Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
None so far today.
TERM DEPOSIT RATE CHANGES
SBS Bank have raised their one year offer rate by +5 bps to 3.40%.
A SPLUTTERING MARKET
The December housing market transaction data from the REINZ was released today. It says there was an 'extremely quiet' December with the lowest nationwide house sales volumes in seven years. Nationally, the median house price rose by less than +1.5% from the same month a year ago and fell by -$29,000 from November. The +1.5% annual gain is the lowest in more than a year and the third lowest in seven years. Auckland, Waikato and the Bay of Plenty are where the gains are least; they are higher the further south you go from there.
A NO GROWTH MARKET
The REINZ data for Auckland shows the Queen City in a volume and price funk, with unusually low volumes and no price growth at all. For a variety of reasons this situation may last for a few more years yet.
THE PAYOFF FOR THEIR FINANCIAL SUPPORT
Changes to the Employment Relations Act now in effect include the following: Union representatives can now enter workplaces without consent, provided the employees are covered under, or bargaining towards, a collective agreement. Pay deductions can no longer be made for partial strikes, Businesses must now enter into bargaining for multi-employer collective agreements, if asked to join by a union, Employees will have extended protections against discrimination on the basis of their union membership status. From May 6, more union-friendly changes take effect including, Employers will need to allow for reasonable paid time for union delegates to undertake their union activities, Employers will need to pass on information about the role and function of unions to prospective employees, 90-day trial periods will be restricted to businesses with less than 20 employees, The duty to conclude bargaining will be restored for single-employer collective bargaining, Employers will need to provide new employees with an approved active choice form’ within the first ten days of employment and return forms to the applicable union, and a few others.
ACHIEVING MORE WITH LESS
The number of dairy cattle has dipped for a second year, while beef cattle numbers increased strongly in 2018, up +5% to 3.8 mln. The national dairy herd was at its highest level 2014 at 6.7 mln and is now down to 6.4 mln. Meanwhile the national sheep flock fell to 27 mln, down from its peak of 40 mln in 2006. On a stock unit basis (which adjusts for different livestock types), the peak was 100 mln in 1990 and is now down to 86 mln and it is expected to fall further. Despite this, in 2018 agricultural exports from livestock amounted to $26.8 bln, a rise of +14% from 2017.
POSITIVE JOB CONFIDENCE
Confidence in the labour market rose strongly in December, reaching its highest level since early 2008. Households’ perceptions of job opportunities have continued to rise, as demand for workers has remained strong and the pool of unemployed job seekers has fallen. Employment confidence rebounded in Auckland and Waikato, and remains particularly high in Gisborne/Hawke’s Bay and Southland.
BENEFICIARY NUMBERS RISE
After steadily moving down from high levels in 2008, the number of working-aged beneficiaries is moving back up again, and by December reached 299,300 its highest level in four years. "Job seeker support" (unemployment benefits) rose by +9% pa to 134,000 the highest level since 2012 - despite a falling jobless rate. In 2012 84% of those who were jobless or between jobs were on an income support benefit. In 2018 that has risen to 94% - virtually everyone. The level of other benefits are little-changed. There are now 2.0 workers for every adult receiving a benefit.
LOWER YIELD, LESS DEMAND
The latest NZ Government bond tender for $250 mln of April 2029 bonds (ten years) has brought lower yields and less demand. The 2.27% yield is the lowest-ever for this issue (the high was 2.86%). The coverage ratio of 1.6x was the lowest-ever for this issue (the high was 3.5x).
The national median rent for a 3 bdr house has risen to $460 per week in December, up +$10/week. In Auckland, there was a small decline to $640/wk, in Wellington a rise to a record $625/wk, and in Christchurch it was unchanged at $420/wk.
PROPOSED RBNZ BANK CAPITAL INCREASES 'UNNECESSARY & POTENTIALLY DAMAGING'
In a rare move, investment bank UBS has provided one of its research reports to NZ media on an unsolicited basis. The report's on the RBNZ's proposed increase to NZ banks' regulatory capital requirements. UBS argues the RBNZ proposals would increase NZ bank capital requirements to the highest in the developed world and says they appear excessive. Equity is expensive, UBS adds, noting a cost of capital of 11%, with shareholders to demand "at least" this return. Thus UBS estimates NZ's Aussie owned banks will "reprice" (increase) their NZ mortgage rates by between 80 basis points, to generate a 12% Group return on equity (ROE), and 125 basis points, to maintain current ROE of around 14.4%. "A stronger NZ would be dilutive to Australia unless fresh capital is raised. RBNZ capital proposals appear unnecessary and potentially damaging. We believe the RBNZ's endeavours to strengthen the banks could come at a significant cost to the NZ economy as they appear to be materially underestimating the likely mortgage repricing. We see these proposals as expensive and unnecessary. That said, if the RBNZ proceeds with its capital proposals, it may be the final catalyst for dividend cuts at the Aussie major banks [with a] potential range of [an] 11% cut at ANZ to a 29% cut at [BNZ's parent] NAB," UBS says.
In Australia, tighter property lending has investors fleeing the market with the lowest percentage of borrowers since 2009. Overall housing market lending is down more than -10%, with lending in November for new houses down -10.8% and lending for existing housing down -11.3% year-on-year.
HOB-NOBBING WITH THE ECONOMIC ELITES
The Prime Minister and the Minister of Finance (and teams) are off to Davos and the World Economic Forum, to talk up their 'Wellbeing Budget' (and using 'trade talks' as a crutch).
EQUITY MARKET UPDATE
Asian equity markets have all opened lower by about -0.5% today. But Australia isn't showing a decline yet, and New Zealand is up +0.4%.
SWAP RATES LOWER AGAIN
Local wholesale swap rates are at record lows for all durations from one to four years and longer durations are falling still too. The two year is now at 1.88% and that is a cumulative -20 bps fall from just before Christmas. The UST 10yr yield is little-changed at 2.71%. Their 2-10 curve is just on +17 bps. The Aussie Govt 10yr is at 2.29% and up +1 bp, the China Govt 10yr is down -2 bps at 3.13%, while the NZ Govt 10 yr is at 2.31% and unchanged. The 90 day bank bill rate is holding at 1.90%. (The record low is 1.86% in December 2017.)
The bitcoin price has held its level at US$3,603, almost no change from this time yesterday.
The Kiwi dollar is a lot lower today at 67.6 USc a fall of almost -¾c in 24 hours. On the cross rates, we also lower against the Aussie at 94.4 AUc and at 59.3 euro cents. That puts the TWI-5 at 71.8.
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