Here's my summary of the key events overnight that affect New Zealand, with news European Central Bank (ECB) officials are sitting tight in the wake of Brexit.
The just-released minutes from the bank’s July policy meeting show policy makers are ready to launch fresh stimulus as soon as next month, but are waiting to see just how much the Brexit will rock the economy. The ECB’s president has urged investors to see the full effects of it recent policy measures, which include subzero interest rates, bond purchases and cheap loans for banks.
Over to the US, New York Fed President William Dudley is talking up the health of the jobs market, saying a rate hike next month is possible. He says two months of jobs growth has allayed concerns the market is stalling. He also points to the long-awaited return to middle-wage employment. Fed officials took a ‘wait and see’ approach to rates at their July meeting.
Manufacturing activity in the US is looking pretty average. The Philadelphia Fed’s index for business activity in the mid-Atlantic region has rebounded into positive territory in August for the third time this year. Yet its employment index has dropped to a seven-year low, while its new orders index has sunk. The Philly Fed report is a precursor to the release of US’s national manufacturing data.
Australia’s outgoing Reserve Bank governor has issued a warning on foreign investment. Glenn Stevens says Australia should welcome foreign capital that builds new assets, but should be careful about selling existing assets that don’t create new capital. He warns the flow of foreign cash into infrastructure, commercial property, shares and other assets are pushing up the value of the Australian dollar, countering the RBA’s rate cuts.
The UST 10yr yield has fallen right back to 1.54%.
The US benchmark oil price has risen again overnight to US$48/barrel, while the Brent benchmark is just below US$51/barrel.
The gold price is up to US$1,350/oz.
The New Zealand dollar has strengthened since this time yesterday to 72.9 US¢, 94.8 AU¢ and 64.2 euro cents. The TWI-5 index is up to 75.5.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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21 Comments
Indeed. It appears that he can only utter such blasphemy when he's about to leave the building. I suspect Wheeler might want to express similar sentiments. Swapping Kiwi ownership for overseas ownership of our non productive assets does exactly what for our economy? We'll figure it out eventually by which time there won't be much left of Godzone. No doubt comments like these will be deemed racist, xenophobic... yak yak yakkity yak.
Exactly the 13billion foreign buyers (students + Temp visa) are spending on existing NZ housing is just pushing up the asset prices especially when supply is tight. Stamp duty 15% on existing home purchases should do the trick.
These are the buyers pushing up NZ house prices. Foreign Student Parents sending cash so their children can buy houses.
http://www.cbc.ca/news/canada/british-columbia/property-transfer-tax-ch…
I wouldn't have an issue if supply was high and prices were not 1 million dollars , the highest income to loan ratios in the world. Given these circumstances, the government have a responsibility to put their citizens and permanent residents first. (as Canada, Singapore & Australia have done)
Looks like the tax has started to tame Vancouver
http://globalnews.ca/news/2887766/data-is-the-metro-vancouver-real-esta…
According to the website, the City of Vancouver currently has an average home price of $1.1 million, down 20.7 per cent over the last 28 days and down 24.5 per cent over the last three months.
The average detached home is $2.6 million, down seven per cent compared to three months ago.
http://www.huffingtonpost.ca/2016/08/17/vancouver-housing-crash_n_11342…
She'd be concerned if prices were to keep growing for another couple of years. Affordability would worsen, and people could end up racking up more debt to buy more expensive housing.
Yes totally agree with you Joe. It is crazy to let this situation with foreign buyers to continue with them massively over inflating our property market by buying up our existing homes and land.
We all know that if we wanted to reduce our Auckland property prices, all we would need to do is restrict foreign capital. I remember how property prices dropped here by -8% with the IRD requirements putting a temporary hold on foreign buyers. So the bubble with continue to inflate as long as nothing is don in regards to overseas foreign investors.
Yes and that IRD price drop was probably because the foreign students were scrambling to get IRD numbers. (assuming an IRD number is not required for foreign students who don't work)
This is good could be describing NZ
http://vancouversun.com/opinion/columnists/douglas-todd-mixed-motives-f…
"Although B.C.’s Liberal government continues to refuse to provide the information that would allow a researcher to ascertain whether any house buyer, including Tian Yu Zhou, the new owner of the $31-million mansion, is a foreign student, migration specialists say that’s likely the case."
SOUNDS LIKE NATIONAL & LINZ
"Bloomberg News discovered that Canada Mortgage & Housing Corp., the Crown corporation that tracks housing data, is especially interested in how the red-hot housing markets in Toronto and Vancouver are partly fuelled by foreign students, some of whom live in multi-million-dollar homes near the UBC campus."
"Yan’s research showed that, of all self-declared occupations among owners of the high-priced homes in the study, 36 per cent were housewives or students with little income."
"One bonus of getting children into Canada as foreign students, Kurland says, is that those who are able can become players in real-estate investment. Students are being declared as property owners of Vancouver residential property because they aid in international money transfers, Kurland said.
Foreign students have the advantage of being able to appear as residents of Canada for income tax purposes, even as their declared earned income would be extremely low.
As principal resident of a dwelling, Kurland said, a foreign student does not have to pay capital gains when his or her home is sold at a profit. “Then, out of the goodness of their heart, they can send the profit back to their uncle in China,” Kurland said with irony."
The new tax means 15% tax is now required by foreign students & temp visa workers in Vancouver. WELL DONE !
Glenn Stevens says Australia should welcome foreign capital that builds new assets, but should be careful about selling existing assets that don’t create new capital. He warns the flow of foreign cash into infrastructure, commercial property, shares and other assets are pushing up the value of the Australian dollar, countering the RBA’s rate cuts.
Kinda makes you wonder....when someone high up in the food chain states the, almost, inanely obvious. .. Whats' going on up there...???
I thought this guys were super smart ...and would have known all this from the get go. (In the same way we know the sun will rise tomorrow ). ... And from that, they would have formulated good , first principled, based policy...... one would think..
Same problem in Japan.
Heightened investor demand is exacerbating the already dwindling supply of bonds in the market. Japanese investors are being forced to keep money at home despite record-low yields because of rising hedging costs that by one measure stands at the highest since 2009. Meanwhile, dollar-wielding global investors are able to use favorable cross-currency basis-swap rates to turn Japan’s 10-year yield into a fixed coupon equivalent of 2.6 percent.
Overseas investors bought a net 994 billion yen ($8.9 billion) in Japanese bonds during the week ended March 11, the most in a month, according to Ministry of Finance data on Thursday. Read more and more
And yet ....“free trade” has become under purely financialized terms, a long-term benefit to no one. Read more
And that is very true ... and only proves that their hands are tied when in power and holding office as there are other factors preventing them from taking actions ( most of which are unknown to the public) ... the "foreigners" must (do) have a lot of strings to pull which can make life very tough for an executive in power... only when they are liberated from that pressure they come out and start talking sensibly ... isn't that the case with every exec or president leaving office?
National is so sold out that is unable to think logically what is correct for NZ.
They have put themselves in a position that even if they now want, will not be able to act as have just become a puppet and at their mercy.
Any government would have acted promptly and are acting all over the world but ours and is just another example of how helpless our government is to deal with any situation without being biased and looking after Chinese interest than ours
http://www.msn.com/en-nz/news/national/massive-oversupply-of-chinese-st…
Whenever any situation arises the government should think how will our country feel and what we should do to help but instead their immediate reaction is what will their Asian master feel and how to help them to prevent their fury.
Is this the type of government we voted for. Everyone has to think.
"New Zealand homeowners with loans worth more than $3 billion have fallen behind on their mortgage."
Ok not huge at the moment however should NZ ever have a recession this could get interesting especially as "There is almost $225b in active home loans at the moment."
http://www.stuff.co.nz/business/money/83262206/mortgage-arrears-down-bu…
Seeing as the prices had risen 32% on the year in Vancouver that only takes them back to a little less than last year's prices....great start
Auckland's average could fall to 700k and it would still feel expensive relative to what people earn. The long term effects will not be good for nz if it carries on like this.
Re RBA governor comments. So it is Ok for foreigners to invest in new buildings and projects - meaning : pumping money in the economy not by buying existing assets but creating new ones - Cool! isn't that going to create inflation ? Yes it will .... isn't that what we don't want as it will push the dollar higher( hurting exports) and eventually pushes all existing asset prices higher including houses? ... I think it certainly will .... BTW I am against selling assets!!
So the end result is almost the same ... we are entertaining this idea just because we have very low inflation at the moment and some extra is welcome now .. but Inflation is a dirty word - right? .... what will happen when we get there ( 2% - 3% ) ?... so will the rest of the world by then -- Will we then call that party to an end and kick "foreign" investors out? or keep increasing interest rates until we choke our economy again? we are going in circles, I say ... and we just complain when it is not working for us because the world's economy is turning around slower than we would have liked , and this time the money is flowing South towards us ... the money in the world is simply following the Communicating Vessels theory .. the world is connected ... or isn't it not?
I stand to be corrected.
Those economists and central bankers wanting a dose of inflation are like a turkey wanting Christmas - be careful what they wish for.
Record low borrowing costs haven’t led to a surge in investment and spending that would lead to higher prices. That’s the kind of empirical evidence that should produce a reconsideration of what Rothschild Investment Trust Chairman Jacob Rothschild this week called “the greatest experiment in monetary policy in the history of the world.”
https://www.bloomberg.com/view/articles/2016-08-18/a-physics-lesson-for…
We are in an epic bond bubble globally where higher inflation would be kryptonite. With the bond monster central bankers have created, the last thing they should want is higher inflation.
With $13 trillion of negative yielding bonds, and another $10 trillion plus yielding between zero and 1 percent, higher inflation would be the needle that pricks this massive bond bubble. Thus, we can see the dangerous loop that central bankers have put themselves in.
They slash and burn rates in order to generate higher inflation but then create the powder keg of danger if they are actually successful one day. Unfortunately, I believe they will be.
http://www.cnbc.com/2016/08/16/the-idea-of-the-fed-raising-the-inflatio…
Winston should get more list members lined up, as many disgruntled national voters will not vote for the leftist loony options available, and they have a solid record of actually turning up on poling day. The oldies who also regularly vote are already paid up Winston members.
NZ farms and property ponzi are carrying a very very large exposure if things go south. They should pray that the American banking masters are not about to unleash some sort of global asset pump and dump scam on us all. Add in Winston slamming the door on Chinese money offering cash parachutes, I'm picking short odds on a ponzi exiting stampede at some stage.
Will be interesting to see how many allow their greed to override logic by choosing not to deleverage between now and the next election.
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