A review of things you need to know before you go home on Wednesday; improved terms of trade, house prices rise faster, mortgage market avoids winter, nervous ahead of dairy action, 90 day bill rate rises, NZD rises

A review of things you need to know before you go home on Wednesday; improved terms of trade, house prices rise faster, mortgage market avoids winter, nervous ahead of dairy action, 90 day bill rate rises, NZD rises

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

TODAY'S MORTGAGE RATE CHANGES
No changes today.

TODAY'S DEPOSIT RATE CHANGES
No changes here either. But we reviewed how term deposit rates have changed over the past year, here.

TERMS OF TRADE IMPROVE
The drop in import prices in the March quarter was largely due to falling world prices for crude oil. Import prices are now at their lowest level in nearly 30 years. With import prices falling and export prices remaining steady, New Zealand's terms of trade rose +4.4%. Infometrics noted: "A sharp plunge in the cost of oil imports and unchanged pricing for goods exports saw the merchandise terms of trade index rise. However, much of these gains are likely to reverse out again in the June quarter, as oil prices have begun pushing higher once more." New Zealand has been a 'winner' from low oil prices.

STILL RISING FAST
Investors have propelled house prices higher. The average value of homes in Auckland will pass $1m later this year if they keep rising at the current pace. Details for every New Zealand city and town are here.

OCKERS DOING GREAT, MATE
As we suggested this morning, the Q1 2016 Australian growth data has 'smashed' expectations. A massive export spurt pushed annual economic growth to its fastest pace in nearly four years, up +3.1%. Exports may have driven most of it, but this was on a base of solid consumer spending. The Aussie dollar rose on the release.

NO WINTER IN THE MORTGAGE MARKET
Home loan approvals are not sagging as we usually see heading into winter. In fact, volumes are up +6.5% and values are up +16% from the same period a year ago.

EQUITIES SAG
Although Wall Street equities finished virtually unchanged earlier today in new York, it isn't level pegging in equity markets in our time zone. Both the NZX50 and ASX200 are in negative territory, as is Hong Kong and Tokyo. Singapore and Shanghai are managing tiny gains.

DOMINANT PETROL RETAILER LOCALLY OWNED
Z Energy today took full control of Chevron New Zealand, settling the purchase of the Caltex business.

NERVOUS AHEAD OF DAIRY AUCTION
Tomorrow morning all eyes will be on the next dairy auction. But the NZX Futures market for WMP suggests we are unlikely to see another gain, even as small as the last two.

SWAP RATES ADJUST
Wholesale swap rates had another day of very few changes. The short end rose +1 bp. There were no changes for terms from 3 to 5 years. The 10 year swap rate is +2 bps higher today. NZ swap rates are here. The 90-day bank bill rate is up another +1 bp, now to 2.43% continuing the small rises we have seen for a few weeks now. They have risen more than +10 bps in the past six weeks.

NZ DOLLAR RISES
The Kiwi dollar is now at 67.9 USc, at 93.2 AUc, and 61 euro cents. The TWI-5 is now at 72. A solid push higher initially came from the better-than-expected terms of trade data out this morning, although some of that gain was eroded by the better-than-expected Aussie GDP result for Q1. Check our real-time charts here.

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End of day UTC
Source: CoinDesk

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12 Comments

'$50 Oil Doesn’t Work'

.......The modeling done in 1972 laid out the basic situation, but could not be expected to explain precisely how collapse would occur. Now that we are reaching the expected timeframe, we can see more clearly what seems to be happening. We need to be examining what is really happening, rather than tying ourselves to outdated ideas of how the economic system works, and thus, what symptoms we should expect as we approach limits. It may be that $50 per barrel oil is one of the signs that collapse is not far away.

(Sadly, although Gail Tverberg provides insightful commentary on energy and economics, she fails to fully appreciate environmental factors.)

https://ourfiniteworld.com/2016/05/31/50-oil-doesnt-work/#more-40929

I hear a lot of people claiming that the Australian economy is doing poorly but these details tell a different tale. It would appear that both Australia and NZ are doing quite well.

Some sectors of the Australian economy are doing well ( like New Zealand only some sectors) - would not like to be in mining or dairy.....

Let's wait to review the revisions after the Aussie elections.

Doom Doom we are DOOMED brigade sending the message - you are quite right - NZ and Aus doing pretty nicely thank you - despite dairy being stuffed - everything else seems to be on the up plenty of work if you want it - more building and infrastructure than we have builders for - kiwifruit, wine, tourism, social services, technology, research - all going top guns! low unemployment, lowest interest rates ever for longer, crime rates falling ........ Don't Panic!!

People are underestimating the tourism growth we will see in the next 10 years. Unfortunately we don't have a great infrastructure in place to cope with that either.

What a depressing nightmare. Our largest city crammed with new immigrants. Our best holiday spots overrun with tourists and taken over by operators. Our highways clogged with poor drivers, buses and camper vans. Talk about killing the golden goose, shooting oneself in the foot, biting ones nose off to spite ones face. Oh the irony of it all. If it wasn't so tragic it would be funny.
All for what? A few trinkets and some foreign exchange?
Are we too stupid to earn these without trashing our heritage?

Stuff your growth in your rear.

Economy doing well: It may doing well for the sellers of NZ property to the money pouring in from offshore.

However, ( referencing The Big Short) how about the couple who has bought the 900k house recently, servicing their 650k loan with NZ wages? That must be 2008 USA conditions.

will be interesting next year with deposit rates set to rise
http://www.theage.com.au/business/banking-and-finance/cba-predicts-compe...
Banks may be forced to compete more aggressively for deposits by paying savers higher interest rates ahead of new global regulations which come into force at the end of next year,
http://www.wsj.com/articles/why-your-bank-is-going-to-pay-more-for-your-...

A Reuters piece by Elias Glenn and Stanley White today points to real problems with weak demand for Asian factory manufactures .

This is a real problem , there is massive excess capacity and low demand . Sunk costs ( in factories and machinery) means production needs to be maintained and factories need to run .

The excess production will enter the markets at "clearing prices" which is deflationary in the short run

Clearing prices. Similarly non WMP followed Europe pricing (poor spring), then WMP being is what it is.

https://www.globaldairytrade.info/en/product-results/
example of SS volume in action.