A review of things you need to know before you go home on Thursday; FEI changes 6m special, healthy food prices slip, HYFEU assumes solid house price gains, equities up, swaps firm, NZD slips, & more

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

MORTGAGE RATE CHANGES
No changes to mortgage rates today.

TERM DEPOSIT RATE CHANGES
FE Investments have switched their eight month 4.80% special to a six month term.

HEALTHY WINS ON COST CHANGES
The cost of food is not rising, according to the November update of the Food Price Index. Overall, prices are up +0.4% from the same month a year ago. Fruit and vegetable prices decreased -6.7%, meat, poultry, and fish prices increased +3.2%, grocery prices were unchanged. But restaurant meals and ready-to-eat food prices increased +2.9%. Basically healthy eating choices have changed far less than ready-to-eat meals.

FORECAST HOUSE PRICE GAINS
The Minister of Finance released his Half Year Fiscal and Economic update, taking the opportunity to release details of his new Wellbeing approach. The HYFEU shows that Crown tax revenues are expected to grow by +26.3% in the four years to 2022, slightly more than signaled in the 2018 Budget. Spending is expected to grow by +21.1% over the same time. They are not forecasting any downturn in this period although they do see growth in the economy slowing to +2.3% in 2023. The same forecasts see house prices rising at at least +4.5% per year (pg 6). That means a median priced house in 2018 of $562,000 in October 2018 will become $700,000 in 2023, a capital gain of $138,000 is being assumed. Now we just need to await the Cullen Tax Working Group report in February on how these gains are going to be taxes in future. (If there are 90,000 houses sold per year, in the fourth year that is $12.5 bln of gains assumed.)

EQUITY MARKETS GAIN
Equity markets are higher today. After strong gains in Europe overnight approaching +2%, Wall Street closed up +0.5% which was half what they were up for much of the session. Tokyo has opened up another +0.9% after yesterday's even stronger rise. The NZX is up +0.6%, the ASX is up +0.3% and Shanghai has just opened and is starting out with a +1.0% gain after yesterday's flat result. As an aside, we have been checking the KiwiSaver funds we monitor through to October to see if the recent international volatility is hitting their returns. Generally they are not; index tracking funds are more exposed to recent downshifts, but actively managed funds in both the Default and Growth categories we looked at specifically are not showing any negative impacts.

UNCHANGED BOND PROGRAM
The HYFEU review shows that the Government does not intent to raise more that the $8 bln it signaled in the 2018 budget from the bond markets.

ANZ'S FRED OHLSSON TAKING CAREER BREAK
The ANZ Banking Group says Fred Ohlsson, formerly ANZ NZ's head of retail and business banking for five years, is taking an extended unpaid career break in his native Sweden. Ohlsson is stepping down from his current role as ANZ's group executive for Australia.

SWAP RATES FIRM
Wholesale swap rates are a little firmer today again with the two and five year up about +2 bps, and the ten year duration up +3 bps. The UST 10yr is up +2 bps to 2.91% and their 2-10 curve has risen to just under +14 bps. The Aussie Govt 10yr is at 2.47% and up +1 bp, the China Govt 10yr is also up +1 bp at 3.32%, while the NZ Govt 10 yr is at 2.53%, up +2 bps today. The 90 day bank bill rate is unchanged at 1.98%.

BITCOIN FIRMS SLIGHTLY
The bitcoin price is now at US$3,384, up +1.5% from this time yesterday.

NZD SLIPS
The Kiwi dollar is a little softer at 68.5 USc on improved international trade/tariff prospects which has boosted the majors. On the cross rates we are at 94.8 AUc and at 60.3 euro cents. That puts the TWI-5 at 73.2.

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22 Comments

".. is taking an extended unpaid career break.." Good luck Fred. I hope it's what you want.
But don't forget that the rung you occupied on the Ladder has been taken by someone else already, and when you try to get back on, don't be surprised if you're politely kicked away from the apparatus.

Total asset growth, not just bank credit, has ground to a halt. With banks allocating more to UST’s and agency securities, outside of the liquid class the financial system is at a standstill. In Q1 2018, Depository Institutions were collectively holding $15.98 trillion of all other types of assets besides UST’s and agency debt. As of Q3, they own $15.87 trillion."
https://www.alhambrapartners.com/2018/12/11/us-banks-havent-behaved-like...

In the United States, there just hasn’t been any sign of wage-driven inflation. Instead, market signals especially money curves keep suggesting the same negative factors as we’ve seen over the last decade – all consistent with “disastrous to employment.” From surveys of inflation expectations to the various consumer price indices themselves, nothing had changed.

In the CPI, for example, there has been a very curious lack of evidence for an inflationary shift. Core rates have remained conspicuously subdued, some of them perfectly obvious in what they show."
https://www.alhambrapartners.com/2018/12/12/keynes-was-right-the-more-ev...

"China’s entire auto industry is built around the theme of endless rapid growth as a given. Numerous plants are being constructed to add capacity, even as overcapacity is already plaguing the industry, just as sales are declining for the first time in recent history. This is a perfect setup for a big shakeout. And the government’s refusal to jump in and save the sector one more time, indicates that it might actually allow that shakeout to happen."
https://wolfstreet.com/2018/12/11/china-auto-sales-plunge-face-first-ann...

Andrew are you sponsored by these links you post ...how do you have time to milk your cows?

Don't tell PETA, but he makes the Coos do the postings....

it's easier than you think, besides it's wet

I've been here eight years according to David C, 4 of those I lived in California and 18 months in the EU. When I started on this site it was very informative with some really special people. Over the years we have been whittled down me and maybe one other of the original gang, the focus is much more around housing.
I miss the debate, I think Snider is very good and happy to discuss his articles and ones by people like Fisher.
I think Peter Fisher is sufficiently skilled to be worth a listen as is Werner.

Fisher
https://www.grantspub.com/files/presentations/FISHERGRANTSREMARKS15MAR17...

Im not interested in housing, I own a house only need the one, morally opposed to houses as an investment.
I think we are stuck in a low interest low growth world, I don't think we have the thinking to solve the problem.

In France the latest terrorist attack was carried out by ISIS, by one of 20,000 people on Frances extreme high risk , and he escaped into Germany.

. Hours after the attack yesterday, before officials labeled it an act of terror, experts like @JcBrisard already knew a key detail: The gunman named Cherif Chekatt appeared not just on France’s S List of people believed to pose a security threat but also on its FSPRT list
Here’s one interesting takeaway: There are over 20,000 names in this database of radicalized individuals in France alone. According to @JcBrisard, some 10% of them live in the provincial department where the Strasbourg Christmas market is located. Or some 2,000 ppl.
And in the last 24 hours, ISIS acolytes have created memes and video tributes, like this one, which begins with a “Merry Christmas” sign written in red letters that then begins to bleed. I agree with French president when he said that the terror threat remains all too real:

France has problems and they are not going away

As a complete novice, whose skills and knowldege lie outside of the interest.co.nz domain, I have found your post to be incredibly informative. Please keep it up

haha frazz if you think Andrewj milks cows then it shows how little you know about him - or have followed him on this site.

It was always the comment section that made this site, watch the numbers dry up when housing finally tanks. Andrew is almost last man standing. It was great to see PDK back for a bit, but I hear he got pissed of with a few nitpickers wasting his time.

I think it's because a lot of commenters are actually doing it or know someone doing it so their information is relevant, not the Gell-Mann amnesia effect.

" Briefly stated, the Gell-Mann Amnesia effect works as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward-reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them."

In any case, you read with exasperation or amusement the multiple errors in a story-and then turn the page to national or international affairs, and read with renewed interest as if the rest of the newspaper was somehow more accurate about far-off Palestine than it was about the story you just read. You turn the page, and forget what you know.

That is the Gell-Mann Amnesia effect. I’d point out it does not operate in other arenas of life. In ordinary life, if somebody consistently exaggerates or lies to you, you soon discount everything they say. In court, there is the legal doctrine of falsus in uno, falsus in omnibus, which means untruthful in one part, untruthful in all.

But when it comes to the media, we believe against evidence that it is probably worth our time to read other parts of the paper. When, in fact, it almost certainly isn’t. The only possible explanation for our behavior is amnesia.

https://seekerblog.com/2006/01/31/the-murray-gell-mann-amnesia-effect/

Police are trained to work very hard to catch a suspect in a lie because of that lovely principle in latin.

Call me a slow learner as I went to uni late, but the head of the Architecture School taking us for a paper on Critical Thinking said don't bother watching the news, reading the paper, or listening to the radio, it is all controlled.

As always a useful post thanks Andrew.

That's a surprise Robertson predicting house price inflation running at 4.5%/annum the DGM's whom lean left will find that hard to digest !

he is also talking about a wellbeing budget to help reduce poverty especially amongst children. High housing costs are not helping the poverty and letting Aussie banks make of with 5 billion a year isn't either.

While Everyone’s Focused On Yield Curve Inversion THIS Is Happening

https://capitalistexploits.at/2018/12/while-everyones-focused-on-yield-c...

There are good contributors who are widely read and provide links to back up different theories other than that sold to New Zealand alone., in this little neck of the woods...

Plenty of false info and divergent opinions, most with vested interests, it must be stated. ..here...and elsewhere.

I am quite happy to read others links to Financial matters and view points, so keep it up AJ and the rest.

Bland and blind bigatory, with the blind leading the blind is not what we need.

It is an ever changing World, often misled in more ways than one Financially and otherwise..
If you believe all you read from some aspects, portrayed here and there as Gospel, we would be the most gullible people to see the light of Day, before the rest of the World prints an alternative....bombshell....or hard sell.

We are at the mercy of the rest of the Worlds chicanery and printing.....and I do not mean just about Finance...and bleedin houses...energy and its machi-nations.

Education is keeping an open mind......long may it prevail....Interest.co.nz.

worth reading on down.

"Pamela, a single mother, said that while she earned ‘an okay wage’, ‘I still can’t make it to the end of the month’. ‘All these expenses, taxes, council tax, car insurance, taxes on petrol, the price of food, I can’t cope at all. I can just about survive. And that’s what everyone here is saying. We can’t take it anymore.’
https://www.spiked-online.com/2018/12/12/its-time-for-the-people-to-take...

Andrewj, I'm sure you were here before me and per this site I'm on 8 years, 3 months...

so theres still a few old timers left after all.

Where the hell has the time gone. I'm only a fresh faced kid in comparison but the clock tells me I've been around over 4 years. Does this mean I should get a life?? cause I have no real interest in the Auckland house market. Recently seems to have become a pissing contest.

China is getting more interesting al the time

"Foreign direct investment into #China dropped 26.3% y/y in Nov, vs a growth of 7.2% in Oct, said the Ministry of Commerce.
For Jan-Nov, FDI fell 1.3% y/y.
https://tradingeconomics.com/china/foreign-direct-investment