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US trade deficit leaps; US confidence up; Mexico's good NAFTA deal; China ends family planning; SEC tackles Moody's; ALP wants tax transparency; UST 10yr at 2.88%; oil and gold slip; NZ$1 = 67.3 USc; TWI-5 = 70.7

US trade deficit leaps; US confidence up; Mexico's good NAFTA deal; China ends family planning; SEC tackles Moody's; ALP wants tax transparency; UST 10yr at 2.88%; oil and gold slip; NZ$1 = 67.3 USc; TWI-5 = 70.7

Here's our summary of key events overnight that affect New Zealand, with news the amount of tax the big four accounting firms actually pay themselves is in the spotlight.

But first, the American trade deficit in goods is rising fast. In July it was a deficit of US$83.6 bln and that is almost -20% worse than the same month a year ago and the worst single month result ever. Their exports were up +9%, but their imports rose +13% faster. Over the past year, they now have a -US$836 bln goods deficit (-NZ$1.2 tln), a rise of nearly +9%. American consumers are voting clearly with their wallets; they just don't want to pay higher prices for local goods. The deficit at this level is -4.2% of American GDP and all up, imports-plus-exports account for 21% of US GDP. (In New Zealand the equivalent level is 53%.)

Perhaps this aggressive buying of imported goods is behind the rise in consumer confidence. It rose in August to its highest level since since October 2000. Early signs point to a faster rate of local price increases as a result, reinforcing the appeal of imports.

And things might just get 'worse'. Early analysis of the US-Mexico NAFTA Agreement for cars shows the Mexicans have scored a great deal and the it seems likely US producers will shift production to Mexico chasing those benefits.

In China, a new draft of the Civil Code submitted yesterday to the Standing Committee of the National People’s Congress removed all “family planning-related content”, according a report published in the Communist Party’s People’s Daily newspaper.

Back in the US, their Securities and Exchange Commission said that credit rating agency Moody’s has agreed to pay a total of US$16 mln in penalties to settle charges involving internal control failures and failing to clearly define and consistently apply credit rating symbols. This marks the first time the SEC has filed an enforcement action involving rating symbol deficiencies.

In Australia, the opposition Labor party - which seems likely to win government at their next election - wants the big four accounting firms Deloitte, EY, KPMG and PwC to disclose how much tax they pay as a condition of winning big government contacts. The firms are bristling at the idea and have promised to fight it.

The UST 10yr is up another +3 bps at 2.88% and the 2-10 curve is now at +21 bps. The Aussie Govt 10yr is at 2.56% (up +2 bps), the China Govt 10yr is at 3.65%, unchanged, while the NZ Govt 10 yr is at 2.63%, also up +2 bps.

Gold is slightly softer today giving up yesterday's gain. It is down by -US$4 and is now just on US$1,205/oz in New York.

US oil prices are softer today, now just over US$68.50/bbl. And the Brent benchmark is just over US$76/bbl.

The Kiwi dollar is firmer at 67.3 USc. On the cross rates we are now at 91.5 AUc, and at 57.4 euro cents. That puts the TWI-5 at 70.7 and at its average over the past month.

Bitcoin is at US$7,048 and +4.7% higher than this time yesterday.

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12 Comments

Other than a bit of an immediate uptick in births in China, and perhaps a slightly higher sustained level than previously, I doubt that there will be a large sustained increase in births. Look at Japan, most women just don't want lots of children now. They have other priorities.

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In Australia, the opposition Labor party - which seems likely to win government at their next election - wants the big four accounting firms Deloitte, EY, KPMG and PwC to disclose how much tax they pay as a condition of winning big government contacts. The firms are bristling at the idea and have promised to fight it.

Hilarious.

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And appalling

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If only it were so easy to crack down on tax dodgers as bunch of leftie politicians would understand, they wouldn't be the big-4 accounting firms, would they?
If they were to disclose their taxes, the government would require external expertise to handle such complex disclosures. Who would they go to then? Grant Thornton, BDO?

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I dunno, I think it would be quite useful for the general populace to have an idea of revenue, declared profit, and tax paid by these. People could then consider how these compare with their own tax paid.

As our Lord and Saviour John Key once said, "Those who have nothing to hide have nothing to fear". It would be sad if this rule only applied to everyday citizens and their private communications.

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Re NAFTA: "it seems likely US (car) producers will shift production to Mexico chasing those benefits."
Is this exactly opposite of what Trump campaigned on - jobs for Americans and to make America Great Again ?

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Yes it is, but he's also a raving lunatic that doesn't know what he's talking about.

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Crazy petrol price increases in Nelson. Is the South Island subsidising Auckland yet again (in so many ways)?

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Yawn, my nearest petrol station in central Auckland (BP) charges the same for 95 octane as in Nelson. Might pay to check GasSpy

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$1.99 p/l Mobil Chapel St., Tauranga.

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10 cents per litre cheaper in Masterton for 95 versus Wellington, Nelson etc. Strange how somewhere so inland isn't subject to any costs of transportation.

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Japanese women maybe making that "choice" for other reasons - work life balance is not a well recognised concept. Read recently re a Japanese woman working at a day centre fired for getting pregnant "out of turn"! Apparently even pregnancy is rostered.

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