What happened Wednesday

A review of things you need to know before you go home Wednesday; no rate changes, butter makes a comeback, job vacancies grow, low lake levels, wholesale rates fall, NZD stable

19th 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
No changes here either.

LOVE THEM DAIRY FATS
In case you missed it earlier, today's dairy auction was almost a non-event. Prices changed very little and volumes were modest. Overall, prices are up +0.2% in USD terms, down -0.7% in NZD terms. WMP prices are up +0.3%. Of special note however is that the price of butter rose +3.4% to US$6,004/tonne, the first time ever it has reached that level in theses GDT auctions and is +160% higher than their low point in August 2015. Dairy fats are back in favour. Cheddar cheese also rose to their highest level since May 2014.

PLENTY OF VACANCIES
The job vacancy scene in New Zealand is still strong for jobseekers. The latest MBIE review shows the All Vacancies Index remained steady with an increase of +0.5% in June 2017, compared to +0.9% – the average monthly growth since June 2015. Over the past year, online vacancies increased by +10.6%. Vacancies increased in five out of eight industry groups. Among the biggest contributors were hospitality and tourism, and accounting, human resources, legal and administration. The biggest fall was for information technology industries. Vacancies increased in seven out of eight occupation groups. The largest increases were for machinery drivers and labourers . Vacancies increased in four out of five skill levels. The largest increases were in unskilled, followed by semi-skilled and low-skilled occupations.

LGFA BOND TENDER RESULT
Today's LGFA $145 mln bond tender showed demand weakened slightly again with a weighted average coverage ratio of 1.74x compared to 1.98x at the last auction. The weighted average yield for this issue was 3.50%, down from 3.55% last time.

LOW LAKES
Keep an eye on the how full our hydro lakes are. This is an issue because the levels are getting down there. At this time of year moisture is trapped in snowcover, but all the same, lake levels are lower than usual by a significant amount at present. Let's hope the dive in the 2017 line in this chart turns up soon. The contrast with last year is stark.

A COSTLY MISTAKE
In Australia, their Productivity Commission has reviewed the consequences of growing world protectionism for Australia. Their Report is here. They say that a full-blown return to the types of protectionism the world experienced prior to WWII would hit Australia hard with massive job losses and fast declining GDP per capita. It is a warning about the shallow appeal of simple-minded populism. It is not often actual numerical consequences are put to political movements. No doubt, those pitching for more protectionism will be willfully blind. But the rest of us needn't be.

WHOLESALE RATES STILL DROPPING
Wholesale swap rates fell by another -1 bp for the two year term, by -2 bps for the five year term, and by -4 bps for ten years. The 90 day bank bill rate is unchanged at 1.94%.

NZ DOLLAR STABLE
The Kiwi dollar unchanged from this time yesterday at 73.4 USc. On the cross rates have remained similarly stable, trading now at 92.6 AUc and at 63.6 euro cents. That puts the TWI-5 unchanged at 76.5. Bitcoin has risen today to US$2,285, up +3% from this time yesterday.

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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19 Comments

by Peri | 19th Jul 17, 4:32pm 1500438737

"At this time of year moisture is trapped in snowcover". Actually, this year this is not correct.
Snow on the hills is at the lowest end of the range (at least as reported on July 17)
https://www.meridianenergy.co.nz/about-us/our-power-stations/snow-stora…
NZ power system could be in serious trouble for a while.

by James007 | 19th Jul 17, 4:37pm 1500439039

Apparently Tiwai uses 12% of NZ Power - Maybe we need to think laterally about asking them to slow down their power use to tide us over....

by RickStrauss | 19th Jul 17, 5:37pm 1500442627

I don't think it's possible/practical to actually redistribute its power far up north anyway.

But when we stop subsidising Rio Tinto, Southland might be a great place to drive an electric car.

by Stephen Hulme | 19th Jul 17, 4:37pm 1500439060

It is not often actual numerical consequences are put to political movements.

Exactly.

Water levy would bring in $2.37 billion a year

Charging water bottling companies 10 cents per litre for New Zealand water could bring in billions of dollars in revenue for the country

The debate on who owns the water is shaping up to be one of this election’s most political issues. Read more

by kiwichas | 19th Jul 17, 5:31pm 1500442265

Would have thought the Greens might have considered the impact of all the plastic bottles by the billion

by PocketAces | 19th Jul 17, 7:38pm 1500449887

I am sure they are, I know I am

by Hardly | 19th Jul 17, 7:03pm 1500447834

I don't think "billions" is accurate for water bottlers. It might be billions if you draw in all users of water. Although I wonder if charging electricity companies is fair since they don't actually "use" the water in the same way farmers or bottling companies do. Having said that charging hydro companies would be a nice windfall tax.

by kiwichas | 19th Jul 17, 7:25pm 1500449130

the article says The country’s largest water permit grants Okuru Enterprises permission to pump 800 million litres of water out of Jackson Bay on the South Island’s West Coast for export every month, or 9.6 billion litres annually.

by PocketAces | 19th Jul 17, 7:41pm 1500450094

I don't know that that will ever get off the ground. I remember the consent for it being granted back in the early/mid nineties, plan then was to ship this water to the Middle East. It is a fair way from Tuning Fork Creek to Neils Beach and the mouth of the Arawhata River, then they plan to have some sort of reservoir at the mouth capable of holding some 160 million litres of water, then if I remember rightly they would pipe it out about 4km off shore to a waiting ship, that could well have left some greeblies from emptying its ballast water before taking on the fresh stuff. Frankly I think the cost of set up will be far too great for it to go ahead, its long been seen as pretty pie in the sky. I hope so anyway.
Edit Oh and power is going to become a real issue there before much longer, they are reliant from Haast township and some way toward Wanaka all the way down to Jackson Bay on a small turbine in the upper Turnbull River, I am damned if I know how it is coping even now, the area is not on the national grid, the line stops at Lake Paringa to the north and Makarora to the south, maybe a bit further but not much.

by Double-GZ | 19th Jul 17, 7:48pm 1500450502

Love The Craypot in Jackson Bay yummy.

by PocketAces | 19th Jul 17, 7:51pm 1500450701

I know it and all the owners it has had well, was there when it was brought over from Cromwell.

by Double-GZ | 19th Jul 17, 7:57pm 1500451063

Love their whitebait and fish & chips. I go there most summers and one of my fav things to do is to sit at the end of the Jackson Bay wharf having fish & chips enjoying the rugged West Coast ;-)

by PocketAces | 19th Jul 17, 8:00pm 1500451226

And the sandflies, no doubt

by Double-GZ | 19th Jul 17, 8:03pm 1500451401

Argh yes the sandflies! They love me lol

by PocketAces | 19th Jul 17, 8:14pm 1500452058

You develop an immunity after about 5 years there.

by KH | 19th Jul 17, 5:03pm 1500440592

Gales are forecast. Now if we had a decent amount of windmills...... And if the electricity network and market were both reformed to enable distributed generation by folk. It would all be fine.

by Stephen Hulme | 19th Jul 17, 5:06pm 1500440776

Despotism in defence of freedom.

by RickStrauss | 19th Jul 17, 8:35pm 1500453327

Buchanan was strongly influenced by both the neoliberalism of Friedrich Hayek and Ludwig von Mises, and the property supremacism of John C Calhoun, who argued in the first half of the 19th century that freedom consists of the absolute right to use your property (including your slaves) however you may wish; any institution that impinges on this right is an agent of oppression, exploiting men of property on behalf of the undeserving masses.

Interesting article.

And interesting watching NZ now...NZ has swung from where it once was using land tax and the like to break the power described here and get land into the hands of everyday "mum and dad" New Zealanders, to the point where TOP bringing up the idea of rebalancing income and land tax once more, is seen by those who benefited from the earlier as a horrible, despotic idea. How views are formed depending on what one benefits from - and in fairness, obviously on both sides (depending on one's awareness of what has come before).

It's good TOP is starting these conversations, as hopefully it'll make young people aware of how high levels of home ownership were once achieved, and what might be required again in the future.

in seeking to destroy the social security system, they would claim to be saving it, arguing that it would fail without a series of radical “reforms”. (The same argument is used by those attacking the NHS).

No surprise there. Run a government department into the ground and then hold it up as an example of why it needs to be privatised.

by RickStrauss | 19th Jul 17, 5:48pm 1500443336

They say that a full-blown return to the types of protectionism the world experienced prior to WWII would hit Australia hard with massive job losses and fast declining GDP per capita. It is a warning about the shallow appeal of simple-minded populism. It is not often actual numerical consequences are put to political movements. No doubt, those pitching for more protectionism will be willfully blind. But the rest of us needn't be.

In the end, the populists seem to have one where the traditional parties of the people have abandoned the people. E.g. Hillary, an odious candidate in a party that has long since abandoned actually delivering outcomes for average Americans. Not that voters will receive anything different from Trump - but merely to highlight a reason for the swing to populism. The Democrats could achieve a lot by actually working to benefit lower and middle class Americans, as they did in the past.

Much the same with populism in the UK and potentially here in the future. If too many of the people aren't benefiting from the status quo (or are lacking opportunity due to the status quo), they'll be ready to hear the populist voice.