Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes today.
TERM DEPOSIT RATE CHANGES
We had an error in yesterday's edition. The ANZ Serious Saver interest rate is reducing on October 1 by -10 bps to 2.10%, and not to 2.00% as we reported yesterday.
RECORD LOSS
Fonterra reported its full year financials this morning, and a big loss of almost $200 mln for the last season. However, it held its milk price forecast at $6.75 and forecasted earnings per share of 25c-35c for the current season. It is to review its investments including in Beingmate.
QUEEN CITY FLAT-LINES
The REINZ reported its August data today and that shows the housing market on a stable footing as it heads into spring. Sales volumes are up slightly and prices are mostly steady. In Auckland, sales volumes fell however, down -2.5% year on year while median prices were up +1.4% - but that only takes them back to levels we first saw in September 2016. That's almost two years with no capital gains in the Queen City.
THE HEALTHY STUFF COSTS LESS
Food prices fell in August on a year-on-year basis. Although it was only a tiny fall, it's the second time it has happened in the last four months. A -6.5% fall for fruit and vegetables covered small rises for processed foods. And, seen on a sign in rural US; "Despite the high cost of living, it remains popular."
COUNCIL PAY = HIGH PAY
According to data released by the Taxpayers Union, there are now 10,063 employees at Auckland Council. 2,250 of them earn more than $100,000 pa, which includes 194 who earn more than $200,000 pa. They have also released similar data for many other Councils, but only Auckland and Christchurch have pay proportions above 20% of employees earning $100,000+.
HOLDING STEADY
In Australia, they reported an unchanged unemployment rate in August of 5.3%. But the annual growth in the employed workforce dipped to +302,500, the lowest gain in 15 months. Their participation rate of 65.3% is steady (and way below the New Zealand level of 70.6%.)
SWAP RATES UNCHANGED
Swap rates are virtually unchanged today. The UST 10yr is also unchanged at 2.97%. The UST 2-10 curve is lower, down to just above +21 bps. The Aussie Govt 10yr is at 2.58% (down -1 bp), the China Govt 10yr is at 3.70% (also down -1 bp), while the NZ Govt 10 yr is at 2.62%, unchanged. The 90 day bank bill rate is unchanged at 1.89%.
BITCOIN RISING
The bitcoin price is at US$6,390 which is up +2.2% from this time yesterday.
NZD FIRMISH
The NZD is firmer at 65.6 USc. On the cross rates we are softer at 91.2 AUc, and little changed at 56.3 euro cents. That puts the TWI-5 at 69.3.
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24 Comments
Spot on christlucas .........Does anyone in the Council have any idea how hard it is to actually EARN and GENERATE $100,000 per annum in the Productive Sector ?
We need a complete shakedown of the whole edifice
And yes , we need to crack the whip with this bloody council , we actually need a 100% restructure , a review of all jobs and pay scales and some ruthless bastard to get in there and gut the place .
Hear Hear.. This second layer of government is really starting to bite and its only going to get worse. I question how many decisions and policy's could be made at a national level.
Perhaps we should restructure and organise some downsizing. They (the council) would expect nothing less from us..
They don't actually pay that well in many areas. In many roles they are 10-20% less than the market. The problem is not that salaries are too high the problem is that there are far too many staff earning those salaries. There's hundreds and hundreds of 'policy advisors' sitting around pontificating in meaningless talk fests.
On the money, JImbo.
Councils are heavily skewed towards higher-paying occupational classes. Outside (poorer-paid) work is generally contracted out.
There is something of a revolving door between some jobs in engineering and planning and the consultancy firms. Which, of course, does tend to drive the market rate for those jobs up.
I think I may have a theory to explain things here.
- AC staff profiles may have a very high proportion of Aspiring FHB's
- But just as for nurses, police, teachers and other public sector types, these starvelings just cannot get a foot on the Hoosing Ladder at ordinary-mortal salaries
- So AC in its wisdom is paying 'em well over the odds so they can save the Deposit, and, all going well, afford the lotsa-zeroes Mortgage later on
- On the promise, however, that they will buy/build within the AC area, thus bolstering the Hoosing Stats
- Which will be eagerly Hoovered Up into AC 'economists' Big Data mills, gently massaged, then released upon a Hapless Public who will believe 'em, by and large
- Which will be taken by the ever-attuned-to-public-sentiment Antennae at AC, as proof that Our Policies are Working, both as to the Plans and the Salaries
- Thus guaranteeing More of the Same in the next annual funding round - Mo' Planners, Mo' $100K+ staff, Mo' Hooses, Mo' rates.
- The fabled Circular Economy!!! Wheeeee!
China may build more ghost towns to soften the blow from the US-China trade war. What happens next, do banks consolidate mortgages into debt instruments and trade them on money markets?
A couple days ago, we were celebrating Chinese victory on this website and now the regime is clearly looking for a Plan B to keep the economy afloat.
https://www.cnbc.com/2018/09/13/rising-chinese-property-prices-a-potent…
Re the housing market in the feed above .
We bang on about rampant house prices and the chattering classes all expect that by the use of some magic potion (the contents of which are supposedly known only to the Coalition Government) , they are going to become cheaper .
Stop
Think
And look at the sums
Just consider that the costs of construction of a new build in Auckland are now circa $3,000/ m2 .
A serviced section costs $450.000 at least
So a small 150m2 house costs $450 k to build ( including builders profit ) and the land costs $450k, plus developers profit of 20% plus GST of 15%, and the bottom line is a new Auckland house costs $1,200,000 .
That USED Auckland houses are fetching $1,000,000 is therefore no surprise whatseover , its simply a function of the market .
Now go ahead ............ tell me house prices are going to somehow magically come down .
And then please explain how ?
Anyone ?
In a way you’ve answered the question yourself.
As you say - “it’s simply a function of the market”
In microeconomics, supply and demand is an economic model of price determination in a market.
And thus the answer- “tell me house prices are going to somehow magically come down” – supply and demand.
It's not magic.
So I see 11,369 listings in Auckland on Trade Me tonight – my scratchings indicate 10,869 a month ago – increase of exactly 500.
So an increase of listings going into spring – probably nothing surprising about that.
I imagine willing and able buyers haven’t completely disappeared – although some of the buyer hysteria probably has.
I have in my mind the FBB kicking off October 23rd – a bit of a fly in the spring market ointment possibly – but unknown impact, if any.
No black swans in sight (probably a contradiction in terms) so might simply be steady as it goes – with a slight rise or fall in prices hardly surprising.
I wonder what the banks want – perhaps they’ll be the ultimate deciders.
@ CUSTARD Precisely ............. price is a key determinant of both supply and demand , there is a clearing price , but only where there is an over-supply , and we dont have an over-supply .
There is clearly strong demand at current prices , houses are being sold at ridiculous prices, so there is demand at the prices at the current levels of supply .
What will make the prices come down ?
It can only be a reduction in demand OR a huge supply coming on stream, OR an increase in the cost of money
If you want to get technical you need to ask how ' elastic " is the demand in our housing market ?
I dont want to give you a lecture in economics but housing in Auckland has too many determinants affecting price elasticity of demand .
Housing has no substitutes unless you want to take up with a mattress in the Toyota Estima
Its a necessity
Supply takes too long to bring to market
Input costs are escalating
There is a herd mentality in the market .
Don’t worry – elasticity of demand isn’t particularly technical.
For a while there price wasn’t a particularly important variable in terms of demand – I’m referring Auckland and new arrivals or those marginal buyers that had little constraint in terms of average Auckland wages or savings.
The sheer numbers of the above were overwhelming – and they were unleashed onto a market with basically a supply elasticity of zero.
So, the perfect storm.
Zero elasticity of demand met zero elasticity of supply.
Well done to those at the helm – brilliant.
Why does it cost $3000 m2 and not $300,000 m2 to build?
I guess affordability? How many people pay outright cash for a new house? Some do I’m sure. House prices will not come down unless access to cheap credit ceases. That’s my view on it. Houses will no longer cost $3000 per m2 if people can’t borrow that much to build. Unless builders want to start building shoeboxes for all.
A quick guide to just some of the market forces over the majority of the last 10 years.
Demand: A sustainable period of one of the world’s, if not the world’s, highest net immigration rate.
Demand: Unfettered access by all and sundry of the world to our property market fuelled by ultra-cheap money and the occasional desire to hide things.
Supply: Nick Smith.
Possible good news to some ears – the above may be slowly being addressed.
It’s not magic.
so you have kind of answered your question. The answer is the market can't solve the problem. It's simple. The government needs to build lots of houses. And not just for purchase (Kiwibuild). They should be building 1000 rentals a year, with first priority given to teachers, nurses, police etc.
Excellent Fritz – good skills – it’s where I wanted to go.
We have allowed those in government to make a mess of the market, a mess of supply and demand – the subsequent distortions are clear for all to see– and thus we now need government to address those distortions as best they can.
Why the government of nine years allowed, and cheered on, such an obvious nonsense I simply will never understand.
That's right. Successive governments have screwed the housing system with migration, foreign investment, taxation and urban planning policies.
The system is so broken that only the government can fix it. The fix will be costly but that's what happens when you screw up the system over 20-30 years.
2 problems with your theory:
a) you assume that a section costing $450k is a given. There is plenty of land around Auckland, why should it cost so much? Could it be council mandated scarcity by any chance?
b) you assume that the price of all houses should be the same as new houses. My second hand car was much cheaper than a new one. Our CV says our house is worth $150k, which is probably fair enough given the size and lack of modern features. but it also says the land underneath is worth $1 million, that is the stupid part.
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