A review of things you need to know before you go home on Thursday; Fonterra sees early signs of milk price recovery, consumer confidence 'aplomb', RBNZ critiques itself

A review of things you need to know before you go home on Thursday; Fonterra sees early signs of milk price recovery, consumer confidence 'aplomb', RBNZ critiques itself

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

TODAY'S MORTGAGE RATE CHANGES
There were no changes today.

TODAY'S DEPOSIT RATE CHANGES
TSB Bank increased three, six, nine, 12 and 15 month term deposit rates by between 10 and 25 basis points. TSB did, however, reduce its three and four year rates by 10 basis points. See all banks' carded, or advertised, term deposit rates for one to nine months here, and for one to five years here. 

FONTERRA SEES EARLY SIGNS OF RECOVERY IN DAIRY PRICES
Fonterra will pay a further 10 cents per share of its previously announced 2015/16 forecast dividend of 40 cents per share this month as part of a move to bring forward dividend payments to help farmers. Chairman John Wilson says the dairy co-operative is "seeing early signs of the expected recovery in dairy prices." But there is no change to Fonterra's forecast earnings range or forecast total dividend of 40 cents per share for the 2016 financial year. Its end of season 2015/16 Farmgate Milk Price and total payout will be confirmed with Fonterra's annual results announcement on September 22.

AGRIHQ LIFTS MILK PRICE FORECAST BY 82C
And following this week's strong GlobalDairyTrade auctionAgriHQ has increased its 20016-17 milk price forecast by 82 cents to $5.46/kg of milksolids. AgriHQ says the GDT results contributed 10c to the lift in the milk price, with most of the change driven by the futures market. AgriHQ says, however, for this milk price to be attained the GDT prices must follow the upward price trend because if physical sales are not made at this level, then the milk price won't reach the $5.46/kgMS forecast. DairyNZ estimates the break-even milk income required for the average farmer in the current 2016/17 season is $5.05 per kg/MS.

RBNZ CRITIQUES ITS OWN FORECASTING PERFORMANCE
The Reserve Bank has released a Bulletin article evaluating its forecasting performance. The article notes that over recent years, the central bank has "under predicted" the level of the Trade Weighted Index (TWI), leading to lower-than-expected tradable and headline inflation. Non-tradable inflation has also been lower than forecast, the article adds, while forecasts for Gross Domestic Product (GDP) growth are described as having been largely unbiased. "The Bank continues to undertake research to understand these developments," the article says.

ACUTE FINANCE PLEADS NOT GUILTY
The Commerce Commission says Christchurch-based personal loan provider Acute Finance has pleaded not guilty to five charges brought under the Credit Contract and Consumer Finance Act about its credit fees and its repayment waiver. The Commission alleges that the fee Acute charged for its repayment waiver significantly exceeded its reasonable costs. The fifth charge alleges Acute made an unreasonable requirement for borrowers to purchase a repayment waiver when they took out a loan.

CONSUMER CONFIDENCE 'A PICTURE OF APLOMB'
The ANZ-Roy Morgan Consumer Confidence Index shows confidence dropped slightly in August to 117.7 from 118.2. "Our seasonally adjusted estimate showed a small rise. So we still have a picture of aplomb," ANZ chief economist Cameron Bagrie said.

AUSSIE BANKS TARGETED IN US CLASS ACTION OVER ALLEGED RATE RIGGING
ANZ, National Australia Bank and Westpac have confirmed they're among 17 banks and two international broking houses named in a class action in the US by two investment funds and an individual derivatives trader. The class action relates to bank trading and the Australian bank bill swap rate (BBSW). Says ANZ: "Since mid-2012 the Australian Securities and Investments Commission (ASIC) has been investigating the practices of 14 panel bank participants in the Australian interbank BBSW market. ANZ has rejected allegations regarding bank trading and the BBSW made in a statement of claim by ASIC in March 2016 and is vigorously defending the legal action brought by ASIC. ANZ notes there has been no allegation by ASIC of collusion between it and other institutions. ANZ will also be vigorously defending the US class action complaint." NAB also reiterated it doesn't agree with the claims brought by ASIC. Westpac denies the allegations and says it will defend them vigorously.

GOVERNMENT BOND TENDER WELL COVERED
A tender of $150 million worth of 2025 maturity bonds attracted bids of $720 million, giving a coverage ratio of 4.8x. The weighted average yield fell to 2.04% from 2.12%.

WHOLESALE INTEREST RATES DIP 
NZ swap rates responded to moves offshore, with the 2-10 swap curve down two basis points. We now have one-year through to four-year swap rates at or below 2%. NZ government bonds traded up between two to four basis points depending on the maturity. The 90 day bank bill rate remained unchanged at 2.22%.

NZ DOLLAR DOWN VERSUS AUSSIE
The NZ dollar traded higher against most of the majors, but slipped against the Australian dollar after the release of the Australian unemployment numbers came in marginally below expectations. Overnight the NZ dollar gained against the US dollar following what some are saying was a more dovish set of Fed minutes. Since the NZ dollar peaked at US73c in early afternoon trading, the Kiwi has lost some ground and at the time of writing is starting to drift back towards where it was in late morning trading. At US72.8c, the NZ dollar is slightly higher than it was this morning, it's at AU94.6c versus AU94.7c this morning, and the Trade Weighted Index (TWI)  has risen to 75.66 from 75.30 today.

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6 Comments

The Reserve Bank has released a Bulletin article evaluating its forecasting performance. The article notes that over recent years, the central bank has "under predicted" the level of the Trade Weighted Index (TWI), leading to lower-than-expected tradable and headline inflation. Non-tradable inflation has also been lower than forecast, the article adds, while forecasts for Gross Domestic Product (GDP) growth are described as having been largely unbiased. "The Bank continues to undertake research to understand these developments," the article says.

I guess the BoJ wasn't prepared for or forecasting today's eventuality:

Japan’s exports declined the most since 2009, with shipments down for a 10th consecutive month. The continued drop highlights the difficulty of kick-starting growth and pulling Japan’s economy out of the doldrums.

Key Points

Overseas shipments fell 14 percent in July from a year earlier, the Ministry of Finance said on Thursday.

The median estimate of economists surveyed by Bloomberg indicated a 13.7 percent decline.

Imports dropped 24.7 percent, leaving a trade surplus of 513.5 billion yen ($5.2 billion). Read more

Hmmm...Some Fed officials also worried that a prolonged period of very low rates could cause investors to misallocate investments or misprice risk, possibly leading to a destabilizing financial bubble and bust. Read more

Yesterdays C16 RBNZ data , should have every Auckland homeowner looking sideways. Approvals and values are going south quickly . Without continued credit growth , it all comes apart . Auckland has peaked. The banks appear to have battened the hatches, readying themselves, as listings drift upwards. Every speaking head , will tell you its all OK.

I think a lot of home owners realize the fact that it would be healthy for a pull back in house prices. We all know the current price growth in unsustainable. It would only be giving up the gains of the last year which everyone should be able to stomach in this low interest rate environment.
I know many people out there hope for a crash but the demographics don't back up that argument.

What have demographics got to do with Auckland house prices. Nothing !!!

FYI the definition of demographics includes migration. If you think migration has nothing to do with the current situation then so be it.

https://en.m.wikipedia.org/wiki/Demography

Not just immigration pumping the market. Don't forget foreign investors. Anyone, anywhere in the World can purchase up to 5ha of NZ land in any one title. (the government OIA is only involved if the land is larger than 5ha)
Houses are a no brainer for someone in Europe or China getting zero for money in the bank when we will sell them the house and rent it back and our government will even top the rent up. Maybe even some capital gains to ice the cake.