A review of things you need to know before you go home Monday; mortgage and deposit rate changes; monthly economic indicators; 50 years of ASEAN; geological hazards; Korean tensions mount; CBA board changes; local rates lower; NZD stable

A review of things you need to know before you go home Monday; mortgage and deposit rate changes; monthly economic indicators; 50 years of ASEAN; geological hazards; Korean tensions mount; CBA board changes; local rates lower; NZD stable

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

MORTGAGE RATE CHANGES
BNZ has reduced its 2 yr rate by -10 bps to 4.69%.

DEPOSIT RATE CHANGES
ASB has reduced its 6 mnth rate by -15 bps to 3.35% and introduced an 8 mnth special of 3.60%.

MONTHLY ECONOMIC INDICATORS
The Monthly Economic Indicators report for August 2017 published by The Treasury shows that retail spending picked up in the June quarter and the momentum is likely to flow into September. The housing market continued to slow as prices and volumes fell in July, driven by a weaker Auckland market. Annual merchandise trade deficit narrowed, thanks to an atypical surplus in July. Producer input and output prices increased by +4.7% and +5.2% respectively as higher commodity prices impacted a number of industries. The global economy continued to expand but wage growth and inflation remain subdued and risks to the outlook remain.

50 YEARS OF ASEAN
Association of Southeast Asian Nations (ASEAN) established 50 years ago is now responsible for $15.2 bln in trade with New Zealand. Originally established with Indonesia, Malaysia, the Philippines, Singapore and Thailand, they have since added Brunei Darussalam, Cambodia, Laos, Myanmar, and Viet Nam to the list. Trade in 1967 was about $27 mln or about $251 mln in current dollars. The $15.2 bln of trade today is made up of $6.3 bln of exports and $8.9 bln of imports, with dairy products being the largest set of export goods and petroleum products being the largest set of import goods. Travel and transportation services were the largest export service and the largest import service.

GEOLOGICAL HAZARDS
The Government is set to invest $19.5 mln over four years into monitoring of geological hazards such as earthquakes, tsunamis, landslips and volcanoes. The changes will mean New Zealanders and Civil Defence are both equipped with better long-term and real-time information about natural hazards. The information will also help build infrastructure, businesses and communities in ways that are more resilient to disruption.

120 NEW SOCIAL HOUSES
Social Housing Minister Amy Adams has announced today the Government's plan to build 120 new houses, a mix of one- two- and three-bedroom apartments and townhouses, at a 1.2 hectare site on Great North Road in Waterview, Auckland. These houses will solely be used for those who need social housing assistance and are part of 34,000 new homes the Government is building in Auckland over the next ten years, as part of its Crown Building Project.

KOREAN TENSIONS MOUNT
South Korea has conducted some missile drills of its own in response to North Korea testing an advanced hydrogen bomb for a long range missile yesterday. Further tests are being planned with US troops in the region. The UN Security Council is set to meet today to discuss further sanctions that can be placed on North Korea and President Trump has asked to be briefed on all available military options.

CBA BOARD SHAKEUP
Commonwealth Bank of Australia has announced that three of its directors are set to leave and experienced banker Rob Whitfield will take up one of the seats. The changes come as a result of the recent prosecution by money laundering regulator Austrac and the prospect of action from overseas regulators.

WHOLESALE RATES LOWER
Swap rates have fallen today across the curve. The 1 yr rate is down -1 bp and the 2 yr to 10 yr rates are down -2 bps. The 90 day bank bill rate is also down -1 bp to 1.95%.

NZ DOLLAR STABLE
The NZD has been relatively stable today at 71.7 USc. On the cross rates we are lower against the AUD at just under 90.0 AUc and flat against the EUR at 60.3 euro cents. The TWI-5 is at 73.9. The bitcoin price is down to US$4,569.

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How long can this go on??

“Combined, the largest 50 countries in the world owe nearly $65 trillion. That is a staggering 90% of their combined GDPs! Such a figure is unprecedented. The majority of the 50 largest economies in the world have sovereign debt over 50% of GDP and eight have debt over 100% of GDP including two of the three largest economies in the world: the US and Japan.”

http://thesoundingline.com/sovereign-debt-crisis-interest-expenses-alrea...

Having large portions of tax revenue spent on interest and debt servicing is the ideal of these countries. It's a model we're trying again, what could possibly go wrong in the event of default?

Australia is stuck in an economic disconnect.

Business is regaining its strut and has begun investing, but debt-laden households are struggling with stagnant incomes and substantial hikes in power prices. Juggling the two is the Reserve Bank of Australia, which has kept its benchmark interest rate unchanged at a record-low 1.5 percent for the past year, and has little option but to do so again Tuesday.

Policy makers are blowing on the embers of the consumer in the hope of some sparks -- though in truth it’s the strengthening business sector that needs to boost wages. As a result, traders are pricing in virtually no chance of a rate increase this year, but see about a 50 percent chance of a quarter-point hike in June 2018.

Governor Philip Lowe summed up the predicament during testimony to lawmakers last month, noting wage growth in Australia has slowed more than productivity growth: “The consequence of that is that the share of national income that is going to capital is at a five-decade high and the share going to labor is at a five-decade low.”

That discrepancy will have to change for strong, sustained growth to emerge Down Under, given consumption accounts for more than half of gross domestic product. Read more

In simple English, the RBA is irrelevant.

Despite the tough talk, the immediate focus of the international response was expected to be on tougher economic sanctions against Pyongyang.

Hmmmm.....

"As for concrete modalities, let us wait for these discussions and talks," he said when asked whether Moscow would support possible further sanctions against North Korea. "So far, it can only be said that the existing sanctions have yielded no positive result. On the contrary, the situation still leaves much to be desired," Peskov stressed.

"I don’t think anyone knows for sure how to answer that question (of what can be done with North Korea)," he added.

He reminded that Russian President Vladimir Putin has once said that many countries, including the United States, "are indulging in this discussion remotely," as they are located thousands of miles away from the Korean Peninsula. "But, what is happening on the Korean Peninsula is happening in the direct proximity to the Russian border, so, we are no less concerned over developments there," the Kremlin spokesman stressed.

"Like others, and even more than others, we are interested in resolving this situation solely by political and diplomatic means," Peskov noted. Read more

I am sure China is thrilled.

Indeed.

The White House has warned that the US is ready to use the “full range” of capabilities at its disposal and might resort to using its nuclear arsenal against North Korea if it continues to threaten Washington or its allies. Read more