Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Strong migration data likely to seal OCR increase

Strong migration data likely to seal OCR increase on Thursday.


By Garry Dean (Sales Trader, CMC Markets New Zealand)

The Kiwi continues to consolidate around 0.8700 in the leadup to Thursday’s Reserve Bank OCR review. While last week’s Q2 CPI number printed just below market expectation, it was largely in line with the Reserve Bank’s June projections at +0.3% for the quarter. A breakdown of the figure does however show non-tradeable inflation running at an annualised rate of 2.7%, which was slightly below the rate expected by the market and the central bank. This won’t be sufficient to cause the RBNZ to pause on Thursday, with a fourth 25pt increase to the OCR meaning they will have delivered around half of the tightening expected by the end of next year. Focus will be on the tone of the Governor’s statement, with some market economists forecasting that an increase on Thursday may be the last for this year.

The June MPS highlighted the central banks concerns around the demand pressures fuelled by rising immigration. We saw yesterday the release of net migration figures for June which showed a surge to 11-year highs, and the annualised number of migrant arrivals topping 100,000 for the first time ever. This is far stronger than expected, and at odds with the central banks forecast of a decline from recent highs. The additional demand pressures resulting from this level of immigration will keep the pressure on Governor Wheeler to keep rates high, a move that will likely keep the Kiwi elevated at the expense of an export community suffering from a slump in commodity prices.

Last week’s 8.9% slide in the fortnightly GlobalDairyTrade auction has taken the total fall since February to a staggering 38%, and suggests Fonterra’s $7.00 opening forecast for the 2015 season is a mile off the mark. A figure closer to $6.00 looks more realistic, and this would result in a decline of $3 bio in dairy sector revenue, wiping up to 1.5% off GDP in the process. At some point this will weigh on the Kiwi, but for the moment the Reserve Bank are forced to be on the front foot to manage the inflation pressures created by the government’s immigration policy. A pause at present would send the wrong signal, and lead to a decline in mortgage rates that would further fuel the Auckland property market.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Superu Report: Land Regulation Drives Auckland House Prices

Land use regulation is responsible for up to 56 per cent of the cost of an average house in Auckland according to a new research report quantifying the impact of land use regulations, Finance Minister Steven Joyce says. More>>

ALSO:

Fletcher Whittled: Fletcher Dumps Adamson In Face Of Dissatisfaction

Fletcher Building has taken the unusual step of dumping its chief executive, Mark Adamson, as the company slashed its full-year earnings guidance and flagged an impairment against Australian assets. More>>

ALSO:

No More Dog Docking: New Animal Welfare Regulations Progressed

“These 46 regulations include stock transport, farm husbandry, companion and working animals, pigs, layer hens and the way animals are accounted for in research, testing and teaching.” More>>

ALSO:

Employment: Most Kiwifruit Contractors Breaking Law

A Labour Inspectorate operation targeting the kiwifruit industry in Bay of Plenty has found the majority of labour hire contractors are breaching their obligations as employers. More>>

ALSO:

'Work Experience': Welfare Group Opposes The Warehouse Workfare

“This programme is about exploiting unemployed youth, not teaching them skills. The government are subsidising the Warehouse in the name of reducing benefit dependency,” says Vanessa Cole, spokesperson for Auckland Action Against Poverty. More>>

ALSO:

Internet Taxes: Labour To Target $600M In Unpaid Taxes From Multinationals

The Labour Party would target multinationals operating in New Zealand to ensure they don't avoid paying tax if it wins power and is targeting $600 million over three years through a "diverted profits tax," says leader Andrew Little. More>>

ALSO: