A review of things you need to know before you go home on Thursday; no rate changes, wholesale trade soft, councils take much higher revenues, linker yields lower, swaps flatten, NZ firm, & more

A review of things you need to know before you go home on Thursday; no rate changes, wholesale trade soft, councils take much higher revenues, linker yields lower, swaps flatten, NZ firm, & more

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

MORTGAGE RATE CHANGES
No changes here today.

TERM DEPOSIT RATE CHANGES
Again, none here either.

TAILING OFF
Wholesale trade was quiet in the December 2018 quarter after two strong quarterly rises. It rose just +4.8% compared to the same quarter a year ago, the slowest gain in eight quarters. Inventories were up almost +10% from a year ago. This data won't help Q4 GDP. For all of 2018, wholesale trade rose +6.6% compared to the +6.5% rise in 2017.

NOT TAILING OFF
The money local authorities are taking in in rates and other regulatory 'income' is growing fast, up almost +9% in the 2018 year. This was the fastest pace in increase since the 2002 to 2009 splurge that averaged +8.2% over those seven years. Since then and before 2018, the average calmed down to just +4.3%. Now its rising fast again.

RISING AUCTION SUCCESS
The auction success rate is rising and was 40% in last week's residential auctions. In Christchurch more than half the properties offered at auction were sold, in Auckland it was 40% and 28% in the Bay of Plenty.

HEAVY BIDDING DRIVES YIELD DOWN
The latest Government bond auction was for linkers - bonds where the bid is for a yield-plus-inflation. $100 mln was offered, drawing $197 mln in bids. The average winning tender was for 1.45% pa (plus inflation) and this is the lowest level ever for the 18 tenders of these September 2040 bonds. The highest yield this series ever achieved was 2.34% plus inflation back in mid 2017. CPI inflation is currently running at 1.9%, so if that still applies at the next yield payment, investors will be getting just 3.35%. Still, that is higher than the April 2033 nominal bond which at the last tender achieved an average winning yield of 3.13% pa. (A five year term deposit at a major bank pays 3.60%, so bond investors are accepting a discount for access to liquidity, and risk-free status.)

BOUNCE-BACK?
The Aussies recorded a massive +AU$4.5 bln surplus in goods and services in January month, a record high for any month for them. Markets are still reeling from yesterday's GDP fail so aren't actually giving them any credit for this yet. Maybe weakish retail sales in January are undermining the good news.

LOCALS BUCK DOWN TREND
Local equities are in positive territory in both New Zealand and Australia and that is in contrast to Wall Street overnight, Europe, and today in the rest of Asia.

SWAP RATES DOWN
Local swap rates are taking some tough signals locally from the Aussie GDP fail yesterday. The two year is little-changed at 1.84% but the five year is down sharply by -2 bps while the 10 year is down -5 bps. The UST 10yr yield is -3 bps lower at 2.68%. Their 2-10 curve is unchanged at +17 bps while their 1-5 curve remains more inverted at -4 bp. The Aussie Govt 10yr is down a massive -10 bps to 2.07%, the China Govt 10yr is down -1 bp to 3.23%, while the NZ Govt 10 yr is down -6 bps so far today to 2.14%. The 90 day bank bill rate is down -1 bp at 1.90%.

BITCOIN FIRM
The bitcoin price is up to US$3,858, a rise of +0.8% today.

NZD FIRM
The NZD has drifted up to 67.9 USc. And we are higher against the Aussie at 96.4 AUc, but little-changed at 60 euro cents. That puts the TWI-5 marginally higher at 72.6.

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10 Comments

Well done the Aussies. Good on them. Maybe one day we might learn a trick or two from them. I doubt it, but you never know. Profitable export businesses leading the economy, who would have thought?

What happens next, you ask? Those with training and get up and go will start making the move to the Lucky Country, where much higher pay and much cheaper houses beckon. Likewise with capital, it will flow towards profitable opportunity and away from stagnation and decay.

Meanwhile, we will all continue all argueing amongst ourselves about precisely which of a veritable smorgasbord of modern Leninist policies to choose next. We have either National Leninism based on house price inflation and immigration: or Labour Leninism based on income inflation for all those dependent on the government teat, coupled with immigration as well of course, plus more taxation of everyone left behind in the private sector to pay for it. Gonna need more immigration to support 'em all.

https://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_inflation...

Worth remembering!

“The welfare state is the oldest con game in the world. First you take people’s money away quietly and then you give some of it back to them flamboyantly.” ― Thomas Sowell https://www.goodreads.com/quotes/1224002-the-welfare-state-is-the-oldest...

“If you have been voting for politicians who promise to give you goodies at someone else’s expense, then you have no right to complain when they take your money and give it to someone else, including themselves.” ― Thomas Sowell
https://www.goodreads.com/quotes/978024-if-you-have-been-voting-for-poli...

While it looks good, I think Australian economy is as reliant on retal bank alchemy, bubble economics, and immigration as much as we are. In fact, I would say the factors I mentioned underpin their economy at present.

True enough, except they haven't gutted their productive base to anything like the extent we have. Well, Western Australia and Queensland haven't, anyway.

I'm not actually anti-government or anti welfare state, we need well functioning institutions. It's the cheating and manipulation inherent in inflation that seems to be our weakness. It misallocates wealth and destroys all trust in the mechanisms of our society. It is viciously destructive. It flatters our accounts by applying a stretchy tape measure, thus allowing stupidity and deception to thrive.

Good argument. So how to stop the rush of our energetic talent to Oz - only two ways (1) improve NZ productivity (2) make living in NZ cheaper and better than Oz. The trouble with improving productivity is nobody knows how and secondly it will take time. To make life better than Oz shouldn't be difficult - it really has a single component: house prices and more specifically land prices. So how to drop the price of land? Land taxes, nationalisation, change the council consent fees to negative charges - every obstacle is paid by the council so long as a building is built - I expect some of the dumber rules would disappear quick.

If Melbourne and Sydney house prices drop 20% I am sure we will see an exodus out of Auckland. That is assuming their housing decline doesn’t decimate jobs, which it doesn’t seem to be

Land Tax along with a drop in company and personal income taxes would be ideal. Dropping taxes on actual productive activities and raising taxes on monopoly resources.

And it has a history of helping in New Zealand, too.

Instead we pay ever increasing amounts of equivalent rent to Australian banks instead of recirculating it through our own economy more productively.

Look at the name of the Committee Chairman, Raymond Huo, the first Labour MP of Chinese descent. It seems both National and Labour are now under Chinese control.

Descent and origin. Has never criticised Dr Jian Yang MP the proven spy (maybe ex-spy?) in parliament.