A review of things you need to know before you go home on Friday; Westpac tweaks rates, major migration revision; tourism risk, tax receipts under pressure; new S35 upgrade; swaps sink, NZD holds, & more

A review of things you need to know before you go home on Friday; Westpac tweaks rates, major migration revision; tourism risk, tax receipts under pressure; new S35 upgrade; swaps sink, NZD holds, & more

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

MORTGAGE RATE CHANGES
Nothing to report today. But we will have a major rate change to announce tomorrow (it's embargoed).

TERM DEPOSIT RATE CHANGES
Westpac has tweaked some short-term rates, up and down.

NOT WHAT WE THOUGHT
Migration data published today revealed that Statistics NZ's new system for measuring these flows suggests net migration is significantly lower than previously officially reported. The new data shows that previous public policy initiatives had more of an impact than realised and migration peaked a lot earlier than previously thought, all the way back in 2016. It turns out much of the 'anti-migrant' angst was based on dud stats.

TOURISM GROWTH AT RISK
The same release updated inbound tourism numbers. Analysts at Infometrics said in November compared with a year earlier, growth in visitor arrivals from Australia and the US more than offset falls from China and Japan. The second consecutive decline in arrivals from China compared with a year earlier highlights risks for the tourism sector as China’s economic growth slows. The potential for slowdown in other international economies, such as the US, could further dampen tourism growth over the next couple of years. Australia made up nearly 40% of tourist arrivals in the past year and could become an increasingly important tourist market as economic growth slows elsewhere.

SLOWER GROWTH, LESS TAX, MORE SPENDING
International analysts Fitch see our economy slowing with tax receipts coming under pressure on the back of this slowdown. They forecast New Zealand's fiscal surplus to narrow to +0.8% of GDP in FY2018/19 (July-June) and +1.2% in FY2019/20, relative to +2.1% in FY2017/18, marking a downward revision from our previous forecasts of +2.0% and +1.9% respectively. This is on the back of the country’s slowing economic growth, which they expect to weigh on revenue collection over the coming quarters, combined with greater spending as outlined in the new Wellbeing Budget for 2019. That said, our public finances are likely to remain healthy, posing little risk to macroeconomic stability.

CAN - SO THERE
As an indication of just how controlling Australian bank bosses are of their New Zealand operations, it turns out CBA dismissed ASB concerns many months ago about the timing of their results release which have been scheduled for Waitangi Day. "We don't care" is the message. It actually isn't a big deal, but the attitude is revealing.

IGNORING WALL STREET SIGNALS
Tokyo (+0.6%), Hong Kong (+0.3%), and Shanghai (+0.5%) equity markets have all opened up positively today, alter lackluster trading on Wall Street overnight (+0.1%). Australia has also responded (+0.6%) although New Zealand hasn't (-0.1%)

COAL MINING COUNTRY SIZZLES
Even hotter temperatures in Australia have brought new load-shedding notices by their regulator. Blackouts seem very likely, especially in Victoria, even in these extreme conditions. An Alcoa smelter has been ordered shutdown.

BIG OFFICIAL DATA LEAKS
And staying in Australia, it turns out all the details of their electoral rolls have been passed on to five firms, four of which are major global marketing firms. It was intentional.

BALANCING THE SCALES
In New Zealand, the Government is moving to strengthen the law protecting consumers and small business from anti-competitive behaviour by powerful firms. Section 36 of the Commerce Act is to be beefed up significantly. The discussion paper is here.

WHAT HAPPENS MONDAY
North of Taupo it will be a public holiday on Monday. Because we are based in the zone, we will only have a skeleton staff covering the news and our content, but most regular features will be published.

SWAP RATES FALL
Local wholesale swap rates are lower across the board, motivated by international concerns about growth especially in Europe. Our swap rates are sagging by about -2 bps so that puts the short end back to record-low territory. The UST 10yr yield is also a little lower than this time yesterday, at 2.73% and their 2-10 curve has slipped slightly to under +15 bps. The Aussie Govt 10yr is down sharply to 2.21% and that's an -8 bps fall, the China Govt 10yr is up +2 bps at 3.17%, while the NZ Govt 10 yr is at 2.34% and down -4 bps catching some blowback from the Aussie weakness. The 90 day bank bill rate market is up +1 bp at 1.89%.

BITCOIN FIRMER
The bitcoin price is marginal higher at US$3,570.

NZD SOFT
The Kiwi dollar has slipped against the greenback, down to 67.5 USc. On the cross rates however, we are up to 95.3 AUc, and are holding at 59.7 euro cents. That leaves the TWI-5 at 72.

This chart is animated here. For previous users, the animation process has been updated and works better now.

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

21 Comments

Comment Filter

Highlight new comments in the last hr(s).

And Gisborne! On holiday.

I'm in Ohope (Bay of Pleanty), on holiday : )

Mount Maunganui here. You guys are showing your age.

Well, Gisborne inherits the Auckland Anniversary holiday (which causes interesting disconnects between Hawkes Bay & Gisborne given many organisations with branches in both regions).

If swaps are back at record lows then all the Aussie banks operating in NZ should be offering interest rates for a 1 year mortgage well below 4% - why do Kiwis tolerate the billions of dollars profit each of these banks makes when the interest rates should be significantly lower. I guess during 2019 we will not hear any bank economists (the "mist" part of their name is quite appropriate) predicting interest rates increasing - perhaps they will start saying it is only a matter of time before rates are at 3% or less for 1 year fixed? Anyone heard from Tony Alexander lately or his he away tramping?

NZers need to be more German.

False assumption here. As the bank metrics clearly show, banks are mostly funded by customer deposits. Even the big four banks who have some wholesale funding, rely about 82% on those local customer deposits. Shareholder funds supply 10%. Wholesale funding is actually a very small proportion. Banks use wholesale sources to get long term funding - almost all the customer deposit funds are very short-term.

Bank margins are essentially the difference between what they charge customers for loans, and what they pay other customers for their deposits. The only material way to get lower mortgage rates is to pay depositors less. So far banks haven't shown much recent inclination to do that. (Or to let their margins slip significantly.)

David your comment on margins neglects to mention the fact that banks create loans out of thin air, ie the "money multiplier". Your bank metrics page shows the leverage ratios. So their total quantum of achieved margin is hugely more than just the difference between interest paid on actual customer deposits and charged for loans. Just saying......

Denpal, your comment on leverage neglects to mention the fact this is leverage on shareholder funds, not on deposits. You may wish to avail yourself of the balance sheets. While a deposit is created with the creation of credit, the deposit goes to vendor which may or may not bank with the lending bank. Regardless, the deposit attracts an interest rate and is open market to competition ... all banks need to maintain deposit to loan ratios etc.

Billion dollar profits by the big banks don't lie.

I've had some complaints about power outages in Victoria turn up on social media. The rolling blackouts appear to be widespread.

Presumably they are trying not to kill too many people in one place. Shutting down coal fired stations way too soon seemed such a good idea at the time. Politicians got points for supporting fashionable ideas. Hopefully there will be a backlash. Abject failure of representative democracy, again.

Oh dear, if this goes on I'll have to get one of those there yellow vests and stand about on a roundabout with a sign saying Enough is Enough. Sad.

The main driver is probably to stop the frequency from going out of range and the whole electrical grid failing. No doubt people will suffer or die, and businesses will be harmed by having no power to operate.

I did my best to help my friends feel better by pointing out they don't really need power given that they don't need to run the heater in this weather. ;)

Indeed, Roger. VIC shut down Hazelwood (1600MW), SA blew up Northern (520MW). For comparison, NZ's total demand is of the order of 5000MW (5GW).

Prices in SA and VIC are, but of course, higher than the rest, although all are having to stump up to cover SA and VIC's parlous state. See the AEMO real-time dispatch overview.

Letting pollies and non-engineering types effectively redesign power grids via granting or withholding funding or subsidy by generation type, is a folly, paid for by guess who.....

I have visited Hazelwood power station. It was a truly amazing place. Really massive industrial machines roaring away. Absolutely fascinating. Inside the machine hall it is like a good painting, level upon level of detail. ie As you get closer to each mechanical or electrical device more interesting detail becomes apparent....

NOT WHAT WE THOUGHT
Migration data published today revealed that Statistics NZ's new system for measuring these flows suggests net migration is significantly lower than previously officially reported. The new data shows that previous public policy initiatives had more of an impact than realised and migration peaked a lot earlier than previously thought, all the way back in 2016

Wait.. immigration peaked in 2016? Isn't that when the Auckland REINZ HPI stopped going up and started heading sideways? Just a random coincidence?

Let me see now, 43,400 in year to Nov, at say, 3 per household gives 14466 houses new houses required, less 33 Kiwibuild houses leaves 14434 houses short. Put another way, only 43,301 people had to move in with someone else. That's all right then? Problem solved? Immigration is wonderful. Is it just me, or am I hearing whispers of "We know what's best for you" in the wind? Or is it arbeit macht frei? I can't quite tell.

Ah Roger, the anti-immigrant immigrant..

More to do with offshore interest rates rising rapidly / local demographic factors / stimulus from the recent OCR cuts wearing off.

But mainly offshore rates

Property Recessions in NZ are surprisingly similar so is reasonably easy to deduce what’s going on.

FYI an increase of 1,000 people a month in migration increases capital gains by approximately 10% in the following year

It’s definitely a big factor so you’re right, but a number of things were happening that also chip in as part of the explanation

DC, being as how you "will only have a skeleton staff covering the news and our content", there's a good excuse for stories about Zombie Companies.....

The guts of the matter will not get any coverage.