A review of things you need to know before you go home on Tuesday; no rate changes, tame CPI, crazy petrol discounting, crazy house values, SFF cutback, NZX in heavy drop, swap rates jump, NZD rises

A review of things you need to know before you go home on Tuesday; no rate changes, tame CPI, crazy petrol discounting, crazy house values, SFF cutback, NZX in heavy drop, swap rates jump, NZD rises

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

TODAY'S MORTGAGE RATE CHANGES
No changes for borrowers today.

TODAY'S DEPOSIT RATE CHANGES
No changes advised for savers/investors either.

CONSUMER INFLATION STILL TAME
Inflation has dropped to +0.2% in September quarter from +0.4% in June quarter, but it was slightly above economists' expectations. The housing cost components (excluding land and other asset prices) rose +2.0% in the quarter and +6.3% for year, while transport costs were down -11% for year due to ACC and petrol. A number of economists however are calling this as the bottom - it will be all up from here they forecast. But most still expect another OCR rate cut next month.

GET READY FOR PETROL PRICE HIKES
The retail petrol price is being buffeted by a tough scramble for market share and aggressive 'discounting'. Pump discounts averaged -7c/litre for the three years to the end of 2015 and ended 2015 at -8c/litre. But since the start of 2016 this discounting has taken off and currently sites at -16c/litre. Discounted prices are now sitting -2c/litre lower than at the start of the year and this is despite a +55% rise in the cost of crude in NZ dollars over the same period. (Yes, I had to recheck that data and it is correct. At January 1, 2016 crude cost NZ$46.34/barrel while on October 7 it cost NZ$67.36/barrel.) Oil company margins have fallen -4c/L since the start of 2016 and now sit below their three year average. It is hard to see the current discounted petrol price levels staying at their low levels if crude prices stay elevated and company margins stay depressed. Petrol prices may move quite quickly from here, and have an out-sized impact on future CPI changes.

OUT OF PUFF
New car sales in Australia in September took a bit of a jump from a weak August, but they are only up +0.8% from the same month a year ago. This market is strong in South Australia and in the Northern Territories where the numbers are up a healthy +10.3% and +14.0% respectively year-on-year. But they are not too flash in Queensland, Western Australia, or Tasmania where they are retreating. Having noted all that, the absolute levels are all at about a record high. It is just that the growth has gone.

EFFICIENCY MOVE
Silver Fern Farms is "consulting with staff" about closing two meat packing plants at Mossburn and Wairoa. They say the 110 staff affected will be offered positions at other nearby facilities. It reminds me that "Job Loss" news is pretty rare these days. If you hear of any, please let us know and we will add them to our tally. One day, this trend will turn ...

SCOTT ST JOHN GETS THE GIG
Fonterra have appointed First NZ Capital CEO, Scott St John, as an independent director to their board. He is the replacement for John Waller who passed away recently. St John says he will be standing down from his role at First NZ Capital in early 2017.

A KEY COMMODITY PRICE TEST
Ahead of tomorrow's next dairy auction, prices on the dairy derivatives market are a touch firmer today, suggesting a minor rise tomorrow. Earlier in the week, prices seemed firmer for contracts further out into 2017. These

SEA OF RED
The NZX equity market is by far the worst performer in our time zone today. Almost all other markets are in higher territory, but the NZX50 is down more than -1% today after falling -1% yesterday. The main losers are Abano, Tegel, Meridian and Mercury. SkyCity is also continuing its decline, joined by Fletcher Building and Trade Me. Today, there are 72 decliners and only 19 gainers, almost 4:1.

THE BIGGEST NUMBERS IN NZ
The RBNZ published its data today for the value of residential property. The numbers are huge. Their M10 report says that as at June 2015, all this property is worth $960 bln. That is up +16.9% in a year. +16.9% seems high but not shocking, especially when you are "talking property". But in dollar terms, that is almost a rise of $400 mln per day, every day, over a full year. But it is worse than that. In the three months April to June, these values rose at almost $600 mln per day! Or in modern vernacular, that is way more than $0.5 bln per day. The New Zealand economy is truly just a housing market, plus a few cows. Nothing else comes close to 'houses".

WHOLESALE RATES JUMP
Swap rates have jumped today, getting a push higher from the CPI data release, although they were on the rise before that. That earlier rise came without support from Wall Street earlier today. They are up +4 bps for 1 year, +5 bps for 2 years, and +6 bps for three to ten year durations. The 90-day bank bill down -1 bps however to 2.13%. Yields for NZGBs have moved very little today.

NZ DOLLAR JUMPS
The Kiwi dollar has firmed strongly today. It was up modestly overnight but has risen since the CPI data release to be a whole 1c higher than at this time yesterday. The NZD/USD is now at 71.8 USc. On the cross rates, it is trading at 93.7 AUc, and is at 65.2 euro cents. The TWI-5 is now at 75.7 so it has been a broad-based gain for the Kiwi dollar. (At one point today - 11:20 am - we got up to almost touching 59 UK pence, although it has slipped a little since then, now at 58.7 UKp). Check our real-time charts here.

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USD 
NZD
End of day UTC
Source: CoinDesk

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23 Comments

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NZX50 been getting a thrashing of late. Just as well that the average citizen has relatively little exposure.

Yes luckily Mum & Dad investors stay out of silly share market. Stick to houses ..rock solid and will never go down. Remember JK has your back!

yes but a lot of investors are now holding more cash in their portfolios waiting for the right time to enter, it is amazing how quick you can get out and back in again compared to bricks and mortar.

HBL up 160% approx over the last 4.5 years.I am not one to complain especially since they are paying an alright divie as well
No doubt plenty of mums and dads got into this and are now smiling.

one off the many that has done that over the last 4 years, alas we could be heading to a bear market, good time to top off and enjoy the divies

HBL up 160% approx over the last 4.5 years.I am not one to complain especially since they are paying an alright divie as well
No doubt plenty of mums and dads got into this and are now smiling.

Who among you can deny that NZ property is too big to fail?

I'll put my hand up to that. I deny it's too big to fail.
Not saying it's going to, but lots of much bigger scenes have gone tit's up. "Big" did not help.

I don't think that it is as simple as bailing out the banks. The housing market is on such a trajectory and so far displaced from a sustainable stable state that it can exist only in two states now. One carry on rising or two crash. The minute anything starts to meaningfully address the fundamental causes of the problems, the speculative exuberance will collapse and take the market with it. There can be no middle ground and whichever happens it is going to be disastrous. The longer the government continues to do nothing the more prices will rise and the larger the crash will be when it inevitable occurs. The longer they leave it, the worse it will be and they should have bitten the bullet a long time ago.

Did you ever feel that you were in a lift that was about to fall and you weren't sure at what stage to jump out?

Re false economy: The New Zealand economy is truly just a housing market, plus a few cows. Nothing else comes close to 'houses".

David Chaston , gets my quote of the day/ month / year ' The New Zealand economy is truly just a housing market plus a few cows ' end quote. How do I insert that in the board thingy.

Perhaps to rephrase... 'The New Zealand economy is truly just a ship of fools plus a few cows and sheep'

And Dubai is a city build on sand. When oil demand starts to decrease in 10 years time it will be interesting to see what happens out there.

I believe it will have a major impact on global stability and NZ will once gain stand out to be a global safe haven. We just need to keep it a select club!

http://www.bloomberg.com/news/articles/2016-10-16/what-opec-s-oil-u-turn...

htTP://www.bloomberg.com/news/articles/2016-10-16/what-opec-s-oil-u-turn-missed...

and perhaps nothing will happen....

Cowpat: It's not my phrase. I got it from Bernard. he told me years ago. It's become more relevant as the years roll by.

Anyone know who was bringing in that palm kernel. Was all over the news a 6, but no mention of owner?.unless I missed it.

The RBNZ published its data today for the value of residential property. The numbers are huge. Their M10 report says that as at June 2015, all this property is worth $960 bln. That is up +16.9% in a year. +16.9% seems high but not shocking, especially when you are "talking property".

All part of the deliberate plan for the entitled, right?

Persistent inflation, like low interest rates, has become a tool policy-makers use to minimize the burden of debt. As a simple example, assume a household earns $50,000 a year and takes on a $500,000 mortgage. Servicing such a debt will dramatically reduce the household’s appetite to consume and their capacity to take on additional debt. Inflation, however, can change their situation. If the value of the house appreciates 10% per year, then in five years the house would have increased in value to over $800,000, rewarding our borrower with over $300,000 in equity. Even though the household’s income did not increase, the presence of additional equity in the house allows the household to borrow more and increase consumption. Read more

Central bankers have collectively lost the plot. They must raise interest rates or face their doom
http://tinyurl.com/CBs-have-lost-plot

If I was really good at pickpocketing, and could steal $60K per annum over the next 5 years and spend it into the economy, then that is a net positive contributio to the economy right? I mean all that spending has got to help the positive cashflow of local businesses, and they can borrow even more to buy their next house. Sure a bit of a temporary hit to those I stole from, but they will make it up with even more capital gains when the merchant pushed up the value of homes in their neighbourhood. Win win all around.

Jeez. There are going to be quite a few 20-30m people cities in a few years time. Will make AKL look like a hamlet.

https://www.weforum.org/agenda/2016/10/what-is-habitat-iii

Cities are such enormous wealth sinks/pumps that I doubt they will survive the collapse in complexity that the world economy is facing. They are all so heavily dependant on sucking in resources from the surrounding and/or distant environs that any sustained interruption causes rapid unwinding; sixth great extinction anyone?

Then there is this.....https://theintercept.com/.../pentagon-video-warns-of-unavoidable-dystopi......

"But it is worse than that. In the three months April to June, these values rose at almost $600 mln per day! Or in modern vernacular, that is way more than $0.5 bln per day. The New Zealand economy is truly just a housing market, plus a few cows. Nothing else comes close to 'houses".

Brilliant and still the Government sits bye and does nothing....