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

 

Economic Update: RBNZ Says Rate Cut Seems Likely

The Reserve Bank will likely cut interest rates further as a persistently strong kiwi dollar makes it difficult for the bank to meet its inflation target, it said. The local currency fell. More>>

ALSO:

House Price Action Plan: RBNZ Signals National Lending Restrictions

The central bank wants to cap bank lending to property investors with a deposit of less than 40 percent at 5 percent and restore the 10 percent limit for owner-occupiers wanting to take out a mortgage with a deposit of less than 20 percent, according to a consultation paper released today. More>>

ALSO:

Sparks Fly: Gordon Campbell On China Steel Dumping Allegations

No doubt, officials on the China desk at MFAT have prided themselves on fashioning a niche position for New Zealand right in between the US and China – and leveraging off both of them! Well, as the Aussies would say, of MFAT: tell ‘em they’re dreaming. More>>

ALSO:

Loan Sharks: Finance Companies Found Guilty Of Breaching Fair Trading Act

Finance companies Budget Loans and Evolution Finance, run by former 1980s corporate high-flyer Allan Hawkins, have been found guilty of 106 charges of breaching the Fair Trading Act for misleading 21 borrowers while enforcing loan contracts. More>>

ALSO:

Post Panama Papers: Govt To Adopt Shewan's Foreign Trust Recommendations

The government will adopt all of the recommendations from former PwC chairman John Shewan to increase disclosure and introduce a register for foreign trusts with new legislation to be introduced next month. More>>

ALSO:

The Price Of Cheese: Cheddar At Eight-Year Low

Food prices decreased 0.5 percent in the year to June 2016, influenced by lower grocery food prices (down 2.3 percent), Statistics New Zealand said today. Compared with June 2015, cheese prices were down 9.5 percent, fresh milk was down 3.9 percent, and yoghurt was down 9.2 percent. More>>

ALSO:

Financial Advisers: New 'Customer-First' Obligations

Goldsmith plans to do away with the current adviser designations which he says have been "unsatisfactory" in that some advisers are obliged to disclose potential conflicts of interest and act in their customers' best interests, but others are not. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news