A review of things you need to know before you go home on Friday; no rate changes, FHB affordability improves, retail strong, regional slush fund launched, Kiwibank's results tank, swaps slip, NZD stable

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

MORTGAGE RATE CHANGES
No rate changes to report today.

TERM DEPOSIT RATE CHANGES
None here either.

SHARP IMPROVEMENT
A sharp fall in first quartile house prices, including in Auckland, is changing the game for first home buyers. While these have always been affordable in most of New Zealand, affordability is returning to significant parts of Auckland as well. Low interest rates are keeping repayment amounts down and household debt servicing costs remain accessible for nearly everyone - unless you live on Auckland's North Shore, Rodney or in the leafy central suburbs. Parts of Waitakere are also still considered unaffordable although the improvements are such that this area is on the cusp of 'affordable' for the first time since early 2015. And then of course there is Queenstown in which unaffordability has reached a decade high.

A STRONG RETAIL SECTOR
Retail sales to December came in stronger than analysts were expecting and the prior quarter was revised higher. They were up +6.3% from the same quarter in 2016 and for all of 2017 they were up +6.7% over calendar 2016. So there was some softening off at the end of the year. The big year-on-year gainers in the December quarter were "specialised food" (+12.0%), liquor (+15.3%), "non-store and commission-based selling" (+16.6%), "clothing, footwear and accessories" (+10.0%), and "food and beverage services" (+10.7%). Areas at the other end include "recreational goods" (-1.5%) and "department stores" (+1.2%). Supermarket and Fuel sales grew +5.5% and +5.3% respectively.

A SLIGHT ADVANTAGE
Interestingly, BNZ's review of online sales shows retail sales for that sector only growing at +7% year-on-year. And it confirms that local online retailers hold about a 55% share which has been pretty consistent for more than 2½ years now.

A DASHBOARD UPDATE
The Reserve Bank has confirmed its previously signalled policy decision on the Dashboard approach for quarterly disclosures for locally incorporated banks. Work to implement the Dashboard has commenced and they aim to publish the first Dashboard in late May 2018 with data from Q1 2018. Corresponding changes to bank disclosure requirements take effect for the same reporting date, namely 31 March 2018.

PORK-BARREL NZ STYLE
The first $60 mln of the Government’s $3 bln provincial investment fund has had details released. When this sort of "investment" happens in other countries, we see it as pork-barrel politics. Here however it is welcomed by the beneficiaries, and the payers remain silent. This fund was a price to get anointed by NZ First. There is a heavy focus on rail 'investment' which unfortunately will just embed unprofitable operations by KiwiRail and mean KiwiRail's losses will be larger, and the 'investment' will never be paid back. But that is the point of a pork-barrel.

PERFORMANCE FAILURE
Another of these publicly owned "Kiwi"-enterprise organisations reported its results today and they were pretty poor. In the year to December 2017, Kiwibank earned just $32 mln after tax. That is the lowest annual rate in more than a decade. (Their half year tax paid profit to December 2017 was $21 mln.) Kiwibank was formed in 2002 and has never succeeded in capturing profits from the Aussie banks, nor paid much tax. It has been a very weak performer with excessively high leverage. Let's hope the new NZSF and ACC shareholders can get it performing better. Other than the Co-operative Bank, every other New Zealand owned bank is performing better.

CALLING FOR CONSUMER REACTION
In Australia, average petrol prices in their five largest cities increased significantly in the December 2017 quarter and hit their highest levels since 2015, according to the ACCC’s latest quarterly petrol report. The ACCC found that average petrol prices in Sydney, Melbourne, Brisbane, Adelaide and Perth increased by +12.6 AUc per litre in the quarter to AU$1.351 AUc per litre (NZ$1.446/l). They want consumers to react. The current NZ discounted pump price is NZ$1.935/ltr. The difference is all higher taxes in New Zealand, both GST and excise taxes.

AIMING AT FOREIGNERS, HITTING LOCALS
In Vancouver, new higher taxes on housing aimed at 'foreign investors' are said to be having a devastating impact on long-time locals, some of whom claim they will have to sell up because they can't afford the new higher imposts. And there is a new focus on how many homeowners may be 'under water' if measures cause prices to drop even -15%. Some estimates are as high as one in eight.

BENCHMARK INTEREST RATES SLIP
Wholesale swap rates gave up all of yesterday's rises today. The two year is down -1 bp, the five year is down -2 bps and the ten year is down -2 bps. The UST 10yr is now at 2.93%. The Aussie Govt 10 yr is down -2 bps at 2.84%. The China 10 yr is unchanged at 3.90%. The NZ Govt 10 yr down -3 bps at 2.98%. The 90 day bank bill rate is down -1 bp at 1.92% today.

BITCOIN FALLS BACK UNDER US$10,000
The bitcoin price is now at US$9,675 a fall of US$965 or -9.0% on the day. These declines are starting to mount up again, making -14.5% for the week so far..

NZ DOLLAR STABLE
The Kiwi dollar is unchanged against the greenback at 73.2 USc, a little softer against the Aussie at 93.5 AUc and little softer against the euro at 59.4 euro cents. That leaves the TWI-5 at 74.3 and anchored well within its 2018 range.

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