A review of things you need to know before you go home on Tuesday; no rate changes, eyes on dairy prices, credit card growth weak, RBA causes waves, swaps firm, NZD soft, & more

A review of things you need to know before you go home on Tuesday; no rate changes, eyes on dairy prices, credit card growth weak, RBA causes waves, swaps firm, NZD soft, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report.

TERM DEPOSIT RATE CHANGES
None here either.

DAIRY PRICES CONFRONT STRONG GREENBACK
There is another dairy auction early tomorrow morning, one coming after a string of eleven where consecutive gains have been booked. The dairy derivatives pricing suggests that another small gain is expected tomorrow. But remember that the US dollar has been rising recently and while settlement for trades will be in US dollars, most buyers will not be from the US and they may have affordability limitations. This applies especially to Chinese buyers whose own currency has depreciated -2.5% in US dollar terms since the start of the month.

NO LONGER A GROWTH EARNER
The latest credit card data suggests banks are suffering extended low balance growth. Balances are flat and the amounts incurring interest have been about 60% of those, their historical low, for nearly a year and a half. But transaction volumes are still growing well, up +7% in April from a year ago.

ALLOWING BANKS TO SET THEIR OWN SERVICEABILITY STANDARDS
In Australia, their prudential regulator APRA is proposing to loosen the serviceability restrictions banks must use when assessing a borrowers ability to afford a mortgage. Currently they must use "at least" the higher of 7% or a 2% buffer above the loan's actual interest rate. All banks adopt tougher standards than that. Now APRA is 'consulting' on changing this so that banks "would be permitted to review and set their own minimum interest rate floor for use in serviceability assessments". But an "at least" 2.5% buffer would still be retained, and in practical terms that would mean at least +2.75%.

BACK IN THE BLACK
Listed local insurer Tower has returned to profitability in its first half of trading and expects that to continue for the full year.

STEPPING BACK TODAY
Equity markets in Australia are having second thoughts after yesterday's election relief rally - second thoughts that they may have overdone it somewhat. The ASX200 is down -0.3% today after yesterday's +1.7% rise. You may recall Europe was down -1.5% overnight and Wall Street was down -0.8%. Today in very early trade, Shanghai is up +0.3%.

A NEGATIVE GENERATION
From a 16,000 person survey, including 300 from New Zealand, millennials and Gen Zs are disillusioned with traditional institutions, skeptical of business’ motives and pessimistic about economic and social progress. That's all according to the 2019 Deloitte Millennial Survey,

MINUTE EXCITEMENT
The relase of the RBA minutes from their May meeting (pre-election) caused a minor flurry on the currency markets as it was revealed it was close to cutting rates. In the end it didn't. But these minutes will encourage those who think a cut is coming soon. They see the coming low- and middle-income tax offsets announced in the Australian Government 2019-20 Budget but are uncertain how this might affect the outlook for growth in household disposable income.

AUSSIES ABANDONING SHIP?
More than 8500 people went to the "New Zealand Now" website the day after the Australian election and 512 registered interest - the first step in the visa process. That compares to about 20 registrations on a normal day, the government department said.

LOCAL SWAPS FIRM
Local swap rates are holding, up +1 bp for tenors from 1 to 10 years. The UST 10yr rate is firmer at 2.42%, up +2 bps. Their 2-10 curve is little-changed at +19 bps while their negative 1-5 curve is narrower at -13 bps. The Aussie Govt 10yr is unchanged at 1.68%, as is the China Govt 10yr at 3.31%, while the New Zealand Govt 10yr is up +2 bps to 1.85%. (All changes from this time yesterday.) The 90 day bank bill rate is up +1 at 1.71%.

NZ DOLLAR SLIPS
The NZ dollar was unchanged at 65.4 USc. But after the Lowe/RBA speech in Brisbane today, the bears are out and the collateral effects have pushed it down to 65.3 USc, an eight month low. Against the Aussie we are a little firmer at 94.6 AUc. And we are also down at 58.4 euro cents. That leaves the TWI-5 at 70.4.

BITCOIN STILL ELEVATED
Bitcoin is still elevated but little changed from this time yesterday at US$7,903. Bitcoin is tracked in the chart below.

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USD 
NZD
End of day UTC
Source: CoinDesk

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14 Comments

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60% of the credit card balance is interest paying. Evidence that kiwis don't manage financially and are happy to pay real money for nothing. No surprise then that much of the population are simply broke.

100% correct, not paying off your credit card on time is one of the greatest way to waste money, and lots of it over years. Instead of complaining about anything out of their control, the 60% of people who do not pay off their credit cards, would be so much better off taking better care of their own affairs.

10
up

"......millennials and Gen Zs are disillusioned with ..... and pessimistic about economic and social progress" bit sad that. When I was a young fella it was all going to be upwards and onwards.

10
up

Hmmm, I’m gen Y and I’m pessimistic about the future. But I guess that’s what happens when you “borrow from the future” and run Ponzi schemes like we have been for a long time.

Not a surprise really Withay if the numbers are true. (2017) 750,000 New Zealanders still paying off a student loan. Most will be Xers and millennials.

Good news is that the average KiwiSaver balance at $19,000 equates to just over 2% of the median price of a house in the City where all the work is.

Oh and let’s not forget the credit card debt, car loan to get to work and pay for the rent on the bedroom in the shared apartment.

Uber Eats once a month is the only luxury item many can afford to get over the reality of the situation. No wonder the Banks are lobbying for lower capital requirements for all. I just feel for all those parents that didn’t get it and leveraged themselves up to prop their kids up in the bankers housing finance ponzi.

https://i.stuff.co.nz/business/industries/104788457/what-do-most-kiwis-o...

Could be worse US has average student loan debt of US$37,000. And some poor sods 100 recorded as of last year have accumulated student loans in excess of US$1,000,000. Great start to your working career..

Those 100 are 'professional students'

Tax cuts, monetary stimulus and propositions to loosen lending standards - even the imminent threat of a debt-fueled crisis won't convince a nation to step away from creating a yet larger debt binge to artificially boost the economy.
Can Australia still call itself the lucky country after all this plus suffering a per-capita economic recession recently?

Calling...... Roger, .............. Roger,......................... Roger. You are invited to Martin Place

If these Aussies come here, do they know that on the plane they will more than likely be sitting next to a criminal being repatriated back to NZ?

Green MP Golriz Ghahraman gets a security escort after increased threat level
https://www.nzherald.co.nz/front-page-top-stories/news/article.cfm?c_id=...
Almost all of her policies are wrong headed IMHO but she deserves respect - for example she is a good deal brighter than most MPs.
There is evidence that the young men who go out intending to kill choose girls and attractive women as preferable targets. It happens at school shootings in the USA and to Jo Cox and with the muslim terrorist attack in Manchester. It is freudian.
This comment has nothing to do with economics but it is the important thing that we need to know today.

From Deloitte's website: "Despite current global economic growth, expansion and opportunity, millennials and Generation Z are expressing uneasiness and pessimism—about their careers, their lives and the world around them".

This is not surprising. We've seen one of the longest economic expansions in history since the GFC but it's all but passed by these two generations. Fewer job opportunities, more insecure work, skyrocketing house prices, repeatedly being told there won't be superannuation by the time we're retirement age, not to mention a dying planet.

For nearly nine years, we had a Government that did nothing to address these issues, housing in particular, going as far as to say that ever increasing prices were a good thing. The Government we have now talked big, but was ultimately beholden to the part of the electorate that *has* benefited, which has seriously limited the policy they're prepared to progress.

“For nearly nine years, we had a Government that did nothing to address these issues, housing in particular“ - and don’t forget the 9 years before that too. House prices up 100% from memory.

Yeah that’s true but foresight is a lot more difficult than hindsight. Which party campaigned on addressing the problem with the luxury of hindsight?

Haha I’m not disagreeing, merely pointing out that both national and labour are crap regardless of what they say they will do.