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A review of things you need to know before you go home Wednesday; another mortgage rate cut, good Current Account progress, more job vacancies, dairy payout rise suggested, swaps up again, NZD up

A review of things you need to know before you go home Wednesday; another mortgage rate cut, good Current Account progress, more job vacancies, dairy payout rise suggested, swaps up again, NZD up
20th Sep 17, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
The Co-operative Bank has trimmed its 18 month, 2 and 3 year fixed rates today, taking them to levels that match most of their rivals.

DEPOSIT RATE CHANGES
No changes so far today.

LONG TERM PROGRESS
There was something of a pleasant surprise in today's Current Account data to June 30, 2017. For the full year, that fell to -$7.49 bln, an improvement of +$240 mln from the year to March 2017. In the June quarter, the smaller deficit recorded was due to a record high +$1.3 bln services surplus and a smaller primary income deficit. The overall deficit-to-GDP is now -2.8%, down from -2.9% in March. Our net external debt-to-GDP ratio also fell to -54.3%, down from -59.1% in the September 2016 quarter. (This is the key external debt metric, which ignores the internal debt we have, and the debt owed by one public agency to another public agency.) These key metrics have been moving the 'right way' for quite a while now. For example, the current-account-to-GDP ratio peaked at -7.8% in 2008 so for it to now be just -2.8% is significant progress. The net-debt-to-GDP peaked at -83.6% also in 2008 and just before the GFC, and for it to now be down to -54.3% is also big progress. Tomorrow we get the June quarter GDP data.

MORE JOB VACANCIES
Also improving is the MBIE Online Jobs Vacancies Index. It rose to 198.2, its highest level ever. Semi-skilled and unskilled jobs in the regions are where there is the greatest demand. Skilled vacancies in the main cities are a bit flat however (except in Wellington).

UPSIDE?
Dairy prices rose marginally in the latest auction, again showing the derivatives market is an uncertain predictor. Prices were up +0.9% overall, up +0.6% for WMP. At least one analyst thinks the dairy payout for the new season may start in the $7/kgMS range.

TALK ENDS, ACTION TO START
The RBNZ today started the clock for local banks (with assets of $10 bln and greater) to meet their tighter outsourcing policy. Banks now have five years to fully comply. Some banks are grumpy about this tighter policy, especially as they can't share some capacity with their Aussie parents. The RBNZ position is not new; it has been long signalled. Today they just kicked off the formal implementation process.

GET READY ...
On Saturday night we will be live blogging the election results. The interest.co.nz team, led on the night by Alex Tarrant, will cover everything you need to know as the results come in progressively over the evening. And of course, you can participate in the Comment section. Just make sure you are registered. There will be a lot to talk about. Bring popcorn. Don't forget to vote. And our Policy Comparative summaries are proving a very big hit this election.

BIDDERS CIRCLING
Australia's largest dairy company, Murray Goulburn is on the block. Chinese dairy companies are circling, with one (Yili) reported to have made a "knockout bid". There are other Chinese bidders. In addition to them, bids are also expected from Saputo, Parmalat, and local Bega Cheese. New Zealand's Fonterra and A2 Milk are also in there competing for all or parts of this dairy carcase.

JAPAN RISING AGAIN
Japan's export economy is taking off. Data out today shows booming shipments of cars and electronics in August. This activity drove up Japan’s exports at the exceptional rate of +18.1% year-on-year and far faster than analysts were expecting and the fastest pace in nearly four years. This is the ninth straight month of gains and is reinvigorating the Japanese economy.

SIXTY YEARS ON, ONE WEEK LATER
The time snow starts to thaw and grass starts to turn green in the heart of Tibetan plateau is over a week earlier now than in the 1960s, according to a new study by Chinese scientists. The researchers warned that the early arrival of springtime on the Tibetan plateau could have an impact across almost all of China. China’s three main rivers – the Yellow, Yangtze and Lancang – originate in a region 4,000 metres above sea level covered by snow and glaciers.

WHOLESALE RATES KEEP ON RISING
Local swap rates for two years are up +2 bps, the five year is up another +4 bps and the ten year is up another +3 bps today. The 90 day bank bill rate is unchanged 1.94%. Today's changes mean the two year swap has risen +10 bps in a week and is now at levels last seen in mid July. The rate curves are now their steepest in 8 weeks.

NZ DOLLAR RISES
The NZD has risen today and is now ½c higher than at this time yesterday, at 73.3 USc. On the cross rates we are at 91.4 AUc and at 61 euro cents, also both slightly higher. The TWI-5 is now at 75.2. The bitcoin price has slipped, now at US$3,885, down -1.7% on the day.

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: RBNZ
Source: RBNZ
Source: RBNZ
Source: RBNZ
Source: RBNZ
Source: RBNZ
Source: CoinDesk

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7 Comments

by  Stephen Hulme  |  20th Sep 17, 5:20pm 1505884805

Evaluating the effects of monetary policy is difficult, even in the case of conventional interest rate policy. With unconventional monetary policy, the difficulty is magnified, as the economic theory can be lacking, and there is a small amount of data available for empirical evaluation. With respect to QE, there are good reasons to be skeptical that it works as advertised, and some economists have made a good case that QE is actually detrimental.

One way of viewing QE is that it represents an asset transformation by the central bank; for example, the central bank turns long maturity government debt into short maturity reserves. Two questions then arise.

First, the fiscal authority could have done the same thing by issuing less long-maturity debt and more short-maturity government debt. So, is the case for QE that the central bank is somehow better at debt management than the fiscal authority? If so, there should be an explicit agreement between the government and the central bank concerning who possesses the power to manage the maturity structure of outstanding debt.

Second, perhaps the private sector can do a better job than the central bank in turning long-maturity debt into short-maturity debt. If that is the case, then perhaps the central bank should be permitted to issue a richer set of liabilities—circulating debt similar to Treasury bills for example, which would be superior as an asset to bank reserves. Indeed, the central banks in Switzerland and China already have the power to issue such central bank bills. Read more and more

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by  Cowpat  |  20th Sep 17, 6:19pm 1505888343

Hunan Dakang, resumed trading on the Shenzhen stock exchange, last week, after six months of 'restructuring', deciding to suspend the major issues , replying to the China securities commission multiple letters, what it proposed doing with its unused funds and announcing a non-public offering of new shares.Given the political situation , best time to rejoin the stock exchange. Business acumen was given a big tick by the OIO when Shanghai Pengxin overpaid for the Crafer farms.The El Crappo ranch (when translated ) remains in steady hands.

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by  Penguin  |  20th Sep 17, 9:15pm 1505898928

Incidentally has anyone followed the Vancouver house prices since they introduced the 15% tax for foreign owners? Everyone( including me) thought prices would fall. One year on...up 9% year on year. Mind you the money laundering rules in British Columbia are incredibly weak.

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by  PocketAces  |  21st Sep 17, 6:32am 1505932370
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by  bw  |  21st Sep 17, 7:45am 1505936744

"Fed calls end to QE. Sets October date for balance sheet reduction "
Oh Dear....

"Household Debt, relative to disposable income, that has reached the record high of 200 per cent, it's really the ability to service the debt that is the ticking time bomb. Money has become so cheap over the past 40 years that when interest rates start to rise it's a fair bet it will have more of an impact than what everyone thinks....house prices have been called overvalued is the current house price to earnings ratio of 5.8, for all capital cities, that is way higher than the historical average of, since 1980, around 3.6."

5.8?! Oh, that's for Aussie....What's our again?

http://www.afr.com/markets/equity-markets/interest-rate-rises-to-trigge…

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by  nymad  |  21st Sep 17, 7:56am 1505937365

Pfft. What are you worried about.
Wild Bill told us 'just the other day' that house affordability is better than it was in 2007.

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by  Alter Ego  |  21st Sep 17, 9:11am 1505941890

Tomorrows World.

You can buy anything with a small deposit....even a seesaw, if your credit is good and rates....appear......yes. appear low. But if you cannot meet the payments, it may come back to smack you in the pocket.

When robots take over the World, earnings will go up for some and jobs will be non-existent. so free money would have to be given to even more layabouts, not actually in Parliament, with their handouts.

I could turn Parliament into a robotic organization, then we could have no lies and bull-,pucky, just efficiency and , just the plain old truth, as my robots would never lie...nor stop working for the good of mankind.

We could all co-exist and live off the fat of the land, robotically and effectively idling away our days in regal splendor.. A bit like a Minister of the crown, with knobs on...today.

But we would have no need for Ministers, Sir Humphrey, would be just an old Joke, a bit like them all today.

We would not dig trenches for profit, nor log, nor fly around the World in idle splendor....waiting for a pipeline to be fixed by man....(From Hamilton, as Awkland would be still..Closed)...as no need,
Heaven would be here in New Zealand, Cos we would not need Workers of any sort...Robots would think first and Act accordingly. Labour would be done by Robots, in the National interest ...of course. Green I may be...stupid I ain't.

I would cover all bases...and freely allow all views to be posted...in the Interest of no interest whatsoever.

So no immigrants, no tourists, just a plain old simple life as it used to be....but as we are all a bit under the weather today,,,, no cars, no smog, no puffing about...nor applauding people for living on their big fat posteriors......Electrifying.... would be my answer.....and I would program them to all think alike.......and work for the good of the Country, not the 1% who BOUGHT IT.....like today. No pollution, no smug poll-lies...no shitty rivers....just reprogram if not Working.....like this bleeding lot ain't...Today.

Yours sincerely...
I Robot

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