A review of things you need to know before you go home on Friday; state sector productivity; teacher's council; inflation expectations; producer price index; international visitor spending; KiwiSaver update; rates steeper; NZD firm

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

Westpac has cut its five-year fixed-term mortgage "special" rate to a market leading 4.99%. Kiwibank is cutting 20 basis points from its one-year "special" mortgage rate, dropping it to 3.99% from Monday.

Westpac has cut a series of savings rates by up to 45 basis points. See details here.

Higher state sector productivity is critical to delivering more and better public services now and into the future, yet many government agencies lack the cultures, capability and encouragement to make these gains, says the Productivity Commission in its latest report, Improving state sector productivity. Faced with demand for more services, the public sector often relies on hiring more people. That strategy is not sustainable. Getting the best value out of existing resources requires good information, measurement of performance, openness to new ways of working, and an environment committed to making improvements. The Commission saw examples of good and innovative practices within the state sector. But there are too many barriers to these sorts of practices emerging and spreading. Few government agencies measure the productivity of their services, and some lack the capability or inclination to do so. Many agencies are risk-averse and through prescriptive and inflexible commissioning arrangements, make it difficult for contracted service providers to innovate. The Government’s budget system tends to reinforce ‘business-as-usual’ activities instead of new and innovative approaches. Making progress on public sector productivity will require action by ministers, central agencies such as the Treasury and State Services Commission, and departmental leaders.

"The passing of the second reading of the Education (Teaching Council of Aotearoa) Amendment Bill brings us one step closer to restoring the voice of teachers to their own professional body," Education Minister Chris Hipkins said today. "The Bill gives the teaching profession the right to directly elect seven of their own to their professional and regulatory body. It reverses the previous National Government’s decision to remove elected teachers from the council, one of many ways they sought to undermine teachers," Chris Hipkins said. Another six members will be appointed by the Minister of Education. The Government voted in favour and National voted against.

RBNZ has released its quarterly data on household inflation expectations. Household perception of current inflation is that it is at 2.3% - mean of all households surveyed. Expected inflation in one year's time is 3.3% and in five years' time it is expected to be 3.9%. Of all households surveyed, a net 48.8% expect house prices to rise. House price inflation in one year's time is expected to be 3.2%.

Higher fuel prices contributed to rises in producer output prices (up 0.9 percent) and input prices (up 1.0 percent) in the June 2018 quarter, Stats NZ said today. Higher prices received for whole milk powder also contributed to the increase in overall output price. In the June 2018 quarter, higher prices for imported crude oil increased the costs paid by the petroleum and coal product manufacturing industry (up 11.3 percent). The higher cost for buying crude oil was passed on to petroleum products. The petroleum and coal product manufacturing industry received higher prices (up 10.9 percent) for petrol, diesel, other petroleum products (eg aviation fuel and fuel oils). Petrol bought by businesses was up 5.5 percent while diesel was up 9.8 percent. These higher costs for fuel flowed to other industries. For example, input prices for the road transport industry rose 2.0 percent in the June 2018 quarter, mainly due to higher petrol and diesel prices.

Spending by international visitors in New Zealand increased nine per cent to $11.1 billion for the year to June 2018, according to the latest International Visitor Survey results released today by the Ministry of Business, Innovation and Employment (MBIE). MBIE’s manager of Sector Trends Mark Gordon says there has been significant growth in international visitor spending, with an increase of $879 million compared with the year ended June 2017. China and the United States have contributed to this increase with both markets growing 11 per cent to $1.66 billion and $1.29 billion respectively for the year ending June 2018.

We have made our monthly update to the regular savings based KiwiSaver analysis that we provide. See the returns your fund is generating here.

Wholesale swap rates are down -1 bp at the short end of the curve and up +1 bp at the long end. The UST 10yr is a little lower at 2.87%, down -1 bp from this time yesterday. The Aussie Govt 10yr is at 2.56% (down -1 bp), the China Govt 10yr is at 3.63% (up +2 bps), while the NZ Govt 10 yr is now at 2.60%, unchanged for the day. The 90 day bank bill rate is down -1 bp to 1.90%.

The bitcoin price is now at US$6,340, up 1.0% from this time yesterday.

The NZD is up slightly against the USD at 66.0 USc. On the cross rates we are at 90.7 AUc and 58.0 euro cents. That puts the TWI-5 at 70.1.

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As it is Friday, I will en devour to educate you Taxpayers with a Beer....but you must pay......here goes..

A pound to a penny, from UK....but it has merit for NZ....too.

The tax system explained using a beer analogy:-

Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100.If they paid their bill the way we pay our taxes, it would go something like this..

The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
And the tenth man (the richest) would pay £59.
So, that's what they decided to do.

The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. "Since you are all such good customers," he said, "I'm going to reduce the cost of your weekly beer by £20.” Drinks for the ten men would now cost just £80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the £20 windfall so that everyone would get his fair share? They realised that £20 divided by six is £3.33 but if they subtracted that from everybody's share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fairer to reduce each man's bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.

And so, the fifth man, like the first four, now paid nothing (a100% saving).
The sixth man now paid £2 instead of £3 (a 33% saving).
The seventh man now paid £5 instead of £7 (a 28% saving).
The eighth man now paid £9 instead of £12 (a 25% saving).
The ninth man now paid £14 instead of £18 (a 22% saving).
And the tenth man now paid £49 instead of £59 (a 16% saving).
Each of the last six was better off than before with the first four continuing to drink for free.

But, once outside the bar, the men began to compare their savings. "I only got £1 out of the £20 saving," declared the sixth man. He pointed to the tenth man, "but he got £10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a £1 too. It's unfair that he got ten times more benefit than me!"

"That's true!" shouted the seventh man. "Why should he get £10 back, when I only got £2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!" The nine men surrounded the tenth and beat him up.

The next week the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important - they didn't have enough money between all of them to pay for even half of the bill!

Plus GST....naturally.

Ponder this this week-end.
Ponder why we subsidise so many things....tax-wise..and other---wise.

All donations gratefully expected......

Ta ever so.

PS...that is the Beer analogy....just to get you into the Spirit of things....this Friday.
A Capital idea....on why Tax Avoiders......win.

Based on this I suppose, https://www.telegraph.co.uk/news/2017/03/19/tax-burden-wealthy-has-trebl....
Shows the huge difference between the income of the top 10 % vs the bottom 40 % , more than anything. They are not paying 59 % tax as the beer analogy shows, nor are the bottom 40 % paying zero tax. .

I think NZ often loses sight of the big picture of taxation. Great analogy as most of is can probably relate better to beer.

Good example but there will never be an end to this debate because no side will ever concede. At the end of the day we are all greedy beings driven by self-interest. We all pick the side where we are likely to personally gain the most. There can never be a perfect solution to such discrepancies.
The poor claims individual taxes on the rich are too low until he stumbles upon a million-dollar winning lottery ticket, at which point the tax code on windfall gains becomes crude and unfair to him.

Well...there is 1 way, shoot for the Moon. No immoral government = No tax = Everyone wins

No, more like 90% lose, 10% make out like robber barons.

AE, this is brilliant.

A more accurate analogy would be 10 men going out for free beers - free, as long as the give 10%
of every beer to the pub pig.
However, the greediest man who drank 59 times more beer than the men who drank the least, soon started to resent having to give so much of 'his' beer to the pig, incensed he stormed out of the pub and started the ACT party.

"Of all households surveyed, a net 48.8% expect house prices to rise. House price inflation in one year's time is expected to be 3.2%."

That is so different from the majority of commenters on this site!

Everybody get together, let’s hold hands and send a prayer to Guanyin.

In all seriousness who knows and who cares?

Not necessarily. Have you run a survey across interest.co.nz visitors who make comments? First of all, expectations are different from hopes. Secondly, the general population's expectations are not a barometer of what will happen in the future. Finally, I don't think most h'holds would have a clue as to the magnitude of house price movements in 12 months time.

The great thing about speaking anecdotally, as Yvil is doing, is he/she can hide behind the sheer logistics of proving their assertion.

I expect to wake up next to a couple of Victoria's Secret models every morning... still waiting!

To be fair these are the same households that have been expecting a more than 2% inflation for several quarters now. They are no more accurate at this then the guy on CNBC claiming bank stocks were the sure thing to go long on, back in Q4-2007.

https://www.rbnz.govt.nz/statistics/m13. Undoubtedly there has been a large swing in house price expectations over the past year. Remember the majority of the commentators that discuss real estate on this website and indeed the articles that appear on this website are related to Auckland, down to singular apartment sales .The M13 data is not a regional measure., two thirds of households reside outside of Auckland.. The m13 data also has an inherent bias

Don't worry Andrew, Wer diffrunt! /sarc

We are so spishul

This might cause some problems for the reserve banks forcasts:

‘Household perception of current inflation is that it is at 2.3% - mean of all households surveyed. Expected inflation in one year's time is 3.3% and in five years' time it is expected to be 3.9%.’

Al Capone is bolt-holed in New Zealand

NZ's Al Capone launders $77 million into New Zealand, makes $2 million from plumbing business, declares $1000 income to IRD, buys 8 homes, and gets caught by NZ police, convicted, but no jail time

Money laundering in Auckland Property, who would have thought? Think about the impact of prices by this behaviour, it isn't like you are going to haggle over price when you just want to wash you money. What is a shame is that those benefitting from the untaxed capital gains that is a byproduct by this behaviour get away with their proceeds. Until it all comes undone anyway.