Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No rate changes today. The lack of change over the past two weeks is now quite noticeable.
DEPOSIT RATE CHANGES
No changes here either.
STUCK IN A TIGHT BAND
The next dairy auction is on Wednesday morning, NZ time. The derivatives markets is suggesting the WMP price will rise +3.7%. Today's USDA monitoring also shows a rise, but a smaller +2.4%. But even with these indicated changes being adopted in the auction, WMP prices will be continuing the long 2017 trend of a very stable range of +/- US$100 around a core US$3,100/tonne anchor. The challenge will to be to break out of that band.
After a disappointing few months, the residential construction sector rebounded in August, with the highest residential consents total since June 2004. Total consents were up +11.7% compared to August 2016, underpinned by a spike in consented retirement units in Auckland. The challenge now is to find the capacity to build, even if the consent levels move higher. Outside Auckland, consent levels in Waikato, the Bay of Plenty, Hawke's Bay, and Wellington all maintained relatively high levels, while the trend lower continued in Christchurch.
Infometrics reports that the value of non-residential consents ramped up to $707 mln in August, boosted by $119 mln worth of large projects. Taking these large projects out of the equation, consent values were +25% higher than in August 2016 and helped to balance out the declines seen in previous months. As a result, the value of consents over the year to August was on par with last year, showing that underlying activity has held steady.
Auckland Council issued its Annual Report for the year to June 2017. Our largest local authority had revenue of $4.1 bln, an increase of +$424 mln, an operating surplus of $340 mln, against a prior-year surplus of $250 mln, net debt (after cash on hand) was just under $8.0 bln, an increase of +$486 mln from the prior year but actually lower than budgeted, and total assets grew to $47.4 bln, an increase of +6%. In the year ahead, the Council says it will spend another $2 bln on capital projects predominantly "to cater for population growth or to improve service levels". Through all of this, this council has held on to its AA (Stable) credit rating from Standard & Poor's, and Aa2 from Moody's. These are better ratings than our main banks, and compares with the NZ sovereign rating of AA (Stable) (or Aaa from Moody's).
YIELDS CONTINUE TO RISE
Today's $150 mln NZ Govt bond tender saw the weighted average yield accepted rise to 3.30% from 3.29%. This has risen from 2.56% in July 2017. The coverage ratio rose to 3.3x from 2.2x in the prior auction. The next NZGB tender is on October 18, 2017 for $200 mln.
ANOTHER AIA BOND COMING
Auckland International Airport has signaled that it will be issuing a new 2023 bond in the near future. Details to follow, but this will no doubt be to replace (and replenish?) their $100 mln bond that matures on October 17, 2017. They have a $2 bln capital investment program to run between now and and 2022, so their debt requirements will be rising.
A TOUGH REALITY
Someone born in 1942 is now 75 years old. The life tables updated today shows they can expect to live on average another 14 years if they are male (to 89 years) and another 15 years if they are female (to 90). If you were born later than that, these expectancies will be longer or course. Is your retirement planning able to cope with that? Spending your later years in penury is not much to look forward to. (Hint: owning a house is not a retirement plan.)
A 'SOUND FOOTING'
New Zealand’s economy and financial system remain on a sound footing despite continuing challenges in the global environment, according to the Reserve Bank’s Annual Report 2016-17 released today.
Our unique grocery price monitoring has the weekly basket now at $161.50, which is just $5.18 more than it was four years ago.
A DANGEROUS SWITCH
New Zealand households are showing more inclination to borrow for consumption, than for housing. Consumer debt rose by more than $1 bln in the year to August, the first time that sort of growth has been seen since 2005. This represents a +7.0% year-on-year growth rate and it is now a faster rate than for housing debt. Lending by banks for this type of debt is relatively restrained; it is lending by non-banks that is growing really fast, up +9.8% in the year to August. You have to go back to 2005 to find non-bank lending growth for these types of loans at today's levels. In the same period, housing debt grew by less than $15 bln, its slowest annual growth in 19 months in dollar terms. The growth rate is down to +6.7% pa, now far below the +9.2% rate we had in December 2016.
BUSINESS LOAN GROWTH HEALTHY
On the commercial side, rural debt is growing quite slowly now, up just +2.5% in the past year. However business lending is up +6.2% year-on-year and maintaining a faster-than-inflation pace we have seen consistently over the past seven years.
WHOLESALE RATES UNCHANGED
Local swap rates are essentially unchanged today after a few days of strong rises. The 90 day bank bill rate is up +1 bp, back to 1.96%. (Aussie swap rates are falling.)
NZ DOLLAR HOLDS
The Kiwi dollar is ending the week on a tame note, little changed from this time yesterday. The NZD is now 72.2 USc. On the cross rates we are holding at 92 AUc and at 61.3 euro cents The TWI-5 is now at 74.9. The bitcoin price is also going nowhere today, virtually unchanged at US$4,189.
You can now see an animation of this chart. Click on it, or click here.