A review of things you need to know before you go home on Wednesday; no rate changes, employment confidence sags, trade deficit leaps, business confidence bounces, high LVR interest only loans to investors low, swaps & NZD stable

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

MORTGAGE RATE CHANGES
No changes today.

TERM DEPOSIT RATE CHANGES
None here either.

EMPLOYMENT CONFIDENCE SAGS
The latest Westpac MM employment confidence reports: "Overall confidence in the labour market eased slightly in September, but it remains fairly buoyant compared to other measures of confidence. However, what really stands out are workers growing concerns about their incomes. The number of workers reporting a pay increase has fallen to a three year low. Workers have also become very pessimistic about their chances of a pay increase over the coming year. Workers still remain confident about their chances of finding work. Employment confidence has firmed in Otago and the central North Island, but has fallen sharply in the upper North Island, especially in the Waikato."

DUBIOUS RECORD
New Zealand's August trade deficit was the widest monthly deficit on record. It was driven to this dubious record high by rising costs of crude oil and diesel imports. But these were high by the unusual dual shutdowns of the Marsden Point refinery for maintenance, and the Methanex gas plant, also for maintenance.

BACK FROM THE BRINK
Business confidence recovered somewhat in September from its recent plunge. ANZ says latest results of its Business Outlook Survey suggest that while 'the economy may have hit a pothole, the wheels are not falling off'. Despite that, the latest data doesn't change the trend lower. Only agriculture didn't get a bounce in September.

A REMINDER TO REAL ESTATE AGENTS
There are potentially significant consequences that a licensee may face if they withhold information from their client and lose sight of their fiduciary obligations. In the recent High Court decision Pangani Properties Limited v Lloyd, there was an award of a large sum to a vendor ($750,000 compensation and the refund of commission) because of this failure.

TINY RETENTIONS
Co-operative Westland Milk Products has set its 2017/18 final milk payout of $6.12/kg/MS, a reduction from their previous indication. In addition they have declared a -$0.05/kgMS retention, making the cash payout $6.07/kgMS. For the 2018/19 year they have also trimmed that back to a range of $6.50-$6.90/kgMS, a drop of -$0.15. This is more in line with Fonterra's new year indication. In the 2017/18 year Fonterra retained nothing. Farmers may like that, but it is very unhealthy for the co-operative.

TINY EXPOSURE TO HIGH LVR INVESTOR INTEREST-ONLY LOANS
It is common these days to worry about the level of interest-only mortgage lending. That is because of issues with that type of lending in Australia. But in New Zealand, mortgages using revolving credit arrangements are all classified as 'interest only' even when they have a sinking limit that mimics the principal repayment plans of P&I deals. Data out today from the RBNZ shows that 31% of the $5.4 bln of new home loan lending in August was interest-only. But 75% of that was for owner occupies and 23% for investors. And only 1.3% went to investors in a LVR >80% situation. Still, that 1.3% was the highest allocation to investors in more than 2 years. (The highest ever was 1.8% over 80% LVR in July 2015.)

RECORD LOW DEATH RATE
Australia reported a record low death rate of 6.5 people per 1000 population in 2017. New Zealand's equivalent rate is 6.95/1000.

TRADE WAR SCORECARD
While the S&P500 fell -0.1% today, Shanghai is rising today, up a strong +1.1% in mid-day trading.

A RECOMMENDED READ x2
If you haven't already done so, this is a worthwhile perspective of the long-term problems of running external deficits, something even the most powerful countries can't escape the consequences. And as a followup, this article also shows what can happen, even when the cost of servicing the cumulative debt is at record low interest rates. Higher interest rates could be devastating.

THAT -30% HOUSE PRICE FALL FORECAST AGAIN
In Australia, UBS analysts expect further credit tightening there, and given the RBA's lack of willingness to cut rates, they expect to see the longest house price downturn in decades. They say there's a risk that home loans could fall by as much as -30%, potentially seeing credit growth fall to zero. Under such a scenario, that could also see home prices decline more than their previous current forecasts of -5 to -10%.

SWAP RATES LITTLE CHANGED
Swap rates are up +1 bps for terms 4 years and longer. The UST 10yr is unchanged at 3.10% with the UST 2-10 curve under +26 bps. The Aussie Govt 10yr is at 2.75% (unchanged), the China Govt 10yr is at 3.70% (also unchanged), while the NZ Govt 10 yr is at 2.72%, and up +2 bps. The 90 day bank bill rate is down -1 bp at 1.91%.

BITCOIN STABLE
The bitcoin price is little changed today at US$6,390.

NZD FIRMER
The NZD is up +½c at 66.8 USc. It reacted very little to the trade deficit, but rose strongly on the better-than-expected business confidence readings. On the cross rates we are unchanged at 91.7 AUc, and a little firmer at 56.7 euro cents. That puts the TWI-5 at 70.3.

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