Today's Top 10 is a guest post from Christian Hawkesby, head of fixed income at Harbour Asset Management.
As always, we welcome your additions in the comment stream below or via email to david.chaston@interest.co.nz.
And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.
See all previous Top 10s here.
1. NZ Political Polls: keeping National honest
There was a brief period this year when the polls suggested that National may be in a position to govern alone.
Since the release of ‘Dirty Politics’, National is back in the zone of looking for coalition partners. If NZ First can sneak over 5%, once again this could result in Winston Peters playing the kingmaker role following the election.
The TV3 poll released on Wednesday night also suggests that Colin Craig’s motto of keeping the Government on a short leash is appealing to voters since the release of ‘Dirty Politics’.
National 45 percent, down 2.5 percent
Labour 26.4 percent, down 2.6 percent
Greens 13.5 percent, up 0.5 percent
NZ First 6.3 percent, up 1.7 percent
Conservative 4.6 percent, up 2.1 percent
Internet Mana 2.1 percent, up 0.1 percent
Maori Party 0.7 percent, down 0.1 percent
United Future 0.4 percent, up 0.2 percent
ACT 0.3 percent, no change
2. NZ Houses as Affordable as in 1985
National announced its first time buyer’s policy this week.
At the same time, there was an interesting piece of research released by the NZ Property Investor Federation.
The Federation has researched changes in housing affordability from 1985 to today and says once interest rates are factored in, the average monthly cost of buying a house over 25 years on a principal-and-interest mortgage had barely increased since 1985, as mortgage interest rates have fallen from 18% to 6.3%. It says it is also comparatively "cheaper" to rent now than it was in 1985, though the deposits needed to buy homes are bigger, making it tough for youngsters to get their foot on the housing ladder.
3. RBNZ - from hikes to hold
Having lifted the Official Cash Rate 100 basis over the course of 4 months, the Overnight Indexed Swaps market is now pricing less than 50 basis points of additional hikes over the next 12 months.
4. The end of the glory age for term deposits?
Historians may look back at the period between January 2009 and July 2014 as the golden age for investors in term deposits. New funding and liquidity regulations meant that banks were willing to pay much more attractive interest rates on 6 month retail term deposits than on traditional wholesale money market instruments.
In 2010, the gap almost reached 2 percentage points.
However, over the past 6 months, bank term deposit rates have not kept up with the full extent of increases in the OCR. The gap between 6 month retail deposit rates and the wholesale 90 day bank bill rate is now the narrowest in 5 years.
5. Labour markets are complicated
The Kansas Fed’s conference at Jackson Hole has become an annual event for global central bank watching, waiting for clues on the next policy moves. Janet Yellen gave a carefully balanced speech, giving away very little.
The major theme was that the job of measuring spare capacity in the US labour market is complicated and complex. The 1,899 words in the footnotes of the speech illustrated that Fed is looking at every conceivable bit of research to guide their policy judgements.
6. Structural reforms to complement monetary policy
With Yellen offering little clues, Mario Draghi stole the spotlight at Jackson Hole. His speech reinforced expectations that the ECB will provide more stimulus.
However, he also emphasised the need for fiscal action and structural reforms. The chart below makes a striking comparison between Spain (ES) and Ireland (IE).
The key message is the a more flexible labour market in Ireland meant that wages could adjust, so that unemployment didn’t have to rise as much as in Spain. Monetary policy can’t fix all Europe’s problems.
7. France continues to stand out for the need to reform
France continues to stand out for the need to reform. This article from Bondvigilantes makes the case.
France has a unique social model. It originates from the end of the Second World War, when the National Council of the Resistance (NCR) hastily put together a plan to rebuild the country after five years of Nazi occupation. Despite not having any official political affiliations, the NCR was in fact influenced by left wing individuals and the “National Front”, a communist party. The NCR’s “action plan” helped shape France in the aftermath of the war and is one of the reasons today that trade unions have such a prominent position in society and why the French are so fond of their “established social rights”.
8. Hollande purges government
The pressure is showing on French politicians. Francois Hollande’s satisfaction ratings are now in low single digits, and he has been forced to announce the second government reshuffle since March. Europe has an unstable core.
9. Scottish independence referendum
Two days before New Zealand’s general election, the Scottish people will vote on independence. In the second live debate, Alex Salmond staged a dramatic comeback against Alistair Darling, turning the tide on the first debate where Darling and the pro-UK Better Together campaign dominated the stage.
10. "All Blacks in crisis and losing their aura"
If you think it’s hard to research and predict financial markets, spare a thought for sport reporters and commentators.
Only a week ago they had written the All Blacks off as being in crisis and losing their aura.
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