Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report today.
DEPOSIT RATE CHANGES
Update: ANZ signaled some rate cuts for terms 9 months to 5 years, with a small +5 bps rise for their low one year rate. The Police Credit Union has cut -20 bps from its bonus saver account.
BUSINESSES ARE NOT HAPPY
In the latest ANZ survey, business confidence turned sharply negative this month. Look at the chart here; we are back to 2009 confidence levels. Uncertainty around changing Government policy, a softer housing market, and difficulty getting credit are likely culprits. Weakness was apparent across all activity indicators, but pricing intentions, inflation expectations and interest rates expectations all increased. ANZ says there is a real risk, given an economy at a delicate juncture, that the fall in activity expectations could prove to be self-fulfilling. Outcomes will depend crucially on how prolonged the apprehension proves to be.
NEW HOUSING PULLBACK
The number of new dwelling consents issued in October was below where it was 12 months ago. Ironically, there were far fewer apartment (affordable) consents which outweighed a small increase in single family house (not-so-affordable) consents. The trend across the regions was mixed. There were a few areas of strong growth in the North Island, but much of the South Island saw falls on an annual basis.
DITTO FOR COMMERCIAL PROJECTS
And the approval of buidings for other-than-housing also fell sharply - except for one large University of Auckland consent. Non-residential building consents totaled $584 mln in October, up +11% from a year earlier. However, it would have been a -12% fall if it wasn't for the $120 mln consent for the University of Auckland’s new engineering building.
TURNING UP
In contrast, Aussie building approvals jumped sharply, up +19.6% year-on-year. This was even higher that the positive +14.1% estimates by market watchers. Still, over the full year to October, these consents are still down -7.3% from the same 12 months a year ago. If we don't watch out, Kiwi builders will move across the Tasman for work, making KiwiBuild even harder to achieve.
IN AUSTRALIA TOO
In Australia, Youi has refunded 102 consumers approximately AU$14,000 in total, and will pay AU$150,000 as a community benefit payment to the Financial Rights Legal Centre's Insurance Law Service, after ASIC challenged its home and car insurance sales practices. It was the same behaviour seen in New Zealand; some sales staff were charging consumers for insurance policies without their consent to purchase. This included where consumers only made an inquiry to get an insurance quote.
HOUSING DEBT GROWTH SLOWS
New Zealand housing debt grew by $1.064 bln in October from September, the slowest growth for an October since 2014. On a year-on-year basis, it is up +6.2%, the slowest growth in more than two years. That growth rate has tailed off in every month of 2017 (it was +9.3% in December 2016).
CONSUMER DEBT GROWS FASTER
Consumer debt is now growing very fast. It is up +7.7% year-on-year and that is its fastest pace since November 2005. Banks have been lagging finance companies in this sector but have really started to pick up their appetite for more consumer debt in the last six months after having pulled back over the past two years.
COMMERCIAL DEBT GROWTH MIXED
Business debt is growing faster again, up +6.4% year-on-year to October. But rural debt is marking time, only up +2.5% on the same basis.
AUSTRALIA TO GET A BANKING ROYAL COMMISSION
Australian government announces Royal Commission into alleged misconduct of financial services providers pledging 'it won't be a never-ending lawyers’ picnic'. Also, see this.
THE COST OF ZOMBIES
In China, badly performing local authority-owned enterprises being kept alive excessive debt are taking more than -1.2% off the Chinese growth rate, says the IMF. Meanwhile, an IMF review of the Hong Kong economy sees growth rising to +3.5% next year.
WHOLESALE RATES MIXED
Swap rates are up +/-1 bp across the curve. But of note, the one year fell -1 bp to a record low 1.99%. The 90 day bank bill rate has slipped back -1 bp to 1.91%.
NZ DOLLAR LOWER
The NZ dollar is lower and is now at 68.5 USc, falling sharply on the poor business confidence survey. On the cross rates we are just under 90.3 AUc, and 57.7 euro cents. That has the TWI-5 down to at 71.3. Bitcoin is still on a wild ride. Today it rose at one point to US$11,364, three hours later it had fallen to US$9,301, but now it is back to US$10,318.
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17 Comments
Milford spits(a very expensive) dummy over Xero delisting
https://milfordasset.com/letter-head-nzx-market-supervision-regarding-x…
Really not a good look for the NZX, is it? Are they completely out of touch with the people who keep them in business? They are outrageously overpriced to deal with as a retail investor, costs me $1 to buy or sell in the US, $6 in Aussie and $29 in NZ, pretty much the exact opposite of what I would prefer. I did send them an email about it but got the normal snotty nosed corporate reply, basically "We are far to important to care about the concerns of small investors".
In the latest ANZ survey, business confidence turned sharply negative this month. Look at the chart here; we are back to 2009 confidence levels
Ten year NZ government debt could not have forecast this eventuality more accurately - I guess it's not any worse or better here than in the US.
Depending on the specific measure, corporate net income is in Q3 2017 at best barely more than Q4 2014, or, in the more important economic measures like profits from current income and corporate net cash flow, still below that period.
This lack of growth goes back almost six years, a deviation in growth rates (and much more volatility) registering in early 2012 following the monetary fireworks in 2011. Economists and central bankers after finally admitting their might be an economic problem have tried to turn it into an exogenous one, blaming the medical profession so as to avoid scrutiny of the monetary profession.
The opioid crisis is all-too-real, of course, but the labor market doesn’t have a drug problem so much as businesses have a cash flow problem. Corporate cash flow is clearly and substantially restrained. Absent sustained cash flow growth, which goes along with profit growth, businesses in the aggregate can only be cautious about their cost structures. Labor is their single largest input. [emphasis added]
Given this situation, one that has been thoroughly proved as more than temporary, from inside the corporate board room the repurchase of shares actually makes some (perverse) sense. With limited internal resources, it appears far less of a risk to borrow funds from the bond market to buyback stock rather than build more and better productive capacity.
That underlying flow into stocks has led to a growing imbalance therefore between prices and profits; i.e., valuations. Along with stock investors who have rationalized this difference as something like the mainstream inflation story (the 4.1% unemployment rate really does mean full employment, which can only lead to really, really robust economic conditions), valuations have struck levels last seen, only seen, in the late nineties during the dot-com bubble. Read more
Some P/E have ended up in the 300 region. The S&P500 looks very manipulated so it does not represent the statistical investment tool that it used to. This can only go on for so long.
The Fed's shadow rate is starting to match the official rate.
https://www.frbatlanta.org/cqer/research/shadow_rate.aspx?panel=1
Healthy Homes Bill passes requiring rentals to be warm and dry
http://www.legislation.govt.nz/bill/government/2015/0077/latest/DLM6512…
Under our law, every rental property will have a modern heating source," said Housing Minister Phil Twyford. "It will be effectively illegal for landlords to rent out properties that are a threat to the health of the people living in them.
What's the ceiling made of? Rising heat from solid wood burners, for instance, tend to warp the old wooden ceilings ( pre gib!) and crack them ( heat just goes up, heat pumps direct it down first), but I guess you checked that out with the installers first? Some still do have the old ventilation roses, but they were to allow gas fumes to escape - along with the heat!
Labour Government has ventured where National was afraid to wander. It sends a clear signal to all Landlords to self reflect as to why they are in the game in the first place.
Speculator sells at discount price - FHB take your time and buy at more affordable price.
RSA to follow Zimbabwe?
State capture goes beyond simple corruption. It involves the systematic ransacking of institutions, so that the nation’s laws and regulations, as well as the people in positions of power, work for the financial benefit of groups or individuals. “The singular aim of state capture is to facilitate the plunder of state resources for the benefit of politically connected individuals and their corporate vehicles.” It amounts to “institutional vandalism on a massive scale”.
https://www.ft.com/content/707c5560-d49a-11e7-8c9a-d9c0a5c8d5c9
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