numbers have continued to decline. There are now just over six sheep for every New Zealander, down from 13 sheep per person 20 years ago.

BIG DEBTOR
Australia owes the world more with its "net investment position" now over NZ$1 tln in deficit. (AU$944 bln in 2015.) But the same data release shows the net flow from New Zealand to Australia was NZ$5.8 bln, up +11%. Most of that flow was likely generated by the investment in our banking system.

"NO DIFFERENT TO ANYONE ELSE"
Here's something you don't see every day; the Prime Minister being kicked out of Parliament. It may be a tiresomely regular thing for WP, but not John Key - his first.

SWAP RATES RISE
Following the RBNZ FSR, wholesale rates rose strongly, up +5 or +6 bps across the whole curve. Although they suggested more macro-tools may be coming, by not announcing anything at this time, markets have taken that as a hands-off stance for housing demand. NZ swap rates are here. The 90-day bank bill rate is essentially unchanged however, up +1 bp to 2.36%.

NZ DOLLAR HIGHER
Currency markets reacted to non-action in the RBNZ FSR too, rising to add back most of the recent falls. The Kiwi dollar is now at 68 USc, 92.5 AUc, 59.8 euro cents. The TWI-5 is now at 71.4. The nine month range is under no threats yet. Check our real-time charts here.

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Source: RBNZ

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26 Comments

by sharetrader | 11th May 16, 4:05pm 1462939553

first of many things for JK, people are slowing waking up to him

by sharetrader | 11th May 16, 4:09pm 1462939748

that is a lot of cash flowing from NZ to aussie 5.8 Bn, just goes to show what harm taking on debt to buy rental properties is doing to this countries balance of payments

by dictator | 11th May 16, 4:20pm 1462940447

Just another reason for people to follow my advice on paying off their mortgage faster. It not only minimises bank profits but helps the balance of payments.

Now to buy up Australian dividend bearing shares to reverse the flow.

by Stephen Hulme | 11th May 16, 6:33pm 1462948415

Not really unless you think this is the bottom of Australian bank woes?

by dictator | 11th May 16, 6:59pm 1462949981

I wouldn't touch bank stocks especially ANZ with it's massive profits that feel like they have massive leverage. I mean buy up their productive assets. Australians really should be working for us.

by Ralph | 11th May 16, 4:15pm 1462940103

David, you seem to have overlooked some 'major news' for this week.

1. The Chinese are leading the world in finally banning erotic banana eating. Only a start and just in China, but it could be the start of something:
http://www.theguardian.com/world/2016/may/09/gone-bananas-china-bans-er…

2. This from our ever diligent neighbours, we can all sleep again at night because Australian police have foiled a nefarious "plot" to sail a seven metre dingy from Australia to Indonesia to join the Islamic state;
http://www.bbc.com/news/world-australia-36209680

by sharetrader | 11th May 16, 4:30pm 1462941043

2 just like us too PC, i would have let them go and made sure they became fish food, as you pushed them off removed the bung

by Yvil | 11th May 16, 4:15pm 1462940155

I don't think the hot real estate market poses a significant risk to the economy, seriously ! When did NZ house prices fall 25% in value or more... NEVER BEFORE. When things turn sour, stocks tumble but most people tend to sit on their houses which creates a small decline in value followed by a long time of steady values.

by sferris | 11th May 16, 4:20pm 1462940438

Terrible logic to assume its never gone down before so therefore it can't.

When has the Auckland market previously increased 20-25% a year for 4 years straight?

by Donald Ellis | 11th May 16, 4:37pm 1462941446

When shares in Equiticorp, Omnicorp and Euronational sank like stones in October 1987 it was for a very good reason. The owners of the shares knew that nobody sensible would ever want those shares again. They had no market value.

On the other hand there will be, according to Auckland Council, an excess of demand over supply for residential housing in Auckland for the next 30 years. A house owner in Auckland only needs nerves of jelly to hold on through a price plateau.

A "soft" market is not a falling market; it's not even a sign of a falling market to come while the current policy settings remain in place.

by Afewknowthetruth | 11th May 16, 5:20pm 1462944033

'On the other hand there will be, according to Auckland Council, an excess of demand over supply for residential housing in Auckland for the next 30 years.'

It pays to remember that Auckland Council officers and most councillors are firmly locked into denial of reality (insane) and totally ignore everything that will determine the future of the city.

1. Planetary meltdown WILL result in large regions of currently-occupied land in Auckland (and elsewhere) becoming inundated by rapid sea level rise. In the short time since this -flagging a multi-metre sea level rise- was published:

http://www.insurancejournal.com/news/national/2016/04/12/405089.htm

the predicament has got significantly worse:

https://ads.nipr.ac.jp/vishop/vishop-extent.html

2. The peak of global conventional oil extraction was around 2005-2008, and present economic arrangements have been propped up via low EROEI unconventional oil, which is starting to fall off the cliff:

http://crudeoilpeak.info/us-shale-oil-peak-in-2015

It is perfectly evident that there is no '30 years' because the energy required to maintain current arrangements DOES NOT EXIST and persisting with present policies rapidly exacerbates the environmental predicament.

Whether ANYONE will be living in the Auckland region 30 years from now is still open to debate; many say no one will be.

by Donald Ellis | 11th May 16, 6:07pm 1462946863

OK Auckland Council are not "the people who know". Of course not. I was using a bit of shorthand for saying that's what they think they know. And they are basing their short-medium term policies on "what they know" (assume). Those policies will prop up property prices into most peoples' planning horizons (assuming the black swan is nowhere near yet).

by Afewknowthetruth | 11th May 16, 6:21pm 1462947660

Fair comment.

Ah, black swans; they've been circling for quite a while but none have 'landed' yet, despite all the predictions from around 2005 on that one or more would! I must admit I have grown tired of the 'imminent attack on Iran', 'imminent collapse of the dollar', 'WW3 will commence this summer', 'gold is about to skyrocket' narratives that have proliferated over recent years.

'The system' sure has an amazing capacity to keep functioning in the face of multiple 'problems'.

That said, many are saying there has to be a major economic jolt before the end of 2016, simply because interest rates have been pushed so low for so long, and there is almost no yield anywhere.

Definitely a case of watch this space.

by dictator | 11th May 16, 7:12pm 1462950729

Problems will emerge but no one can predict when. When has anyone identified the tipping point that started a crash (no one). The tipping point is where the majority switch from buy to sell, more specifically dump whatever financial asset immediately. That takes a huge loss off confidence.

I do comment that problems and bubbles are there. They could be diffused or they could turn into a problem. I just don't want people to make a one way bet with their entire life savings. I've seen people pour everything into the peak of a bubble.

by rastus1 | 11th May 16, 7:14pm 1462950886

...maybe this is a reflection of where you sit? No offence intended, however for many out there (and I'd suggest far more than the press is reporting/govt admitting) the economic collapse is well and truely here. The system might be functioning for some, but for a growing number it has already collapsed.

by Afewknowthetruth | 11th May 16, 8:19pm 1462954796

Yes, collapse usually comes one person at a time, one family at a time, one community at a time etc.

If you don't happen to be that person, in that family, or in that community, things can still look fine.....until it's your turn to lose your job or home.

by Yvil | 11th May 16, 8:05pm 1462953933

What are you smoking "afewknowthetruth"

by Afewknowthetruth | 11th May 16, 8:21pm 1462954909

Truth.

What are you smoking?

by David Chaston | 12th May 16, 6:24am 1462991058

Believe those who are seeking the truth. Doubt those who find it. Andre Gide

by xelnaga | 11th May 16, 11:46pm 1462967209

Only if you subscribe to the theory that the current price stupidity is basic supply and demand nothing to do with extraordinarily loose monetary policy and reckless bank lending.

Increases in the cost of debt servicing will slaughter asset values. It's wonderful that the echo chamber have all convinced themselves that interest rates are guarenteed to stay at the zero bound for decades to come. But that's just crystal ball gazing. I wouldn't bet my life on it.

On a timescale of years big events that will completely change the financial landscape are a near certainty.

Don't over extend yourself.

by dictator | 11th May 16, 4:22pm 1462940534

People thought the same way in the US until the subprime crash. Just because it hasn't happened in New Zealand we should feel fortunate, but that doesn't mean it can't happen. It's also why RBNZ wants to keep changing lending rules, financial stability is important.

by Andrewj | 11th May 16, 4:34pm 1462941277

How the rich and powerful exploit the system.

Marian Wilkinson follows the money trail and it's worth trillions of dollars.

$12 Trillion Looted from Developing Countries and Hidden Offshore

http://www.informationclearinghouse.info/article44612.htm

by notaneconomist | 11th May 16, 6:00pm 1462946436

The trouble is the same structures are used for both legal and illegal activity........we have to look beyond what is going on and look at the reasons why....when you have a system that offers no privacy, is at the whim of those getting into power via elections, when you have carrot dangling that is about spending other people's money, when you have everyone thinking they own the resources and income of others you have a system malfunction!!!!

by Alter Ego | 11th May 16, 8:33pm 1462955633

Thanks for the link AJ.

Weird but riveting. Nails it quite well. Full marks to the Journos...Pity we do not have more of the same,,,in our neck of the woods..

British Virgin Islands, prostituting itself for all it is worth....not just NZ, Caymans.. etc...

Small fry, as yet here, but bigger fish to fry elsewhere. NZ catching on fast.

And may I say it, Honk Konk appears to coming out on top of the list. But thousands and thousands of others, too. Following the path, well trod before.

Australia seems to be almost dependent on their essential services, ironically jails and other services, taxpayer funded, but tax avoidance based.

Legal it maybe, clean it is not, laundering based on old laws, via tax havens, whilst others pay through the nose for every dollar earned, just because our Politicians and others are as blind as these trusts..

Trillions of dollars hidden, speaks volumes, but others cannot see where there next crust is coming from...

Parking their money in Tax Havens is ironically costing Awklanders and Aussies a lot, plus overcharged in the process. What a joke.

by MortgageBelt | 11th May 16, 9:35pm 1462959341

Wilson Parking , Wilson Group
An example of a faceless Global "company" with multiple shells chained back via MF to the BVI, as described in AJ's link.
But quite happy to take money from customers within a free open society. Wonder how much tax they pay in NZ?
http://www.abc.net.au/news/2016-04-04/australian-company-wilson-linked-…

by Stephen Hulme | 11th May 16, 7:35pm 1462952148

Australia owes the world more with its "net investment position" now over NZ$1 tln in deficit. (AU$944 bln in 2015.)

Hmmmm - Of the portfolio investment liabilities, debt securities accounted for $1,162.3b (38% of foreign investment in Australia).

Yes indeed , straight up tax avoidance deals. New Zealand is overwhelmed with those helping themselves to taxpayer funded services for a positive untaxed foreign interest rate return.

Of course, people say a dollar tastes like a dollar wherever it comes from, but Chalkie reckons overseas buyers of New Zealand assets tend to taint their acquisitions with a bitter tax flavour. Read more and don't forget to check our Haier behind NBR paywall.

direct investment for $735.5b (24%) Good old fashioned currency swaps which cost more to roll on maturity since the RBA is fascinated with getting the AUD down through the floor to benefit I know not whom. The importers always put the prices of necessities up to facilitate cost plus accounting returns.