What happened Tuesday

A review of things you need to know before you go home Tuesday; inflation stable, retail sales trends, big infrastructure boost, wholesale rates slip, NZD dips, bitcoin drops

11th Jul 17, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
There are no changes to report today.

DEPOSIT RATE CHANGES
None here either.

KEEP AN EYE ON RENTS
ANZ's unofficial monthly CPI tracking found little change in June, although they did note rents were soft. Their survey says inflation is running at +2.1% pa, and very much in line with Stats NZ's official annual rate of +2.2% in the March 2017 quarter.

GOOD TIME CHARLIES
Stats NZ tracks spending via electronic card transactions as a proxy for retail sales, and the June data revealed little change from May. But that hid some notable elements. Hospitality spending was up +2.4% from May while spending on petrol (and other fuels) was down -3.2%. The increased spending on hospitality could be largely a result of the influx of British and Irish Lions fans. On a year-on-year basis, hospitality spending is up +9.8% while fuels spending is flat, up just +0.7%. Actually fast rising spending on hospitality has been the story for a few years now. The level in June 2017 is actually +27% higher than it was two years ago, and +48% more than four years ago.

INFRASTRUCTURE FUNDING BOOST
The Government and Auckland Council announced a project to spend $300 mln from the Housing Infrastructure Fund to support the construction of 10,500 new homes in Whenuapai and Redhills, Auckland. The new money will go on wastewater, stormwater and transport projects in the two areas. No start or completion target dates were announced. In Hamilton, the Government and the HCC announced $272 mln of similar funding to support 3,700 new homes in a ten year project. Announcements for another three councils are in the pipeline, for Tauranga, Waikato, and Queenstown. All up, $1 bln in such projects are announced today, claimed to support the construction of 60,000 new homes.

PULLING BACK
Lending to property investors fell by -1.5% in May in Australia.

REAL STRESS
Watch the Canadians for how homeowners sweat rising interest rates. The Bank of Canada is widely expected to raise their benchmark rate on Thursday (NZ time) from 0.5% to 0.75% - or will it be to 1.00%? Apparently 48% of home owners with a mortgage are worried about this increase and more than a quarter agree they are in over their heads. With rates this low, how could so many people have gotten it so wrong? Affordability is all about the monthly mortgage payment, little about the loan amount or the house price. It is amazing that one quarter of Canadian home owners feel they can't handle a +0.25% increase.

WHOLESALE RATES SLIP
Wholesale swap rates are down -2 bps across the board. The 90 day bank bill rate is unchanged at 1.98%. (In Australia, starting from much lower levels, their swap rates are up +1 bp across the board. The US benchmark rates are unchanged. Those for China are too, but the ten year took a +3 bps spike a few hours ago.

NZ DOLLAR DOWN
The Kiwi dollar is lower today at 72.4 USc. On the cross rates we are a lower again against the Aussie, trading now at 95.1 AUc and at 63.6 euro cents. That leaves the TWI-5 at 76.5. Bitcoin is sharply lower on the day, down -7.1% from this time yesterday to US$2,345 and near a one-month low. Actually, exactly one month ago today, bitcoin was over US$3,000.

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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21 Comments

by RichMuhlach | 11th Jul 17, 4:18pm 1499746702

COMMENTS SECTION
Double-GZ was quoted yesterday saying "A good illustration would be my rental in Mission Bay. I'm currently looking for tenants, very close to Eastridge shopping centre and public transport. I am expecting it to be snapped up within the next 2-3 days".

However, earlier today, retracted his/her statement with the following statement: "That is not my investment, I was just posting it as a rental example for Mission Bay." says the alleged Real Estate Agent from B&T.

Furthermore, the Remuera resident reiterated that "It was meant to be just an example. I got carried away and put myself in the landlord position, a bit like telling a story. I don't own this property in any way shape or form. Glad I can now clarify." but our dear readers begged to differ. He/she responded "It is not mine, and I have clarified. There's no point to keep digging now and we should put this to an end." says Double-GZ.

When pressed for further comment, Double-GZ said "OMG this is so wrong and out of whack. Please give me a break thank you."

by two otherguys | 11th Jul 17, 4:35pm 1499747728

DGZ has disappeared and Zachary Smith has vanished in sympathy

by Cowpat | 11th Jul 17, 4:42pm 1499748165

I want to see a reply from Jafalad who sold his rental property in Onehunga, leaking roof and all at auction on Sunday. Nice photo by the way of Jafalad, . If 4/28 Tawa Rd was indeed the property questions could be asked .

by Smalltown | 11th Jul 17, 5:10pm 1499749802

RichM - You'd be rattled too if you were a RE agent , give the poor guy a break.
All his chinese buyers are hiding under the bed from the Beijing Goon squad and the so called Kiwi investspeculators can't get a loan from the Ozzie banks. RE agents only friend is the billshitter and he is having a quiet time after an energetic fortnight.

by RichMuhlach | 11th Jul 17, 6:05pm 1499753118

I know Smalltown, I really should lay off. He/she's probably all stressed out with the prospect of job/income loss, I forget trolls are people too.

by Yvil | 11th Jul 17, 7:59pm 1499759976

Children, stop arguing and let's get back to what this site should be for, the exchange of information for the good of all.

by Stephen Hulme | 11th Jul 17, 4:32pm 1499747543

Inter-American Development Bank (IADB) (AAA/Aaa) launched a minimum NZ$100 million (US$72.5 million) seven-year Kauri bond on 11 July. According to lead managers ANZ and Commonwealth Bank of Australia, books are expected to close during the afternoon of 12 July. Read more

Did our banks just write up both sides of their balance sheets to underwrite this issue in preparation to hedge /swap foreign funding for domestic NZD mortgage funding?

by Cowpat | 11th Jul 17, 4:35pm 1499747756

ANZ. " Inflation signals remain benign. Even in an area where we are expecting to see upward movement , such as rents (if the so called housing shortage thesis has substance) we are not. " We are not seeing the anecdotes of skyrocketing rents in some regions. Has property speculation/investment risen at such an explosive rate( as seen thru the household estimates) that the displacement rate simply provided sufficient rental accommodation,that even though investors are willing to pay ever greater amounts to acquire the asset they are unable to increase their incomes

by Stephen Hulme | 11th Jul 17, 4:51pm 1499748663

Australia’s central bank is relying on an obscure piece of legislation dating back to World War II to justify keeping interest rates steady: its rarely-discussed third objective of monetary policy.

Traditionally, the Reserve Bank of Australia is seen as having a dual mandate of maintaining stability of the currency and full employment. Both goals support its aim to control inflation over the medium-term.

But there’s another goal that’s lesser known and somewhat less defined: the economic prosperity and welfare of the people of Australia. That’s allowed the central bank to keep the benchmark rate at a record low 1.5 percent for 11 months as it weighs the impact of a rate move on a financially-stretched population against an array of mixed economic signals. Read more [my added emphasis]

A mandate that blatantly discriminates against the financial well-being of those forsaking consumption today to save for the future. Who empowered the RBA to pick society's winners.

by bw | 11th Jul 17, 7:53pm 1499759584

"Yet in the U.S., the jobless rate is below full employment, and wage growth still remains tepid -- as it does in the tight labor markets of Germany, U.K. and Japan. So it’s possible Australia faces a prolonged period of weak wage gains and, in turn, below-target inflation."

(from your link)
Winners? We're ALL going to be losers, one way or another.

by dictator | 11th Jul 17, 9:01pm 1499763691

To protect the economic prosperity and welfare of Australia would involve increasing interest rates. Oh well Australia never wanted real wealth anyway.

by albinodog | 11th Jul 17, 6:24pm 1499754244

Would not be surprised if either Peter Lee, Gary Lin or Ron Foy Fong was a poster on here.

by Double-GZ | 11th Jul 17, 6:29pm 1499754544

Who are these people with Chinese sounding surnames?

by RickStrauss | 11th Jul 17, 9:12pm 1499764346

Some guy from Fongovations?

by CJ099 | 11th Jul 17, 6:47pm 1499755670

Vancouver's detached property market is starting to wobble now.

Quote: Vancouver real estate may be booming, but someone forgot to tell detached buyers.
Detached sales across the REBGV showed a significant decline. June saw 1,312 detached sales, a 15.62% decline year-over-year. Month-over-month showed a similar decline, dropping 15.1% from May.

Article Better Dwelling: Vancouver Detached Real Estate Is Rising Below The Rate of Inflation
https://betterdwelling.com/city/vancouver/vancouver-detached-real-estat…

by Yvil | 11th Jul 17, 8:07pm 1499760432

"watch the Canadians for how homeowners sweat rising interest rates. the bank of Canada is widely expected to raise their benchmark rate on Thursday from 0.5% to 0.75%"

That represents a 50% increase in interest rates, luckily a 0.25% increase in NZ would "only" represent 14% increase on the current 1.75%

by dictator | 11th Jul 17, 8:09pm 1499760555

Fourteen per cent of respondents to Manulife's survey said they wouldn't be able to withstand any increase in their monthly payments, while 38 per cent of those polled said they could withstand a payment hike of between one and five per cent before having difficulty. An additional 20 per cent said they could stomach a hike of between six and 10 per cent before feeling the pinch. Add it all up, and that means 72 per cent of homeowners polled couldn't withstand a hike of just 10 per cent from their current record lows.

http://www.cbc.ca/news/business/manulife-housing-debt-1.4127243

The article is from May but Canada is balanced on a knife edge. I don't know how we're positioned here but I'd be concerned if we're in the same boat. Personally I think we have more leeway with interest rates but that's because we didn't hit 3% card rates.

by Boatman | 11th Jul 17, 8:40pm 1499762405

NZ Herald has just reported that the teacher shortfall in Auckland is the worst ever .

What did the Government expect ?

There is no way any young person on a teachers salary can have anything remotely like a decent standard of living in Auckland , where the rent for a ice cold un - insulated damp converted garage is anything up to $490 a week .

Even Wellington and Tauranga are too expensive now

My daughter Emily was until recently on the Novopay payroll and her earnings were an insult , she has now taken a post at a Private School and will be leaving for Australia in due course when she completes her registration process and has paid off her student loan (with our help) .

Regrettably there is no future here for her as a teacher

At least in Sydney she can afford to rent an apartment on a teachers pay .

Its now clear that Labour's much touted affordable housing plan for young folk is a pie beyond the furthest cloud .

by dictator | 11th Jul 17, 8:49pm 1499762973

Sorry to hear that she's planning on leaving Boatman. In the past people left because jobs weren't so great, now it's the cost of housing. I don't think that a human right like shelter should be so financially crippling that the cost puts you into poverty.

by RickStrauss | 11th Jul 17, 9:19pm 1499764788

It does seem ridiculous, doesn't it...but yeah, your daughter simply can't live reasonably in Auckland as a teacher (unless she marries someone rich...back to the 19th century we head). Unfortunately we seem to have a government that is choosing between enriching their investor voter bloc vs. creating reasonable outcomes for up and coming Kiwis too. Things are way out of balance at the moment.

Do we have an alternative with a better chance of working than government build activity such as has been undertaken in NZ's past? Dunno. If we could apply the Pharmac model and invite wide tenders for building materials, leverage scale, invite workers without bribing with residency (like how Olympic villages get built).

What other alternatives? Maybe only tax treatment changes a la TOP - to shift the burden off incomes and on to land somewhat more, balancing things out a bit...that would at least remove the demand in the market that is solely for speculative investment and leave the demand that's for homes to live in.

by Hardly | 11th Jul 17, 10:16pm 1499768183

It is an indictment that teachers can't afford to live. We - soceity and government - have allowed living costs to overwhelm wage costs simply because we can't organise ourselves to build houses. Now teachers, police, fireman, doctors, nurses, etc, etc, will all need pay increases to make ends meat and then everyone will have a pay increase so everything will be back to where it started. That is inflation for you. And if that happens, watch out for higher interest rates. The alternative is that we just don't have teachers anymore.