A review of things you need to know before you go home on Wednesday; a TD rate rise, home ownership rate falls again, commodity prices fall, Wellington job demand up, swaps stable, NZD firms, & more

A review of things you need to know before you go home on Wednesday; a TD rate rise, home ownership rate falls again, commodity prices fall, Wellington job demand up, swaps stable, NZD firms, & more

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

No changes to report today.

Today Asset Finance upped its 1-5 year TD rates with some very substantial increases.

Data updated to December 2018 has been released by Stats NZ that shows the home ownership rate at 62.4% a record low. This data starts in March 1991 and back then, 27 years ago, it was its highest of the series at 73.8%. in December 1999 it was 68.5% having fallen -5.3% in the prior 9 years. In the next 9 years to December 2008 it fell -2.4% to 66.1%. The next nine years saw it fall -3.3% to 62.8%. It has fallen another -0.4% since.

The same data shows that in the past year, the housing stock has risen by +28,700 or a gain of more than +1.5%. That is its fastest rise in 13 years, and for the first time in a decade, the owner-occupied stock rise more than +10,000 in a year. However, it is the rental stock that is growing the fastest, up +17,400 in a year and the biggest gain since 2000 (+2.8% pa). You have to go back to the 2003/2004/2005 period to find larger levels of new-builds.

The ANZ World Commodity Price Index fell for a sixth consecutive month, but the decline of -0.6% month-on-month recorded in November was considerably smaller than the previous months’ falls. The index is +5.3% lower than a year ago. Meat was the only category to record stronger prices in November. The fall in world prices was accentuated by the stronger NZD. This saw the NZD index down a sharp -4.4% month-on-month. The NZD index slipped into negative territory for the first time since October 2016, down -4.2% year-on-year.

The ANZ job ads fell -3.5% in December from November to finish the quarter on a softer note. Overall, job ads point to steady labour demand amidst a tight market. Wellington is the strongest main centre and it accelerated further in December. Public sector hiring is juicing things nicely in the Capital.

Fonterra has today announced that it will sell their FarmSource livestock division to Carrfields Livestock – an established livestock agency provider. This is part of Fonterra's new direction where paying down debt is a priority. This is not the sale of the FarmSource stores, only the livestock division, which has about 25 agents. In 2017, this division facilitated the purchase of almost 200,000 animals.

In Australia, the growth in job vacancies continues to slow. In the year to November 2018, the rise was just +29,700 in data published today. That is the lowest annual gain in a year, but it is still a relatively healthy level. In the Sept-to-November quarter the gain was a tiny +2,700 vacancies nationwide. The biggest gains were for shiny-bum admin jobs, accounting for a quarter of the annual rise. Healthcare vacancies rose +20%. There were annual falls for manufacturing, retail, and IT positions.

There has been a much bigger falloff in Australian housing consents. New home approvals fell by -9.1% in November last year to reach their lowest level since August 2013. The monthly decline in total approvals was driven by multi-unit homes, which fell by -18.4 %, while detached house approvals declined by a more modest -2.3%. This weak result shows just how much the current credit squeeze is weighing on the home building sector.

It is all smiles on Asian stock exchanges today. The Shanghai exchange has opened +1.3% higher, Hong Kong is +1.8% higher while Tokyo is up +1.2%. Recall that the S&P500 closed earlier in the day up +1.0%. Locally the NZX is up +1.0% as well while the ASX200 is up +0.8% in afternoon trade. It is all based on leaked reports (from both sides) that "good progress" is being made in the US:China trade negotiations - but both sides are still far from a deal.

Local wholesale swap rates are little-changed today. The UST 10yr yield has risen however as the day has progressed, now up to 2.73%. Their 2-10 curve is at +14 bps. The Aussie Govt 10yr is at 2.35% and down -2 bps today, the China Govt 10yr is down -1 bp at 3.14%, while the NZ Govt 10 yr is at 2.43%, and up +1 bp since this morning. The 90 day bank bill rate is unchanged at 1.91%.

The bitcoin price is holding at US$4,000 and little changed from this morning although in the meantime it did rise to as high as US$4,075. But it couldn't hold those gains.

The Kiwi dollar has turned up slightly today and now at 67.4 USc. On the cross rates we are up to 94.4 AUc and at 58.9 euro cents. That puts the TWI-5 marginally higher at 71.5.

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growth in the bureaucracy can only help prop up Wellington house prices. My dad is looking to sell in April so fingers crossed for him.

My friends in the bureaucracy tell me it's not growing, in fact things are tough lots of short term contracts.

Chilean dairy farmers are not happy about Fonterra dumping milk powder in the country and reducing payouts.
Could Soprole be next?

The Bank of England’s chief economist has admitted his profession is in crisis having failed to foresee the 2008 financial crash and having misjudged the impact of the Brexit vote.

Blaming the failure of economic models to cope with “irrational behaviour” in the modern era, the economist said the profession needed to adapt to regain the trust of the public and politicians.


Doh! I consider myself to be a casual observer, largely unschooled in the discipline, but even to me it is clear that most economics are based on idealised models that largely ignore human psychology and behaviour. Yet it on these models that most advice to Governments and banks are based. Of course the "expert" advisor must be right! But then we all know that an "Expert" is just an unknown quantity (X) tied to a idiot under pressure (Spurt).


The home ownership rate has dropped so much you have to wonder if there was a government conspiracy: "Hey guys, lets make it almost impossible to to build anything and watch our investment portfolios grow".

I found the home ownership rate drop over the past nine years surprisingly low in comparison to previous nine year periods.
" . . . 27 years ago, it was its highest of the series at 73.8%. in December 1999 it was 68.5% having fallen -5.3% in the prior 9 years. In the next 9 years to December 2008 it fell -2.4% to 66.1%. The next nine years saw it fall -3.3% to 62.8%. It has fallen another -0.4% since . . ". The last nine years was the second lowest fall of four.
Given the rises in the cries of affordability related to the period of recent house price inflation, and lots of criticism of John Key, it appears that falling home ownership rates over the past nine years was very much consistent with the trend over the past 27 years which included a long period of Helen Clark's Labour government.
I still feel strongly that home ownership is part of kiwi culture - including those in the lower socio-economic category - and we need to reverse this trend.
However, we need to recognise that this appears to be a continuing societal-economic trend over a long period and solutions need to be found in this context - and those who simply like throwing barbs at the previous National Government need to consider this.

After reading the notes on the stats website I have no faith in the numbers.. I really hope that i'm completely wrong, but it look likes they aren't actually referencing/collecting any current data for the % OO numbers and are just continuing the rate of change from the period between the last two census.

contains this bit of text:

After 5 March 2013, the owner-occupied proportion applied to the estimates is reduced each quarter, while the proportion rented
is increased. This increase/decrease is the average quarterly change in the proportion owner-occupied from 1991-2013.
Provided free proportion is held constant at the 2013 Census tenure proportion.
The tenure of private dwellings is assumed to have the same distribution as the tenure of households in occupied private
dwellings (excluding visitor-only households). No information on the tenure of unoccupied dwellings is available.
Estimates of private dwellings and households by tenure have been derived by applying tenure proportions to the respective

If so, given that the last census was 2013* these numbers could be off by a large amount.

(I believe we are still waiting for 2018 census results.. and they could be rather poor given the shambles that it was)

Isn't this an indictment of the political class and their institutions? The RBNZ looks like a failed institution. Low interest rates have caused houses to be unaffordable to young people. Ok, we are not as bad as Argentina yet, but that appears to be our future unless something is done. Over zealous regulation of the wrong things and politicians taking the easy option, while a docile electorate murmurs approval? Where next?

Whoa, Roger.
You are missing a number of points.
1. Home ownership has been declining over the past 27 years not just the last nine years of low interest rates.
2. Look more carefully at your implied assumption that affordability is simply just due to increasing house prices. Look at the other side of the equation; low interest rates contribute to making houses more affordability. One needs to look a little deeper such as interest.co.affordability reports which has recently (past couple of years) shown some improving affordability. So get over the last nine years and recognise that this is an ongoing trend indicating that longer terms factors (probably including housing supply issues, building costs, resource consent, land availability, local body planning constraints, advantageous tax provisions that - arguably unfairly - advantaged property investors . . . . etc?????) are at play. To identify these needs to be done to arrest declining home ownership rates of the past 27 years - not 9 years.
3. As to the RBNZ being a failed institution this is a rather simplistic slag-off. I think that RBNZ have done a tremendous job of seeing the NZ economy through the GFC without the loss of jobs and mortgagee sales. At the moment with the low OCR they are supporting the exporting sector (including the jobs that go with it) and with LVRs influencing the house market avoiding either ongoing house price inflation or serious market crash (gentle landing?) without all the related negative consequences.

Regarding Point 2: Mortgage serviceability is only part of the equation. Yes a mortgage may be easier to service now than 10 years ago but saving for the required deposit is considerably harder due to A) the size and B) record low interest rates on deposits and that is the real issue.

Nobody is complaining that they cannot service their mortgage, they're complaining because they cannot get a mortgage.

Absolutely it's been happening for a while. But that's why John Key's campaigning on addressing the issue was welcomed by many and also exactly why his subsequent abandoning of the issue once in power caused such annoyance to many.

Home ownership was supported by NZ governments and their policies in the past, and has been undermined by more recent governments. Twas never a case of simply one's own two feet, and will never be. Policies need to support and facilitate supply and discourage non-productive, speculative investment and encourage productive investment (as Land Tax did in the past to break up foreign-held land banks and make NZ land accessible to average New Zealanders).

Well said Printer8.

Yes and no. these stats just show that the problem has been around for a lot longer than most realise and and that several generations of politicians have either ignored it or were not aware of it. National were the Government in power when the issue truly came to a crisis point (they inherited it) but they also chose to ignore or deny it and do nothing.

The real lesson here is to understand trends and the consequences and realise the true purpose of Government regulation. Also that it is far easier to legislate to resolve a negative trend early, politically as well as logistically, while the problem is small, rather than reacting to a crisis.

Not sure what your point is here.

9 years to Dec 99 -5.3% National Govt
9 years to Dec 08 -2.4% Labour Govt
9 years to Dec 17 -3.3% National Govt

The criticism of John Key is/was warranted given his electioneering platform was built around the home affordability issue. It was the only reason I voted him in at the time.

I agree that having a home is a basic human need. The benefit to the individual and community overall cannot be measured in $$.

How do we fix the problem with the same thinking that created it?

Disclaimer: I do not support either National or Labour.

Increasing their investment portfolios would be small change compared to having dibs in insulation suppliers now that rental stock is going to have to come up to a standard.

The challenge for NZ in the face of any housing downturn will be to sustain growth in houses built. The government will need to jump into the breach.

They need to negotiate down the prices for the kiwibuild contracts, and the state house building projects if it looks like private development is falling off a cliff.

And if the story AndrewJ linked about Aussie Construction falling off (almost 33% YoY) is true, we could get us a bunch of extra construction workers to really ramp up building.

Which link, please?


"Aussie dollar dropped and popped in early trading after building approvals plunged 9.1% MoM to a 32.8% YoY drop - the biggest decline since Jan 2009 (and dramatically below expectations)."

But is zerohedge.. pinch of salt may be wise.

Also see link in article above just under the heading "AN AUSSIE TUMBLE"

Edit: the 32.8% is a seaonally adjusted number.. no idea what the actual unadjusted number is.
Source : http://www.abs.gov.au/ausstats/abs@.nsf/mf/8731.0

Can anybody explain how a year on year figure needs to be seasonally adjusted? Last i checked November was always the same season..

They take the average temperature for the month of November and apply some strange metric where for every tenth of a degree Celsius above previous years November average the Building Approvals percentage is adjusted tenfold in a direction to suit their narrative.

Seems likes far to much work.

Hit the random number generator function on the calculator, flip a coin (heads = add, tails = subtract) then go put the jug on for a cuppa?

Not if you’re trying to justify your job position.

Probably far too accurate, and way too efficient. No doubt a lot of Forms are involved, and serious manipulation (is there a clue hidden in there, in that word?) of numbers on a suitably large spreadsheet by a suitably large army of staff, all overseen by Very Serious People.

Workflows. You gotta have plenty of Workflows.

And yes plenty of forms so everyone has something to manually triplicate data onto.

Probably had to do away with the carbon copy forms because they always have a pastel blue and a pink form, and you know, the whole assumed gender thing. So now everything is on non-racially specific skin-tone (sorta latte coloured) paper, and it wont bloody photocopy..

...floated the possibility of controversial money printing policies known as quantitative easing in the event of a crisis. Steve Keen said the same thing. I see that the ASX200 is more or less at the same place it was in 2007.

17,000 more rental houses in a year.
I thought we were about to have a rental housing shortage because all the landlords were going to throw in the towel at having to provide decent housing. Looks like a win-win for renters who are in a position to buy. Either more competition for tenants meaning a better house for less rent, or if all these landlords throw their hands up and flood the market with houses for sale the prices will have to drop. :)

Spec homes being built and released out into the rental market due to not selling?

having looked for a rental property recently, there does seem to be a bit of that happening. And there will be more coming I suspect as many new builds struggle to sell.

how do they ascertain how many of the new builds are rentals?
HNZ are obviously rentals, but private market dwellings could be either owner-occupier or rental.
Do they have a way of linking tenancy agreements to new builds?

The numbers aren't for new builds, its just total pool size (I think). Total residential dwellings (from council data) and total bonds lodged with Tenancy Services would be my guess on where the numbers come from.

Edit: Its not clear, but I think they are just following the trend from between the last two censuses? "After 5 March 2013, the owner-occupied proportion applied to the estimates is reduced each quarter, while the proportion rented
is increased. This increase/decrease is the average quarterly change in the proportion owner-occupied from 1991-2013."
Sounds like the numbers of rentals could be completely out of whack if that's what they are doing. Surely some correlation between numbers of bonds lodged must be used?

And number of dwellings is estimated from number of consents granted, with a lag and an allowance for consents not acted on/completed. Not sure i'm going to put much faith in these numbers, i've seen a lot of properties for sale with consents granted..

37.8% is a lot of votes, i see more pain for housing investors as that pool of votes outgrows them 2 to 1 and politicians eye those votes.
"I'm very familiar with the German situation," he says.
"There you have a very affluent country where you have a low ownership rate and people will rent for 10, 20, 30 years the same home.
"We don't have housing tenancy rules that support that at the moment."
So will we see the rise of the renters? Darby says tenancy rules will have to be looked at before that happens.
"We have to validate that as a way of living in a home and we need to support those that choose that particular way of living in a home," he says.
"At the moment, the tenure rules are weak in favour of the renter, and they're very strong in favour of the landlord."

it is interesting to see long term leased apartments about to be built by corporations in Auckland and queenstown backed by the superfund and nga tahu
i think in ten years these along with the government will make up most of the rental market and the mum and dads will disappear due to regulations

Perhaps the Govt, banks & corporations aim to make most citizens renters, so corporations can buy/own bulk rentals and so another market sewn up.
But would there be enough buyers for all those bank mortgages in this scenario?