What happened Wednesday

A review of things you need to know before you go home on Wednesday; mortgage rate changes, dairy prices rise, factory sales up, housing loan growth slows, Aussie growth continues, swap rates fall, NZD jumps

7th Sep 16, 3:59pm by David Chaston

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

TODAY'S MORTGAGE RATE CHANGES
AMP Home Loans (a Kiwibank white label) today dropped its 2 year fixed rate by -10 bps to 4.19%. That matches TSB Bank and is just a shade higher than SBS Bank's 4.15%. This move may be a precursor to a similar Kiwibank move but we will have to wait-and-see on that. The Co-operative Bank went the other way today, raising its 2 year offer to 4.35% from 4.29%.

TODAY'S DEPOSIT RATE CHANGES
The Co-operative Bank cut -25 bps from a range of savings accounts, taking a 1.50% offer down to 1.25% for most changes..

A GOOD START TO SPRING
As largely expected, we had a third consecutive solid gain in dairy prices today at the latest auction, up +7.7% today. Prices are now at their highest levels in about a year-and-a-half, but the surging Kiwi dollar is taking some gloss off the gains.

VOLUMES UP, STOCKS DOWN
A lift in meat and dairy manufacturing helped increase total manufacturing sales in the June 2016 quarter, Statistics New Zealand said today. The volume of total manufacturing sales rose +6.0% in the June 2016 quarter above the same period a year ago. On a value basis, the rise was only +1.2% given the Q2 struggles with dairy and meat prices. Despite this, manufacturers managed to cut their finished goods stock holdings by an impressive -8.4% year-on-year.

FAST GROWTH, BUT SLOWING
Revenue from rates and other regulatory income for local authorities rose +4.5% in the June quarter from the same period a year ago. This was actually the slowest rise since the June quarter in 2013. (Growth in this revenue flow peaked at +9.1% in June 2015.)

SLOWING LOAN GROWTH
In the week to September 2, the number of new housing loans approved was only marginally higher than the same period a year ago (an a rolling 13 week basis). Even the value of loans approved is slowing fast on the same basis. (But we should note that the RBNZ who publish this data is having doubts about its comprehensiveness and reliability. They has announced they will be discontinuing the release soon.)

A LONG GROWTH RUN
Australia's economy grew a solid +3.3% over the past year, a rates most analysts were expecting, and its fastest pace of annual growth in four years. That makes it 25 years straight without a recession. Strong government spending drove growth in the quarter, while continuing falls in private investment and a drop in net exports weighed on the result.

CONTRUCTION DOWNTURN
But things are not all going OK over the ditch. A big fall in house building pushed their entire construction sector into contraction in August. The Performance of Construction Index fell -5.0 points to 46.6 points in August, from 51.6 points in July.

FOREIGN-OWNED FARMLAND
And staying in Australia, they have released the first data from their agricultural land register. Dastardly foreigners apparently own 13.6% of all farmland there. More than 80% of investment takes place through leasehold, with 52% of foreign-owned agricultural land held by British investors. The countries with the next largest shares are the US, Netherlands, Singapore and China, which holds just 0.38% of Australia’s agricultural land. Maybe talkback radio (and comments streams on websites) will have to find a new meme.

LOTSA LOANS
Peer-to-peer personal loans platform Harmoney says it has facilitated for than $300 mln of lending and borrowing by its participants. It has got to this level in less than 2 years.

COMMERCE COMMISSION ISSUES NEW CREDIT FEE GUIDELINES
The Commerce Commission has issued updated draft guidelines it says are designed to help lenders set credit fees. They come after the resolution, in the Commission's favour, of its long running court case against Motor Trade Finance and Sportzone. The Commission says the guidelines aim to clarify how lenders should set credit fees, and provide guidelines on limitations applying to the fees lenders can charge. The Commission is calling for submissions by October 24. The Commerce Commission is responsible for enforcing the Credit Contracts and Consumer Finance Act 2003, which applies to all lending within New Zealand.

WHOLESALE RATES FALL
Following Wall Street moves overnight, local swap rates fell between -2 and -4 bps in a flattening bias. You can find our chart for all terms of swap rates here. The 90 day bank bill rate pipped back up today by +1 bp to 2.23%.

NZ DOLLAR CLIMBS & CLIMBS
Our currency is a whole 1c higher today follwing US data disappointments and another strong dairy auction. It is now at 74.3 USc. On the cross rates, it is up as well at 96.9 AUc and 66 euro cents. The Trade Weighted Index (TWI-5) is now at 77.2. Check our real-time charts here.

You can now see an animation of this chart. Click on it, or click here.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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8 Comments

by Cowpat | 7th Sep 16, 4:58pm 1473224329

The RBNZ C16 data accounts for 99 percent of all registered bank lending. How can that not be comprehensive. The data , depending on how it is read appears to be very reliable. The very fact it is about to turn negative appears to be of more concern to the RBNZ.

by Triple | 7th Sep 16, 7:00pm 1473231649

Exactly!!

by David Chaston | 7th Sep 16, 7:47pm 1473234421

There is a structural issue with C16. If you roll over your loan with your present lender, it is not a new loan and therefore it is not new lending and not included in in this data.

But if you change banks it is counted (its 'new' at the new bank). So the results are inconsistent. The series may be twisted based on seasonal and trend shifts in borrowers propensity to shift institutions. Therefore the series is not structurally sound.

That 'impending negative' may not be what is seems. Or it might have turned that way already. Who knows? This series doesn't sort it.

by Cowpat | 7th Sep 16, 8:30pm 1473237008

David, the argument was one of whether the data was comprehensive as a reason to drop the series. In years previous they were using imputation to cover the holes. The reality is that the eight reporting banks provide 94 percent of all mortgage lending, and 99 percent of all mortgages for registered banks. Totally agree , the issue with the data is one of borrowers shifting allegiance. Seaonality is not an issue,similarly holidays falling on different days etc all can be read thru if anyone takes ten minutes The reality is , the major lenders move in packs and unless there is some profound move in their markets share the structural issues are easy to distinguish. A week or so ago, I said that I personally use the C!6 data in combination with other series .The data( with caveats ) shows that Auckland mortgage size has plateaued , and structural issues aside, and the regional changes in purchases over the past year , does not account for the rate of increase in mortgage values (on 13 week ) dropping from 29 percent to 2 percent. Like most data series/ charts looking for trends/ change in trend will tell the story before it becomes a story and is often more significant than the numbers themselves. Similarly when the NZD gained 0.5 cents against the AUD at 7.20 tonight , the chart told the story.

by Cowpat | 7th Sep 16, 5:02pm 1473224548

NZD touching on 16 month highs against AUD.Its not all apart the USD.

by Stephen Hulme | 7th Sep 16, 7:27pm 1473233251

Matters in Australia are not comforting for creditors?

Australia appears a shining light in an otherwise fairly moribund developed-world economy, from glancing at its latest GDP report. But that image falters under scrutiny as the country’s powerful expansion fails to generate equivalent jobs gains and dent excess capacity.

The Reserve Bank of Australia’s actions tell us so: it’s been forecasting strengthening growth and at the same time cut interest rates twice in four months to a record-low 1.5 percent; it’s also pointed out that the traditional connection between certain levels of growth and labor-market outcomes no longer holds. Australia’s growth isn’t quite jobless, but it’s not far off.

Wednesday’s second-quarter data showed a 15.5 percent surge in public investment -- mainly state and local government spending on projects. That of course is good: infrastructure spending generates jobs and boosts productivity. But if we take New South Wales, a leader in this field, chances are that actually involved buying properties for demolition rather than road building. Moreover, resource exports from new mines accounted for another large chunk of growth.

“There’s not a lot of jobs created buying back homes or shipping tons of iron ore,” said James McIntyre, head of economic research at Macquarie Bank, who estimates more than half of the 3.3 percent annual growth came from resource export volumes.

As a result, Australia’s economy exceeded its 30-year growth average, but very little inflation was created because of near-record underemployment. While Australia’s jobless rate fell to 5.7 percent in July from 6.3 percent a year earlier, 87 percent of the roles created were part-time: a definition that covers anything from one hour a week to 35. Read more

by Cowpat | 7th Sep 16, 7:54pm 1473234863

Its all about the housing , housing , housing. Here is another, today Riksbank holds rates at -0.5 percent, as expansionary policy warranted to maintain increase in inflation. Continues to buy bonds, sees no tightening bias until at least second half 2017. Negative 0.5 percent.

by Boatman | 7th Sep 16, 5:39pm 1473226779

I saw Phil Goff's statement about Auckland's transport and traffic crisis today , and thought WTF ?

Here we go again , a bloody out-of -touch lunatic with grandiose ideas we don't need and cant afford , that will go nowhere to solve the problem .

And he wants us to all use the city's hopelessly expensive and total dysfunctional bus public transport system , which I'll bet he will never use .

He should just break the 4 big Bus Companies oligopoly stranglehold they have over us by opening ALL routes to minibus owner-driver competition and sort out the chaotic road system , synchronise the traffic lights and re-set the traffic light sequences at peak times.

The prices charged by busses are outrageous , I can travel from Greenhithe to Milford and back in my diesel car for $3 ( diesel, RUC , Depreciation and Insurance ) a distance of 7 kms which takes 20 minutes at peak times and the return bus fare is $16 and takes me nearly 2 hours all up

Why would anyone use Auckland's dysfunctional bus service ?

Goff is just an idiot , plain and simple , and if he is elected Mayor , God help us all