A review of things you need to know before you go home on Tuesday; food price index; takeover update; employment outlook; Smartpay partners with Alipay; interest rate caps inch closer; value of Australian home loans; rates mixed; NZD stable

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

No changes here today.

No changes here either.

Food prices were down 0.5% month-on-month led by lower meat and poultry prices. Beef prices fell 4.4% and chicken prices fell 3.4%. Grocery prices also fell by 0.7% in February 2018, with lower prices for chocolate. On a year-on-year basis, food prices were up 0.1%, led by restaurant meals and ready to eat food with a rise of 2.7%. Prices for fruit and vegetables fell by 4.4% on a year-on-year basis.

Commerce and Consumer Affairs Minister Kris Faafoi says predatory practices, irresponsible lending and unacceptable debt collection practices continue to impact vulnerable New Zealanders. Thus a review of consumer finance regulation is likely to lead to new legislation. Faafoi expects to release a discussion paper on the key issues and proposed solutions around the middle of the year. He says it's likely to consult on options for interest rate caps, as well as options for improving compliance with lender responsibilities. The review's also looking at the debt collection methods employed by some debt collection agencies. There's more detail here.

New Zealand listed companies attracted strong interest from buyers in 2017, producing the highest level of takeover activity seen in the past decade, as per the Bell Gully takeover update released today. This is the fourth consecutive year of increases in takeover activity and the activity was approximately twice the average rate since 2001. While there was record interest, the success rate was lower than in previous years.

The results from the ManpowerGroup Employment Outlook Survey for the second quarter of 2018 show that employment outlook remains positive despite being at its lowest level in two years. The declines in the Construction and Finance, Insurance and Real Estate sectors have not been offset by rises in Transportation and Utilities and Manufacturing sectors. Hiring expectations in Wellington remain generally subdued. The national result is down three percentage points compared to this time last year, however, employment expectations remain positive across all sectors, regions and organisation sizes.

Smartpay has signed an agreement with Alipay, China's largest online and mobile payments provider, to allow Chinese tourists and international students to use their Alipay wallet to pay at Smartpay terminals across Australia and New Zealand. Chinese tourist spend in Australia and New Zealand is estimated to be around $11 bln for this year and this technology should help expand that by providing a convenient payment solution.

The NAB business conditions index in Australia moved +3 points higher to 21 points, a record high since March 1997. The strength in conditions was broadly based across industry groups. The business confidence index conversely declined by -2 points but was still read at +9 points. Employment conditions recorded a large rise - moving to record highs. Trading conditions and profitability showed small gains on top their already high readings.

Seasonally adjusted estimates of dwelling commitments, or value of home loans, in Australia rose 0.7% month-on-month to $33.067 bln for the month  of January 2018. This was made up of $21.165 bln of owner occupied housing and $11.902 bln of investment properties. In trend terms the value was stable at $32.993 bln.

Wholesale swap rates are higher at the short end of the curve and lower at the long end with the 2 yr rate up +1 bps and the 10 yr rate being down -1 bps. The UST 10yr is down to 2.88% today (-3 bps). The Aussie Govt 10 yr is down -2 bps to 2.82%. The China 10 yr is down -3 bps at 3.87% while the NZ Govt 10 yr is down -5 bps to 2.98%. The 90 day bank bill rate is also unchanged at 1.90%.

The bitcoin price is lower at US$9,184.

The NZD has traded slightly higher today to currently trade at 73.1 USc. On the cross rates we are at 92.7 AUc and at 59.2 euro cents. That puts the TWI-5 at 74.0.

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ABC 7.30 Report does ‘liar loans’ and the interest-only time bomb

Would love to know how New Zealand's interest only loan book compares.

RBNZ interest only stats are here - https://www.rbnz.govt.nz/statistics/c32

Thanks GV

Thanks Gareth - was also wondering about how the interest only book will "mature" over time and convert to principle and interest payments. Australia is facing a wave of loans that have reached the end of the maximum interest only period.

I've watched your video ZP, personally, I think we are responsible for our own actions and I therefore don't really agree with this lady (who was reckless) putting the blame on the banks.
Are banks in NZ also considering changing their customers IO loans into P&I loans?

I agree, she was irresponsible and reckless. If she and thousands of other are forced to sell then the effect of this on the market will be interesting - Martin North reckons 10-15% drop in prices due to interest only rolling off.

Re NZ banks that is what I was wondering - I know the banks have maximum durations for IO. If a customer hits the limit can they just change banks or are they forced to refinance with P&I repayments?

Falling food prices and tertiary education fee weighing down on CPI - no surprises if inflation data for this quarter turns out to be dismal. This begs the question if another rate cut is in the Reserve Bank's plan?

Jim Grant


33 minutes in, Chinese debt, 40 trillion of bank debt %50 of total world GDP.

USA banking debt 17 trillion in a 19 trillion dollar US economy
Worth listening to.