Here are the key things you need to know before you leave work today:
MORTGAGE RATE CHANGES
No changes today.
TERM DEPOSIT RATE CHANGES
No changes here either.
TURNING POINT?
ANZ's truckometer report is giving mixed signals now after a long period of strongish ones. The 'heavy' index suggests good GDP growth is continuing, whereas the 'light' index suggests things may be softening a bit. Data to support both bulls and bears for 2018-Q1. But 2017-Q4 is locked and loaded now and will be reported next Thursday and a +2.7% growth is anticipated by markets. That is consistent with ANZ's Truckometer series which if anything suggests any surprise might be on the up side. Was 2017 as good as it is going to get in this business cycle?
A POSITIVE BOOST
One of the last pieces of the Q4-2107 GDP puzzle fell into place today with the manufacturing data released. It showed income up an impressive +10.2% year-on-year which is the highest rate of gain in four years. Factory finished goods stocks rose +6.2%, something they did in all of 2017 in stark contrast to 2016 when they were being wound back.
PROVINCIAL RENTS JUMP
The median rent for a 3 bedroom house jumped to $450/week in the national data for February released by MBIE today. That is $30 or +7.1% higher than the same month a year ago. In Auckland, the rate was unchanged at $630/week, in Christchurch it was also unchanged at $420/week. But in Wellington the jump was $30 to $600/week. Really large rises are being recorded for Napier (+11.1%) and Dunedin (+11.4%). New Plymouth has recorded an +8.6% rent rise for a 3 bedroom house. Nelson, Palmerston North and Hamilton all recorded rises above +5%. The odd place out is Tauranga at +2.2% but at $460/week for a median rent, perhaps it already had its rise in the prior year. (Monthly numbers can be volatile, however.)
SQUEEZING THEIR CAPITAL HARD
For the first time ever bank profits exceeded $5 bln in the year to December 2017, coming in at $5,234 bln, tax paid, or $14.3 mln per day. Shareholders have $39 bln invested, so the average return on their investment is 13.8% pa. ranging from ASB's 15.4% down to Kiwibank's 2.4%. Their equity grew by just +$1.155 bln in the year, so that means shareholders took out just over $4 bln in distributions, or 78% of all profits, a very high extraction rate and no evidence they are investing their gain in the industry. The strongest bank in terms of capital is Rabobank (leverage is just 7.9 times) whereas the most risky is Kiwibank with leverage of 14.4 times. (Leverage measures the amount of shareholder capital supporting the 'assets' of the bank. And the primary 'asset' is a bank's lending protfolio.) Bank shareholders make their money using OPM. As I point out often, no banker would ever lend funds to a company with a capital structure like a bank. They would always insist the shareholders put up more capital. But regulators never ask them to do that in a meaningful way.
NEW 10 YEAR BOND
Treasury is planning to launch an April 2029 bond in a series of tranches depending on funding requirements. But this bond won't be tendered in the normal way, rather it will be placed through a syndicate. Between $1.5 and $2 bln is expected to by raised this way, over time. The syndicate managers were announced today and they are ANZ, BNZ, and the Sydney offices of both Deutsche Bank and UBS.
DIFFERENT LEAGUE
The New Zealand funds management industry manages NZ$124 bln. But the Australian industry is in another galaxy, with data today showing it growing by +AU$300 bln in one year to almost AU$3.4 tln by December 2017, a +9.7% rise. The Aussie level is 27 times larger than ours.
BENCHMARK INTEREST RATES MIXED
Wholesale swap rates are unchanged today for terms of 3 years and shorter, but slightly firmer for the longer durations. The UST 10yr is up to 2.89% today (+3 bps). The Aussie Govt 10 yr is up another +3 bps to 2.83%. The China 10 yr is also up by +1 bp to 3.89% while the NZ Govt 10 yr is unchanged 3.04%. The 90 day bank bill rate is also unchanged at 1.90%.
BITCOIN SPOOKED
The bitcoin price fell sharply this morning as the US SEC ruled that crypto exchanges need to be registered and meet all legal requirements as other exchanges do. The fall stopped at US$9,481 and since then there has been a 'recovery' of sorts to US$9,688 for a net change on the day of -10.9%.
NZ DOLLAR BECALMED
The Kiwi dollar is essentially unchanged today. It is still at 72.8 USc. We are at 93 AUc and at 58.7 euro cents. That puts the TWI-5 unchanged at 73.7.
This chart is animated here. For previous users, the animation process has been updated and works better now.
Daily exchange rates
Select chart tabs
11 Comments
Cracks are starting to appear in the regional performance of Auckland and BOP as a result of capacity constraints. Wellington to follow suit from the looks of it.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=120…
There was an interview on RNZ this PM today
Interviewee expressed concern about the inability of the Civil Service to scale up to speed in order to meet the dictates of the Labour Government. The view is the National Government underfunded government departments with the loss of too much top talent. Labour have inherited a poisoned chalice.
Anne Gibson in NZ Herald on Foreign Investment
The Financial Elites are coming out in force
"The Government wants to pass a new law banning foreigners from buying our residential and lifestyle properties but a top Queenstown businessman has given four examples of how rich overseas people have enhanced New Zealand to the tune of hundreds of millions of dollars. Sir Eion Edgar told Parliament's Finance and Expenditure Select Committee that the foreign buyer ban would "be detrimental to New Zealand's international reputation and greatly restrict overseas parties contributing to the benefit of New Zealand"
Queenstown Rich Lister Sir Eion Edger trumpets on behalf of 4 American groups who have ploughed money into the Queenstown area. He has advocated to Parliament's Finance and Expenditure Select Committee for continued open access to the offshore wealthy. What is not disclosed is the structure of the principal owning vehicles within which the ownership is contained. Edgar provides names of who the ultimate benefial owners are, but no details of how the ownership is structured.
A New Zealand registered company or partnership or Trust can be set up as the vehicles to own properties while the beneficial owners can be American domiciled corporations or trusts. Edgar does not disclose the Tax Residency of the investors
A wealthy Foreign person with Foreign Tax Residency can purchase a sensitive property for $100 million, spend $50 million enhancing the value of the property, but the new enhanced value is owned by the foreign interest. NZ gains nothing under those circumstances. The improved value is immediately exported to the foreign beneficial owners
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=120…
Over the ditch.
A leading national property finance company has collapsed potentially leaving an estimated 10,000 residential, commercial and property investors in the lurch about the fate of nearly $300 million worth of deposits.
http://www.afr.com/personal-finance/10000-property-buyers-caught-in-dep…
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.