Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report today. But we know there will be one change at least coming on Monday.
TERM DEPOSIT RATE CHANGES
No changes here either.
MARKETS ON HOLD
After yesterday's avoidance of yet another fall, the Shanghai equity markets are level-pegging again today. This comes after Wall Street recovered its prior day losses overnight. Both markets are down in 2018, Shanghai sharply so. Today the ASX and NZX are also level-pegging.
RECORD LONG TERM GROWTH
In Australia, they released their national accounts for the year to June 2018, revealing an economy that had GDP of AU$1.8 tln, up +2.8% in real terms. Australia has now recorded its 27th consecutive year of economic growth and is performing above the 10 year average growth of 2.6%.
DEER FARMERS DOING WELL
Apart from a brief downward dip in prices two years ago (driven by uncertainty about regulatory changes in China), NZ velvet production and prices have increased for eight years. And while the industry knows it can't last for ever, based on what they say are all the current known factors, deer farmers can expect another good year in 2018/19, according to their trade association.
VOLUMES UP, PRICES DOWN
Prices might be a bit wobbly (The USDA's market review brought a -2.6% fall today), but dairy production is rising strongly, according to the latest DCANZ data. September production was +6.0% higher than the same month a year ago. October is the month where the industry hits its peak for the year. These gains are driving upward revisions in analysts forecasts for production - and will be weighing on future price expectations. The latest derivatives market for WMP suggests that prices will fall -1.7% at the next auction.
WATCH THE WEATHER
It is also time to point out the growing spread of dryness in the soil moisture charts below - because it is starting earlier this year than last, and earlier than normal. Dry rural conditions could have a major impact on the overall economy, just as lower-than-normal lake levels will have on electricity prices. The chart below is animated and you can set the start date back to as early as 2013.
SWAP RATES ON HOLD
Swap rates are unchanged today after an interim small rise which has now been reversed. The UST 10yr yield is also rose overnight but has slipped back in later trade to be at at 3.11%. The UST 2-10 curve is holding at +27 bps. Benchmark bond rates are holding as well. The Aussie Govt 10yr is at 2.61% (down -1 bp), the China Govt 10yr is at 3.56% (unchanged), while the NZ Govt 10 yr is at 2.59%, also unchanged after yesterday large drop. The 90 day bank bill rate is down -1 bp at 1.89%.
BITCOIN STUCK
The bitcoin price is now at US$6,427, and still basically the same as this time yesterday.
NZD UNCHANGED
The NZD is unchanged at 65.2 USc. On the cross rates we are also going nowhere at 92.2 AUc, and 57.3 euro cents. That puts the TWI-5 at just over 69.7.
This chart is animated here. For previous users, the animation process has been updated and works better now.
Daily exchange rates
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41 Comments
Is there really a housing shortage?
New Zealand's unsold housing stock (realestate.co.nz) continues its rapid climb from 35,961 Wednesday to 36,351 today,..a rise of 1.1% in 48 hours.
Auckland unsold housing stock (real estate,co,nz) has risen from 13,497 on Wednesday to 13,730 today - a rise of 1.7% in 48 hours.
My earlier prediction of 35,000 by mid-November has already been reached and 36,000 (predicted by Chirstmas) could arrive before the end of October. Why is the pace of rise in stock levels happening so fast? Is it a rush for the exits, or are there just no buyers at yesterdays daft prices without the funny money 'cash' injection? A few people will no doubt be questioning when did it all go Wong?
Not just us
Thud! Sept New Home Sales Plunge 5.5% from Dramatically Revised Lower August
https://moneymaven.io/mishtalk/economics/thud-sept-new-home-sales-plung…
@Nic I do not believe there is an absolute housing shortage, but there is an affordability problem .
People's disposable income is so squeezed that saving $100k for a home is too hard for many
Of course this is not helped by taxing petrol when the input costs (crude) are ramping up.
I was talking about several parts of the country where the fuel retail market is largely a duopoly (Wellington, parts of SI)
I wasn’t exactly limiting my argument to pumps on your regular driving routes. Next time when you comment, try looking at real data and not just what happens in your backyard.
Well, I can sit here and via the amazing technology we have these days see that the Mobil in Johnsonville is cheaper than the Z or the BP.. so it looks to me like there is some competition. If Wellingtonians don't bother using the cheaper stations then I guess thats on them.
Somebody piss in your weeties this morning?
In a bizarre turn of events the stock of Auckland Rentals is also on the rise (Trademe) and now sits at 4,182 available properties from 4,109 on the 16th October. A rise of 1.7% over 10 days.... with rents already on the slide over the last quarter and accidental landlords (who can't sell) likely to add further rental stock.
Not at all bizarre. This has a habit of occurring when the market goes stagnant and people pull their homes off the market and decide to rent it out until the market improves. I really appreciated this process a dozen years ago, where I rented a very nice home for a fraction of the carrying costs after I sold my home and needed a place to live. Eventually, there will be enough of a surplus in the rental market that the highly leveraged speculators will be forced to sell. If this happens with any volume, the supply/demand balance will change more than a little bit.
Nic... It hasn't gone wrong... this is what the real estate mkt does..
Are you a little blinded by your strong expectation..?? ( we are biased to only seeing things that confirm expectations).
Since when do listing numbers reflect a housing shortage or not..???
Those houses are not empty... people are living in them.
There is no rush for the exits..
With real estate, in my view, Auctions are the mechanism of "price discovery" when the mkt is hot.
When the mkt is flat/down the mechanism of "price discovery" becomes a growth is listings and a slow process of the serious sellers negotiating with the serious buyers..
I'd suggest ( without knowing ) that many of those listings are not by "serious" sellers who might have time constraints.
I know you are looking for a crash.... and in my experience that requires either a financial crisis or a serious recession with high unemployment.
Here is a link to a news piece in 2015 ... says that in 2007 listings were 40, 000.
https://www.stuff.co.nz/life-style/home-property/72585818/lowest-number…
in 2007 our pop. was 4.2 million
in 2017 is about 4.8 million
If you step back a little..and put aside your narrative.... there are no real signs that this mkt is crashing or about to crash.
In my experience people will not sell a house for a loss...unless they really, really , have to....
Thats why they say that house prices have stickability to the down side.. ( ie. they tend to plateau , and prices gradually decline )
Roelof
With the greatest respect, I don't think that your experience has ever had to take into account the impact of significant constraints to credit. That's what is starting now and it becomes magnified as the tap turns tighter and tighter. It's early days but keep your eyes on the banks here and over the ditch. The lending environment is likely to change quite significantly over the next 12 months and whilst rates may go lower still who gets the cash and the quantity to go around is what will set the tone of the market.
Australasian banks carried on lending as if there never was a GFC and that's why they are now being exposed by 'Mr Market.'
nic, of course I'm just expressing my own point of view.
I have books on my bookself preaching the end of economic world ( inflation/debt) in 1974, 1982, 1991., 1995, 2001...
I even have a book with the title "bankruptcy 1995 " ( in regards to USA ).
Just because the lending environment changes does mean a crash... ( lending constraints is nothing new )
Unless credit actually contracts ( deflation ) , for me tight lending , simply implies a slowdown, and actually suggests there will be no crash.. anytime soon..
Last time I looked total credit growth was still about 5-6% / yr..
I don't think NZ banks have been imprudent in their lending..??
For me, mortgagee sales and increasing interest rates is more of a sign of stress than growth in listings..
Roelof.
How do you explain the current collapse in the Australian housing market? The RBA rate is unchanged, mortgagee sales are hardly significant, employment is pretty good, GDP numbers okay too and yet the housing market is imploding. It's about credit availability and now sentiment is kicking in too. A plateaux is what the banks and the leveraged will want to try and sell,(Australia was no different in 2017, they're just 6-9 months ahead of us), but the housing market is just like any other market when fundamentals get out of whack, the exuberance phase has ended and only ever lasts until the reality of a bubble takes hold. We're still in the next phase, 'denial' in Australia they're through that and into 'acceptance', 'panic' happens next, then 'capitulation.'
Your book on 1974 will have warned you of the 38% fall in New Zealand house prices from 1975-1980. So you hopefully understand that markets don't always plateaux... they can tank and this time wage price inflation won't be there in a globalised world where our wages are already too high.... hence Apple's removal of their call centre contract in Auckland today...
1970's crash 38% from top to bottom... Lasted 5 years
https://www.google.co.nz/search?q=new+zealand+house+price+graph+1970&tb…:
Nic... there was no decline in prices
In the real world it is nominal prices that people respond too.. ie.. the price they paid for a house and the price they sell it for..
You massage your point of view by saying there was a 38% decline, which is the inflation adjusted decline..
In nominal terms, ...prices did not decline.
This is part of the reasons the housing mkt tends to plateau.. ( which in real terms is a decline ) as incomes rise enuf, to play catchup, to start another cycle...etc.
http://photobucket.com/gallery/user/neuralnetwriter/media/bWVkaWFJZDo2M…
The standard Friday Gubmint budget assumptions update:
TWI - 71.82, Treasury BEFU assumption 'The trade-weighted exchange rate is assumed to remain broadly stable around 75 over the forecast period'
WTI - 66.70 Treasury BEFU assumption 'West Texas Intermediate (WTI) oil prices fall from US$62.9 per barrel in the March 2018 quarter to US$60.0 by mid-2018 and remain stable thereafter'
And... an hour later TWI moves to 71.34. NZD isn't very healthy at the moment.
It will be entertaining to read Roger Kerrs oh so positive article about the imminent rise of the NZD on Monday and how he rationalizes the forthcoming significant increase in the value of the NZD...
Very would be my guess. just google AMZN or GOOGL to see what happened in after hours trading for those tech giants when the earnings came out. .. and there is also the US GDP quarterly figure release tonight too. ECB held the interest rate, so no surprises there.
And if premarket trading is an indicator, its going to be volatile in the downwards direction. QQQ which closed the normal trading session the day before yesterday at 165.34, then rallied to 171.06 in yesterdays session is currently trading at 164.30 and still dropping.
SPY (S&P 500 ETF) is also currently under the low from two days ago, and dropping.
"What really happened in the early eighties, and this is the part most people have the greatest difficulty accepting, central bankers by losing touch with money let themselves become bystanders. They really believed they were in control of everything, and this what we’ve all been taught from Econ 101, by moving just the federal funds target around a little here and there. There was, in this detached view, no downside or detriment to knowing nothing about how anything was being funded (or where). It was all just myth and legend, beginning with Paul Volcker."
https://www.realclearmarkets.com/articles/2018/10/26/central_bankers_re…
From Canada to Brazil and China, it isn’t looking good. And central bankers will, true to form, continue undeterred by any of it. The Bank of Canada not only raised its benchmark policy rate yesterday, it signaled its readiness to become more aggressive so as to get ahead of forecast overheating despite a clear slowdown in 2018. In Europe, Mario Draghi notes today, “incoming information, [is] somewhat weaker than expected” but he assured everyone you better believe that won’t stop policy normalization.
https://www.alhambrapartners.com/2018/10/25/fake-boom-no-match-for-the-…
Still in the eye of the storm?
https://www.noted.co.nz/currently/politics/has-national-weathered-the-j…
Or taken by larger forces once he mentioned the JK texts?
National appointed Chair of Outreach.
https://www.stuff.co.nz/business/industries/108124777/national-presiden…
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