A review of things you need to know before you go home on Thursday; record high TWI, swap rates jump, BNZ raises rates, big services focus, big council budget

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

TODAYS RATE CHANGES
BNZ raised fixed rates across the board today up to 4 years fixed. It reduced its unique seven year fixed rate offer. At the same time it increased some very short term deposit offers.

FIF DEEMED RATE OF RETURN 8%
The Government today announced that the deemed rate of return for taxing foreign investment fund interests has been set at 7.99% for the 2013–14 income year, up from 6.91% for the previous income year. The rate is based on an average of the five-year Government bond interest rate at the end of each quarter, plus a 4% margin.

GOVT DRAWN INTO SERVICES PRODUCTIVITY INQUIRY
The Productivity Commission today launched an inquiry into "improving delivery and value of public services", including social services in particular. Services account for more than 70% of the NZ economy, and the "public" portion of this is about 60%.

BIG FREIGHT REFORM
A very major announcement was made today involving how international shipping services will affect New Zealand. Local control will rise and concentrate. The changes are being pushed through by the two big exporters Fonterra and Silver Fern Farms in their Kotahi joint venture. It will mean that extra large container ships will have New Zealand as a primary call-point and avoid them forcing us to be part of a hub out of Australia, which was likely without today's changes.

BIG BUDGET
Auckland Council today adopted its 2014/15 budget. That involves collecting $1.45 bln in rates and an overall spending program of $3.28 bln. There is also a Capex spending program of another $1.7 bln so all up they will be spending $5 bln in the coming year. Auckland Council has 'net debt' of $7.4 bln.

NOT WRITING ANY HIGH LVR LOANS
In May, high LVR lending was only at 5.3% after exemptions, 6.8% before exemptions. Even though this was a rise of about 1% in a month, it is still tiny. Recall that the proportion of this lending before the RBNZ introduced its speed limits was more than 25%. The actual increase in high LVR lending banks did in May was just $75 million; at $250,000 per loan, that means over the whole banking sector only 300 additional loans were made to people with a low deposit. This is not evidence of banks moving back into this space, despite what is seen on the TV promotions.

WHOLESALE RATES
Wholesale swap rates were up today and were up in a technically 'positive' way; that is up more at the long end than the short end. The 90 day bank bill rate was also higher again today and has now reached 3.60%. The last time the 90 day bank bill rate was at 3.60% was in February 2009. That make's today's level the highest in five+ years. It's risen from 2.70% when the RBNZ first seriously signaled OCR hikes on December 12, 2013. So we have had the 90 day bank bill rate rise 0.90% since then while the OCR has risen 0.75%. By the next OCR review on July 24, expect to see the 90 day bank bill rate at least 0.10% higher, probably more.

OUR CURRENCY
The NZ dollar was stronger against almost everyone. It is at 87.6 USc, at 93.2 AUc and the TWI is now at 81.30 and the record post float high. Nose-bleed time.

You can now see an animation of this chart. Click on it, or click here.