What happened Friday

A review of things you need to know before you go home on Friday; some rate changes, dairy prices rise, migration data update, PMIs soft, swap rates fall, NZD rises, & more

15th Feb 19, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
Housing NZ raised its 5yr fixed rate by +10 bps.

TERM DEPOSIT RATE CHANGES
Westpac has cut a range of term deposit rates by -5 bps.

DAIRY PRICES LOOKING FIRM
The rise and rise of dairy prices recently in the dairy auction has been confirmed today by USDA Oceania monitoring - only more so. The next auction is on Wednesday, February 20 (next week) and the derivatives trading is currently suggesting that WMP may rise even further then, perhaps another strong +7% rise.

UPDATED MIGRATION DATA
Lots of migration data revisions today as StatsNZ's new system settles in. December's migration gain was bigger than December 2017 but the annual trend is still down. Overall they now say we gained +48,300 permanent migrants in the 12/16 system in 2018. Here is our charting of the data, with both (old and new) series.

NORTHERN FACTORIES QUIET
January factory PMI data was lower, and not only due to holiday reasons; there were some concerning underlying trends as well. New orders were weaker than expected and stocks are higher and growing. Perhaps it is too soon to be concerned, but it is the Auckland factory community that seems to be the region of most concern.

WESTPAC TO MOVE ON
Westpac has announced that it is to end naming rights sponsorship of the Cake Tin stadium in Wellington. Given the hijacking by the general public of the name, they have been very tolerant and supportive over the 20 years they have had these rights.

"CANNOT BE TRUSTED"
In Australia, consumer groups have walked out of a mortgage broker forum. They have quit en masse, citing a lack of progress and willingness to change. The forum was initiated by the mortgage-broking industry. "Mortgage broking lobbyists continue to swarm on Parliament House in an attempt to derail crucial recommendations from the Royal Commission Final Report, showing the sector cannot be trusted to stand up for everyday home owners when it comes to reform," the groups said in a statement.

SWAP RATES DROP
Wholesale swap rates have sunk again today following the ugly US retail sales data, NZ in a sympathy trend. The 2yr and 5yr rates at about -2 bps lower, the ten year almost -3 bps lower. The UST 10yr yield is down by -4 bps to 2.65% for the same reason. Their 2-10 curve is down to just over +15 bps. The Aussie Govt 10yr is down another -4 bps at 2.09%, the China Govt 10yr is up +1 bp at 3.11%, while the NZ Govt 10 yr is down -3 bps to 2.22% and extending the bull move. The 90 day bank bill rate is up +2 bps to 1.91%.

BITCOIN LITTLE CHANGED
The bitcoin price has hardly moved today, still at $3,564.

NZD HIGHER
The NZD is a little softer today, now at 68.1 USc. But we are firmer against the Aussie at 96.2 AUc, and little-changed at 60.4 euro cents. That has the TWI-5 dipping to 72.8.

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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Source: RBNZ

Source: CoinDesk

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28 Comments

by Andrewj | 15th Feb 19, 4:31pm 1550201485

<p>Vladislav Surkov's Hugely Important New Article About What Putinism Is - Full Translation https://russia-insider.com/en/vladislav-surkovs-hugely-important-new-ar…;

by Andrewj | 15th Feb 19, 4:16pm 1550200598

Germany Avoids Technical Recession, Thereby Confirming High Degree of Recession Risk?
https://www.alhambrapartners.com/2019/02/14/germany-avoids-technical-re…

by Cowpat | 15th Feb 19, 4:44pm 1550202256

Peak to trough,peak to peak. Never buy an Auckland house in a year ending 7.
The Auckland median peaked in March 17 at 900,000. 22 months later its current trough is 800,000
In December 07, the median peaked at 465,000,trough at 420,000 8 months later and reached a new high 23 months later.
In November 1997, the peak was 245000, trough at 225000, 11 months later and new high 29 months later.
The current decline is the longest in terms of setting a new low., the largest decline so far in percentage terms. The previous two declines saw national recessions..

by Yvil | 15th Feb 19, 5:10pm 1550203855

"Never buy an Auckland house in a year ending 7"
Or maybe never listen to Cowpat's advice?

So by Cowpat's own figures
Don't buy a house in 2007 for $465k that is today worth $800k and make $335k after tax
Or don't buy a house in 1997 for $245k that is now worth $800k and make $555k after tax

Outstanding advice!

by bw | 15th Feb 19, 5:45pm 1550205947

How do you make $335k, after tax?
Tax doesn't come into it if it's your own home. It's just the same home with a different $ figure attached to its 'value'. "If you buy and sell in the same market you are neither better or worse off" is the usual RE jargon. And if it was an investment, well, you should have paid tax!( But most people lie, don't they?!) Or to put it another way, they used to, but the IRD is going to cast a more informed eye over property transactions from now on! Lie about your 'intentions' at your peril. The costs and penalties are going to be significant)

by Yvil | 16th Feb 19, 10:57am 1550267872

There's no lying involved at all, what I said is absolutely true you bought a house in 2007 for $465k, it's now worth $800k (not my figures but Cowpats) you've made $335k no tax, nobody said you had to sell that house but if you wanted to sell it now, 11 years later and it it's an investment, you will pay NO tax. That is how it is, I do know from experience what I'm talking about.

by MisterB | 15th Feb 19, 8:53pm 1550217190

Actually in your post you said $335k AFTER tax, the point he picked up on. Not NO tax. The implication is that you paid tax. Actually, if you bought with an intention of selling (which would be true of many purchases in the heddie heights, and certainly negatively geared interest only loans) then you do have a tax obligation.

by Yvil | 16th Feb 19, 10:50am 1550267402

Keep talking theoretical, I'll keep making money in the real world

by bw | 15th Feb 19, 9:42pm 1550220137

11 years later you pay no tax? Not true! There is NO TIME LIMIT as to when a property that is bought for investment purposes is taxable. If you've held it for 1, 11 or 110 years and you sell it for capital gain - it's taxable! (unless you lie about 'intent' on sale, of course! Oh, and hope that any retrospective audit doesn't pick it up.)

by Yvil | 16th Feb 19, 10:46am 1550267167

There's no lying, firstly I did not say you had to sell the house, secondly if you did, you would not pay tax on the gain despite your wonderful theoretical spiel above, which just shows you're not talking from experience of having done it.

by Yvil | 15th Feb 19, 7:43pm 1550212991

Also the first part of your argument doesn't stand either, if it's your own home.
A) you listened to Cowpats advice and rented back in 2007 until now, you now have... Nothing
B) you bought the house in 2007 and you are better off now by $335k

by mfd | 15th Feb 19, 7:58pm 1550213885

Your point A) only holds if you rent and fail to invest your excess money elsewhere. Paying down a mortgage may be the only way some people are able to build up any kind of net worth, but it is certainly not the only way if you have a little self control.

by Yvil | 15th Feb 19, 11:15pm 1550225730

and how did you do with your self control? Better than a forced monthly mortgage repayment? No you didn't!

by mfd | 16th Feb 19, 8:02pm 1550300543

Very nicely, thank you. I transferred ~40% of my pay straight into another account each pay day and that money went into various investments. Any extra left in my main account would be sent over too. It's very easy to recreate the forced mortgage principle payments if you want to.

Not that I'm anti-house, I still have the house I lived in in the UK and am now buying one in NZ, but the idea that property is the only way to get ahead financially is simply not true except for those who completely lack self-control.

by MisterB | 15th Feb 19, 8:56pm 1550217396

you're only better off if you sell the property and decide not to buy again or to downsize. A valuation does not equal money.

Actually, if you had invested the exact same amount that was the difference between the rent and the interest payments, rates, insurance and maintenance in another asset class, say an active managed fund, you'd have generated a similar or better return - Mary Holm has run the numbers in her columns before.

by Yvil | 16th Feb 19, 10:47am 1550267257

"Mary Holm has run the numbers in her columns before" Good on Mary,
In real life, we don't tend to save unless we have to and a mortgage is a great way to be forced to save. Mary's beautiful saving on the side never happens because there's always coffees, cigarettes, booze, holidays, clothes, cars and other stuff to spend your money on.

by Pragmatist | 15th Feb 19, 11:50pm 1550227830

Speak for yourself, some of us do have self control.

by mfd | 16th Feb 19, 8:03pm 1550300618

It's short-sighted to assume that everyone else shares your weaknesses.

by bw | 15th Feb 19, 9:33pm 1550219619

Stage 2. Anger.

by Nzdan | 15th Feb 19, 10:27pm 1550222832

Disregard!

by Jock Silver | 15th Feb 19, 5:20pm 1550204440

That's a short time to the trough. Better get in quick!

by Narrabeen Boy | 15th Feb 19, 5:26pm 1550204817

Shit I shouldn't have bought in 2007!!!!

by Andrewj | 15th Feb 19, 6:24pm 1550208264

Anyone listen to John Rhys-Davies this morning?

https://www.radionz.co.nz/national/programmes/ninetonoon/audio/20186826…

by Fritz | 15th Feb 19, 7:25pm 1550211959

It pays not to be gay, Asian, black etc in Christchurch. What a redneck town.

https://i.stuff.co.nz/national/110529813/north-canterbury-man-says-he-w…

by Andrewj | 15th Feb 19, 7:45pm 1550213101

maybe, it never pays to judge.

by Nzdan | 16th Feb 19, 8:58am 1550260734

Would have been those skinheads again driving around in their clapped out EB falcon drinking meths through a loaf of bread. They’ll go home and trash The Man 2’s rental.

by bw | 15th Feb 19, 9:10pm 1550218218

(Wrong spot!)

by Pragmatist | 15th Feb 19, 10:48pm 1550224110

"Nearly 100 suburbs around Australia are no longer members of the "million-dollar club" after steep drops in house and unit prices.

Suburbs in southwest Sydney and Melbourne's inner ring have been impacted the most after falls of almost 10 per cent in Sydney since its peak in September 2017 and 4 per cent in Melbourne since April 2018, according to realestate.com.au."

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…