A review of things you need to know before you go home Tuesday; rate changes for mortgages and TDs, Govt surplus grows, Auckland housing hits skids, wholesale trade up, commodity prices up, swaps slip, NZD rises

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

MORTGAGE RATE CHANGES
BNZ cut its 2 yr special to 4.74% on Friday, and raised its three year standard rate to 5.59%.

DEPOSIT RATE CHANGES
Kiwibank trimmed -5 bps from its 9 month TD rate. SBS Bank took -10 bps off its six month rate. NZCU South has raised its 18 month rate to 4.30%.

THERE'S MONEY IN THE KITTY
The Government's surplus keeps on getting larger. Driving it for the year to April was better-than-expected corporate tax receipts. Expenses are also slightly less than forecast, and although both movements are not that large in relative terms, because they are going different ways, the surplus has got a boost to NZ$2.5 bln in OBEGAL terms. When valuation changes are included, the surplus is now an impressive NZ$11.8 bln for the ten months to April. Maybe some of the tax receipt spurt will reverse in May due to the way the timing of payment dates worked this year, but it is now almost certain the full year surpluses will be bigger than expected - leaving room for larger election 'bribes' of either "more spending' to favoured groups, or 'tax cuts' for other groups.

AU DEFICIT AFTER DEFICIT
The NZ situation is in stark contrast with across the ditch. They are holding the line, just, with their Government expenditures, by tax revenues are falling, down -2% in the March quarter. That means they are accumulating the thick end of AU$1 bln deficits per quarter

AUCKLAND HOUSING MARKET TURNS
The largest Auckland realtor reported its May sales at lowest level for that month since 2010, which the inventory of unsold homes was up 43% compared to a year ago. Barfoot & Thompson says there is now 'greater pressure for prices to fall than experienced for some years'. Meanwhile, rival Bayleys said it sold more than half the houses it auctioned last week, which is a higher percentage that others have been reporting.

COMPLETION LEVELS SLIP
Infometrics has been reviewing the latest data for building work completed in the March quarter. They report: "The volume of building work slid substantially during the March quarter as non-residential building activity fell 7.2% over the period (seasonally adjusted).  This drop knocked most of the heat out of the annual growth rate of building work, which had been running at a double-digit pace throughout 2016. Residential building work put in place slid 0.8% during the March quarter (seasonally adjusted), although activity was still up 7.7% from a year earlier." Our report is here.

THE ENGINE ROOM IS PURRING ALONG
The level of wholesale trade is rising. The value of wholesale trade sales was $23.4 bln in the March 2017 quarter, up almost +$1.2 bln or +5.3% from the same period a year ago. This rise was led by basic material wholesaling and that includes agricultural products, petroleum, metal and mineral, and timber wholesaling.

PROFITS UP, AS ANZ FLICKS THEM
UDC Finance continues its track record of strong financial performance, posting a first half-year profit after tax of $30.2 mln for its current financial year (1 October 2016 to 30 September 2017). The net profit growth of +11% on the same period from the previous financial year ($27.3 mln) was driven by low provision charges and lending growth across a range of industries. UDC has been provisionally sold to HNA-owned TIP Trailer Services out of Europe.

COMMODITIES RULE ...
ANZ's commodity price index was out today for May, and that showed yet another healthy increase, reinforcing the strong terms of trade data we saw last week. ANZ's Index lifted to be +26% higher than the same time last year. There was broad-based strength across most components, but the horticulture sector led the charge, rising +12.1% month-on-month as more new-season fruit hit markets. In NZD terms, the index rose +4.0% m/m and is +22.3% above the same time last year. The NZD index is now just 5% below the all-time peak registered in March 2011.

... BUT DAIRY PRICES MAY BREAK THE TREND
There is another dairy auction overnight. The last five have brought consecutive rises, even though each was less than +4% per event. But tomorrow may well break that string; futures pricing suggests that WMP prices could fall by about -4%, possibly a little more. WMP accounts for about half the product auctioned. About a quarter is SMP. This is where there may be better prices, possibly as much as +10% higher than the last auction, according to futures pricing indications.

NO POLITICAL WILL OR CAPACITY
Believe it or not, the Aussie current account deficit is running lower than their public government deficits. It is an odd situation, and just reinforces what can happen when governments won't or can't reform their financial situation. Uncompromising politics that won't tolerate any tough-but-necessary decisions can lead to a dead-end trap.

MINIMUMS RISE
Australia's lowest-paid workers will get a $22-a-week pay rise after their Fair Work Commission lifted the national minimum wage to AU$694.90 per week. (NZ$725 per week.) New Zealand's minimum wage for an adult is NZ$630 per week.

RESPONSIBLE LENDING CODE UPDATED
The fees section of the Responsible Lending Code has been updated to reflect Supreme Court decisions in the long running Commerce Commission versus Sportzone court case. The practical outcome means that under consumer credit contracts, lenders are only permitted to recover their costs in the fees they charge customers where those costs are closely connected to the activity for which the fee is charged. 

WHOLESALE RATES SLIP
Local swaps curve have fallen -1 bp across the board today, reversing some of the rise late last week. The 90 day bank bill rate is also -1 bps lower and now at 1.94%.

NZ DOLLAR RISES AGAINST WEAKER GREENBACK
NZD is noticeably stronger against the American currency at 71.5 USc. It was last at this level in late February. But it is not only against the USD that we are rising. On the crosses we are at 95.8 AUc, and at 63.5 euro cents. The TWI-5 is now at 75.7.

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