90 seconds at 9 am: Foxhunt focus on NZ

US economy sags; US debt ceiling issues; China says 20% of its corruption targets living in NZ; ECB unchanged; Brexit spat; NZ trusts in Malta expose; UST 10yr yield at 2.29%; oil falls, gold holds; NZ$1 = 68.7 US¢, TWI-5 = 73.5

28th Apr 17, 7:32am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news China's anti-corruption eyes are firmly on New Zealand.

But first, the Atlanta Fed's GDP Now model shows that the American economy likely expanded at just a +0.2% annualised pace in the first quarter, following lower-than-expected data on March durable goods orders and advance data for their March merchandise trade balance.

In Congress, a short-term deal to extend the debt ceiling by one week seems likely as lawmakers grapple with the deficit trajectory of the new Administration.

In China, authorities overnight released information on 22 corruption suspects who have fled overseas, including their possible current whereabouts. Of the 22, 10 are thought to be in the United States, five in Canada, four in New Zealand (all in Auckland), and one each in Australia, the Caribbean and England.

In Europe, the ECB had a policy review and said threats to the eurozone’s economic recovery are diminishing, but there are as yet few signs that inflation will settle at the target. Policy makers aren’t yet ready to consider a reduction in the stimulus they have been providing since mid-2014, despite optimism that economic growth in the Block has strengthened. Meanwhile Sweden is extending its QE program and has an unexpectedly dovish outlook.

And staying in Europe, a verbal spat between Angela Merkel and the British prime minister points to a very tough set of Brexit negotiations. The EU is apparently going to give no quarter.

New Zealand's dodgy company registration system is in the spotlight again. A Malta magistrate is investigating claims of money laundering and corruption that have put New Zealand in the middle of a global cash trail from the family of the Azerbaijan president. Money is alleged to have been paid to Maltese politicians by Panamanian companies owned by New Zealand trusts set up by the Malta Energy Minister. Trust law was changed here last year after the Panama Papers scandal. But our company registration system and the FSPR continue to provide plenty of reputation risk

In New York, the UST 10yr yield is down today and now at 2.29%.

Oil prices are still slipping lower at now just over US$49 for the US benchmark, while the Brent benchmark is now just over US$51.50 a barrel.

The gold price is up marginally at US$1,265/oz.

The New Zealand dollar is lower again today at 68.7 USc. On the cross rates the Kiwi dollar is at 92.1 AU¢ and against the euro at 63.2 euro cents. The NZ TWI-5 index is now at 73.5 a new nine month low.

If you want to catch up with all the changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

37 Comments

by sharetrader | 28th Apr 17, 7:54am 1493322857

and that is only the high ranking ones, how much dirty money was funneled into NZ from china because our AML was weak or delayed from certain sectors

by Roelof | 28th Apr 17, 9:13am 1493327626

What/who actually defines dirty money from china..??
The ruling elite..??
Chinas independent legal system...?? :)
Money that leaves the country without the Partys blessing..??
Money withheld from the Party ( CPC ) ??

by steven | 28th Apr 17, 9:53am 1493330020

Bribery is rife and the money has to go somewhere....

by Houses Overpriced | 28th Apr 17, 7:57am 1493323055

Hey, the national party invites those type of people as they bring in shit loads of money with them. They are the treasure of the economy

by mvgsmf | 28th Apr 17, 8:07am 1493323673

Wow what a surprise..(NOT) that we have a disproportionate amount of the top corruption suspects (and there must be LOADS of them..) living in this small backwater?

Shows how complicit this Govt has been by turning a blind eye to what was obvious to anyone on the street -
What's the saying? "when good men do nothing?"

Sad day for our once relatively "clean" country...

by Kakapo | 28th Apr 17, 8:11am 1493323906

'Blind eye' is putting it mildly. How about 'actively complicit'.

by bw | 28th Apr 17, 8:59am 1493326744

It's 'who you know' in both jurisdictions?
"One of China's most wanted fugitives voluntarily returned to his homeland, but is now safely back in New Zealand."
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11783174

by positivelywallstreet | 28th Apr 17, 10:12am 1493331123

That is pleasing, we can deport them all and they can seek forgiveness in China.

by redcows1 | 28th Apr 17, 8:55am 1493326505

And this has absolutely no connection to "asset price inflation a concern". None whatsoever.

by Boatman | 28th Apr 17, 9:00am 1493326857

Okay so crude is down , are we going to see a fall in inflation when the figures come out ?

by Uninterested | 28th Apr 17, 9:43am 1493329382

Yes but the NZ dollar is down a bit too...

by Rumpole | 28th Apr 17, 12:31pm 1493339480

Well we certainly havn't seen any reduction in fuel prices!!

by Stephen Hulme | 28th Apr 17, 9:02am 1493326959

... the Atlanta Fed's GDP Now model shows that the American economy likely expanded at just a +0.2% annualised pace in the first quarter,....

Uh oh, auto subprime debt issues materialise, but bank sponsors extend underwriting capacity.

Depending whose money they’re using, Wells Fargo & Co. and JPMorgan Chase & Co. either love subprime car loans or fear them.

.Both banks have grown more reluctant to make new subprime loans using money from their own balance sheets. Wells Fargo tightened its underwriting standards and slashed the volume of all loans it made to car buyers in the first quarter by 29 percent after greater numbers of borrowers fell behind on payments. JPMorgan’s consumer and community banking head Gordon Smith earlier this year said the bank had cut its new lending for subprime auto loans “dramatically.”.

.At the same time the firms are indirectly funding billions of dollars of the loans by helping companies like Santander Consumer USA Holdings Inc. borrow in the asset-backed securities market, essentially shunting money from bond investors to finance companies. Wall Street banks packaged more loans from finance companies into bonds in the first quarter than the same period last year, and Wells Fargo and JPMorgan remained two of the top underwriters of the securities. Read more

No regulator in sight.

by scarfie | 28th Apr 17, 9:20am 1493328000

There is someone I call once a year for his opinion of financial matters generally, he is someone reasonably well connected and has generally been right in his predictions for the coming year. I called him last week and he said the subprime auto loans are the space to watch. In general he refrained from making any predictions for this year, too much uncertainty about everything.

by Rumpole | 28th Apr 17, 12:34pm 1493339642

Agreed I also hear that Bankers are having some brown trousers moments over Auto Loans and repossessions will simply crash the second hand values.

by Ralph | 28th Apr 17, 2:36pm 1493347006

Agree that the the financial situation is particularly opaque at this time.

by Andy Rodgers | 28th Apr 17, 1:56pm 1493344568

I well remember over at least the last 12 months DC regularly reporting here on how strong auto sales were in the U.S. with absolutely no mention on how they were being financed.

by dictator | 28th Apr 17, 2:12pm 1493345575

Notice that the Fed hasn't slowed down purchasing bonds? There's still quantitative easing. What's really interesting is that they are intentionally packaging up toxic debts into bonds, putting them on the market and the Fed seems to be buying them. This is for mortgages that are still defaulting, car loans and potentially the solar panel loans as well which are looking like they're going bad.

Social welfare for the banks seems to point to an issue that the banks do not have the required competence or capital to operate in the financial sector.

by Ralph | 28th Apr 17, 2:39pm 1493347170

We need more money sloshing around the world system looking for a purpose like we need a hole in the head.

by russellj | 28th Apr 17, 9:19am 1493327954

And what makes us think that these guys will behave any differently just because they have moved here? NZ corruption levels are increasing, wonder why?

by mvgsmf | 28th Apr 17, 9:42am 1493329363

Haha - exactly. We have imported corruption from countries that have a different cultural acceptance of it - basically it is intertwined with everyday life, and on every level.

Just look at what we have seen in the last few years from "new arrivals"....crimes of a type and scale we've never ever seen before.

- NZ's first ever human trafficking conviction

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11710423

- Mass exploitation of immigrant workers BY OTHER IMMIGRANTS! (Essentially Modern day slavery)

http://www.stuff.co.nz/business/industries/90545529/head-of-masala-rest…-
country

- Our friend Citizen Yan and his $40M asset forfeiture to police (a joke..)

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11696431

- These charmers who have been here 11 years from China, lived the very HIGH life and never filed a tax return - guess $40M of meth buys alot of fun

http://www.nzherald.co.nz/sam-hurley/news/article.cfm?a_id=908&objectid…

Now of course we have our own homegrown criminals but we cant get rid of them, they were born here - BUT when inviting people in to our precious country shouldn't it only be the best?

Not participants of organised crime.

I'll never forgive the current Govt for opening the floodgates to all and sundry..sickening.

by two otherguys | 28th Apr 17, 2:16pm 1493345781

Possible correction re:- last Item re charmers

According to Inland Revenue records neither Yim nor Wu, who arrived in New Zealand in 1991 and 1994, have ever declared their income nor paid any tax.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11842563

by Kakapo | 28th Apr 17, 4:09pm 1493352577

IRD should be able to do them over nicely.

by two otherguys | 28th Apr 17, 2:24pm 1493346243

The worst part is ......

Talking about Money Laundering and corruption, have a clinical read of this article - it's got the lot - the works, drugs, convictions, etc

The worst part is these two are still here and have not paid 1 red cent in taxes in 20 years - never even filed tax returns - and our system of controls never once picked them up and our judicial system kept it under wraps for nearly a year

http://www.interest.co.nz/property/87238/residential-property-sales-are…

Two clandestine operations

1. Operation Fireball - an investigation into Ka Kit Yim and his assets
2. Operation Coral by the Organised Crime Agency and New Zealand Customs after the discovery of nearly 40kg of crystal meth hidden in a Chinese shipment of granite tea trays in February last year

by MikeM | 28th Apr 17, 9:40am 1493329217

Perhaps the Trump effect is now showing up in US economic data.

by steven | 28th Apr 17, 9:50am 1493329845

Good observation, but I think its a bit early to say that. Keep watching though I think its coming. By Jan next year it should be observable either way (he could always improve the economy mind you).

by Joe Public | 28th Apr 17, 9:52am 1493329964

Shame that the National Government ministers responsible for allowing this to occur can't be convicted and sent to JAIL.

They are part of the money laundering problem by failing to put the necessary safeguards in place. All Real Estate deals should need to comply with strict money laundering checks.

by Chris-M | 30th Apr 17, 2:44pm 1493520253

"failing" I think that our politicians behaviour goes well beyond a simple act of omission.
They must have hundreds of staff keeping abreast of what is going on in the world so I am sure that they are well aware of what is going on and what they are doing. So they are not just actively selling our citizenship to anybody, they are selling it to crooks and are actively resisting China's requests to deport them to face justice. This makes them complicit with the criminals in my view.
These people need to be deported back to China to face justice and if found guilty, be banned from ever returning to NZ. That goes for any body with any criminal history, we don't want them, the world is full of people breaking their necks to live here and most of those we don't need either.
You have to wonder why our politicians are being so solicitous to these crooks.

by GS | 28th Apr 17, 12:34pm 1493339683

Many small countries including our Pacific neighbors have made changes to their AML laws to include RE agents, lawyers, accountants etc. Even they know the risk these sectors pose to the financial services. There is no excuse for a advanced country like NZ to keep shuffling paper on it for over 3 years. The approach used by the government is don't know the problem so don't need to solve the problem. This is damaging our country reputation.

by Hardly | 28th Apr 17, 12:34pm 1493339689

This article is terrible.

http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11846…

Yes, Auckland doesn't have mining so won't see a mining led collapse. But, not all asset price bubbles pop because of industry specific downturns. A general economic downturn could cause prices to tumble and that always happens eventually - no economy grows forever. Also any significant rise in interest rates to the historic norm (7%) would have a severe impact. Finally, I don't agree migration can drive house prices independent of all other variables. House prices must be linked to incomes in the long term and low wage migration doesn't enable people to pay for houses. Having said that, I guess if the average person per house increases this could allow house prices to rise without incomes rising as more people are support the price of the individual asset. That might happen as more people are crammed into Auckland.

It's ridiculous to say - NZ has only had only one significant property downturn therefore it's probably not going to happen. We had a massive property crash in several countries just 10 years ago and they had significantly better economies and desirability factors in key cities than we do now. If London and New York can crash then Auckland can.

by Hardly | 28th Apr 17, 12:36pm 1493339768

Also, can someone please tell me what Auckland's primary industry produces because I honestly don't know. From where I'm sitting it looks like property speculation.

by ham n eggs | 28th Apr 17, 4:46pm 1493354808

I think its mainly producing waste ... Cities in general are just consumption hubs

by David George | 28th Apr 17, 5:33pm 1493357635

Its a services/finance/government dominated economy so doesn't really produce much that's real and with a massive export and net debt deficit as the cherry on top. Our genius government thinks that's just fine and we just need our dairy farms to produce more, dig up our national parks, slaughter what's left of our marine life and flog off our assets and she'll be sweet.

by Smalltown | 28th Apr 17, 2:45pm 1493347507

Yes once again the Herald shows its bias by presenting opinions from someone 100% investing in tbe status quo remaining the same.
Church's comment that we won' t see a collapse as our economy is broadbased is foolish. AKL is so geared to the housing boom that any hiccup will see us on par with Perth. The regional towns will fare similarly to Aussie towns such as Karratha where property has collapsed up to 75%.

by Hardly | 28th Apr 17, 4:20pm 1493353202

My concern is that these views are presented as gospel and everyday people read them and make life/investment decisions based on it.

by zorba - old | 28th Apr 17, 2:17pm 1493345847

"Finally, I don't agree migration can drive house prices independent of all other variables. House prices must be linked to incomes in the long term and low wage migration doesn't enable people to pay for houses. Having said that, I guess if the average person per house increases this could allow house prices to rise without incomes rising as more people are support the price of the individual asset. That might happen as more people are crammed into Auckland."
Correct, there must be more people cramming into an existing household, otherwise where have all the 60,000 Auckland arrivals last year gone? Living on the streets? They're certainly not buying the listings on TradeMe.

by two otherguys | 28th Apr 17, 2:50pm 1493347845

Where are they going ????

Pacifika and Asian cultures happily accept multiple families living in the one house