Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No rate changes today.
DEPOSIT RATE CHANGES
We have added the NZ Firefighters Credit Union to our coverage and monitoring.
'WOT, ME WORRY?'
With a hung election result, a caretaker government, and no clear idea of where New Zealand public policy is headed, and with an interim, lame-duck central bank governor now in place, you would think that financial markets would be seeing elevated risks. But it is not clear they do. They may kind of like a 'no government' situation. Or they don't see any risks in whatever colour a new government may take. Swap rates are holding today, slightly firmer. Exchange rates are only back to where they were at the beginning of the month. Sovereign CDS spreads are still in a range around 20 bps, and that isn't outside the level they have generally been all year. The only mover perhaps is that NZGB yields have trended down and today slipped another -4 bps to be well under 3% for the ten year, under 2.10% for the 2 year. But to be fair, none of these levels is outside the range they have been at for all of 2017. New Zealand public policy has lost the power to move markets
MORE PRODUCTIVITY ISSUES
It's been widely reported that we have a national productivity problem. The official 'multifactor productivity' series was last updated as at March and this is an annual measure. It shows that we have negative labour productivity and only marginally positive capital productivity. Productivity measures the rate of output for the inputs we invest. We calculate an unofficial labour productivity rate quarterly, based on real GDP outputs and actual labour hours employed in the economy (from the HLFS). The data for June 2017 confirms the negative trend. It is charted here. (See bottom of that page.) This is a situation that sometimes happens when you have full employment - the extra hard-to-find, hard-to-encourage labour getting employed is the least efficient and needs a lot of work to train up to be productive. Is that what we are suffering from now? Apart from public agencies, it is hard to believe that businesses would hire, just to get back less than the effort they expend for that extra help. We now have had two straight quarters with declining labour productivity. Production is going up, but labour hours are rising faster than the output. That may be sustainable when it can be paid for via inflation. But we don't have material inflation.
The Auckland fuel pipeline repairs were completed three days ago and aviation fuel has been delivered. Now we are advised that U/L91 fuel will flow on Friday. From then on all liquid fuel stocks will be replenished over the next ten days. No more airport cancellations are expected.
NO HELP COMING FROM OUR COUSINS
Auckland has a construction boom underway (except for affordable housing) that is soaking up construction resources. By our measure, there is more than NZ$35 bln in projects due over the next five years or so. But that pales compared with the AU$62 bln in projects underway in Sydney. We can expect no shifting of resources from there to ease our capacity problems.
TOO MUCH RAIN?
Don't complain. You could be in Australia, or NSW in particular. It's only September, but it is tinder-dry there already. The outlook is dire for their water supply, with almost record low (or non-existent rainfall in the whole month of September and record high temperatures - low 30°s on the coast and over 40° inland. It could presage a weather crisis of major proportions.
In China, data out this afternoon shows an impressive jump in industrial profits. They rose +22% in August from the same month a year ago and accelerating from the previous month in an indication economic growth remains in good heart. This is the biggest percentage jump since the January-Feb period. Profits in their textile and rail industries however were notable by their lagging nature..
WHOLESALE RATES BLIP UP
Local swap rates firmed by just +1 bp today. Update: Late in the day, swap rates rose noticeably. the two year us up +2 bps, the five year is up +3 bps and the ten year is up +4 bps. The 90 day bank bill rate is also up +1 bp and now at 1.96% and that is its highest all month. Having noted that, it is still within the very tight range we have seen for all of 2017.
NZ DOLLAR HOLDS
The NZD has held today on the positive growth data, at 73.4 USc. On the cross rates we are at 91.6 AUc and at 61.7 euro cents, also both slightly higher. The TWI-5 is now at 75.6. The bitcoin price has slipped just marginally today, now at US$3,856.
You can now see an animation of this chart. Click on it, or click here.