A review of things you need to know before you go home on Thursday; it's all about the TWG report and the reactions, plus DHB poor financial management, productivity drops, swap rates fall, NZD soft, & more

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

No changes to report today.

None here either.

There is only one story in New Zealand today, the Tax Working Group's final Report. And 90% of the focus today has been on the recommendation that a Capital Gains Tax be implemented. But it wasn't unanimous. Here are some easy links to what the whole Report covered. Capital Gains Tax. Agriculture in the ETS. A 'vacancy tax' on land-bankers.

There is much more in the Report than just recommendations on a capital gains tax. For example, they recommend that low-income earners get special tax advantages for saving, such as refunding KiwiSaver ESCT, continuing KiwiSavers tax credits when you are on parental leave, reducing low-income PIE rates, more environmental taxes.

But not everything directly involves more tax. For example, the TWG recommended that the Government stop charging the NZ Superfund income tax. They also recommended that the imputation system remain untouched. And they said the best way to help low income workers is not by tax rebates but by "welfare transfers". And they want to target the wealthy. They want the IRD to use big data to identify income under-reporting (which will require them to coerce private companies to share their data). They want to give the IRD the ability to take a lien/security over a taxpayer's assets if there is a dispute. It wants the Government to:a) fund oversampling of the wealthy in existing wealth surveys, b) use the Census to target wealth, c) get the Inland Revenue to regularly repeat its analysis of the tax paid by high wealth individuals, d) commission research on using a variety of data sources on capital income, including administrative data, to estimate the wealth of individuals. The clear message is that wealth taxes are coming at some point.

Every lobby group, including political parties, were quick out of the block giving their views. Here is a summary. And here. Those opposed to a GCT have been very vocal, but they seem to be the usual suspects. Here. Here. Even the Government who commissioned the report ensured they have some distance from the tougher bits.

In the past six months or so, the number of real estate agent licences has been stable at about 15,560 nationally. But over the same period more than -110 agents have let their licenses lapse in Auckland, taking the total down to under 6,800 for the first time since late 2015. The move isn't large and the number of people with active licenses doesn't necessarily reflect the number of people actively working as "land agents". But the trend is down.

Meanwhile, there was another NZ Government bond auction, this time for $200 mln of April 2037 nominal bonds. Eighteen of the 70 bidders were successful and they got their share at a weighted average accepted yield of 2.61% which is the lowest yield for this duration ever.

The Health Minister today castigated the DHB's for their inability to run their operations with the funding allocated in the Budget. He put them on notice to improve and said "we [the Government] are prudently managing the books and running a surplus. We expect DHBs to display the same sort of financial discipline". His main gripe seems to be overspending on staff costs. The Government will be pleased other news has diverted attention away from this.

The Government will also be pleased that today's release of official productivity data won't get much attention either. This shows only a marginal improvement in 2018, the second straight year productivity growth has eased. Rising productivity is really the only way higher real incomes can be afforded and today's data calls into question how big State pay rises, no matter how much 'deserved' can be sustained without damaging the underlying economy.

The Australian economy created +39,100 new jobs last month - outstripping expectations - holding their unemployment rate at 5.0%. Of that, +65,400 were full-time jobs while the number of part-time jobs fell by -26,300. +47,100 full time jobs were created in NSW alone. However, pay rises only managed a +2.4% gain.

Local swap rates have fallen again today, down -2 and -3 bps across the curve. The UST 10yr yield is unchanged at 2.65%. Their 2-10 curve is still just on +14 bps however. The Aussie Govt 10yr is down another -4 bps at 2.06%, the China Govt 10yr is up +2 bps at 3.16%, while the NZ Govt 10 yr is down -3 bps so far today to 2.22%. The 90 day bank bill rate is down -1 bp at 1.89%.

The bitcoin price is marginally higher at US$3,918.

The NZD is marginally lower today at 68.5 USc. And we are slightly softer against the Aussie at 95.7 AUc, and a little lower at 60.4 euro cents. That has the TWI-5 at 72.9.

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$' chart will be drawn here.
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
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 or click on the "Register" link below a 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.


Productivity is falling because of more red tape and society becoming lazier. In need of a good hard recession to focus the minds.

Seems like the world's central banks have been stridently focused on preventing natural cycles from occurring by printing and borrowing their way out though, hoping to pass it on to the future.

The large number of minimum wage workers employed - directly or indirectly via contractors are seeing big pay increases that DHB's cannot avoid.

Why the surprise ?

My reaction too. Gee up union disaffection. mandate min wage increases, tout a Living Wage to all and sundry, and then gape in wonderment as "main gripe seems to be overspending on staff costs."

Getting a 404 error on the link above about the vacancy tax

High wages leads to more investment in productivity enhancing machinery, but only if the business is profitable enough to afford it. If we run a current account deficit due to poor government policy settings, then the result is reduced profitability of exporters and producers of import substitutes. Yet this has been NZ government policy since 1973. We do not need more exports, we need more profits from exports. Investment flows to opportunity, and away from lack of opportunity. Why are we choosing to follow Argentina's path?

China puts quota on Australian coal.Who are your friends ?

This may become an own goal for China by using this type of blackmail, some, even many of the export markets and suppliers of food/goods China cannot make may consider China to be so unreliable to trade with as not worth the effort/risk and go elsewhere. Time for China to join sufficient of the worlds accepted practices to be an acceptable long term trading partner.

Australian investors now seeking to punish the banks for allowing them to partake in risky investments:

I bet you the Tates were “Savvy investors” around the barbie with their mates, but didn’t understand Interest Only lending isn’t forever.