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24 September 2018
ANZ Research
New Zealand Weekly Focus
This is not personal advice.
It does not consider your
objectives or circumstances.
Please refer to the
Important Notice.
Contents
Economic Overview 2
Data Event Calendar 8
Local Data Watch 10
Key Forecasts 11
Important Notice 13
NZ Economics Team
Sharon Zollner
Chief Economist Telephone: +64 9 357 4094
Phil Borkin Senior Macro Strategist
Telephone: +64 9 357 4065 [email protected]
Natalie Denne Desktop Publisher
Telephone: +64 4 802 2217 [email protected]
Liz Kendall
Senior Economist
Telephone: +64 4 382 1995
Kyle Uerata Economist
Telephone: +64 4 802 2357 [email protected]
Miles Workman
Economist Telephone: +64 4 382 1951
Contact [email protected]
Follow us on Twitter @ANZ_Research
Getting gains
Economic overview
The Tax Working Group released its interim report last week. One option that was
discussed is broadening the taxation of capital income. Taxing capital gains would
have benefits: it would increase the tax base, improve fairness and potentially
make property investment less attractive relative to other investments, which at
the margin could lead to higher rates of home ownership. But taxing capital gains is
no silver bullet. It will make our tax system more complicated. It will not fix our
housing affordability problem, could lead to lower investment, may lead to higher
rents, and could have negative implications for saving, depending on other tax
changes. These pros and cons need to be carefully weighed. Our expectation is that
the Tax Working Group will recommend extending capital income taxation in some
form, but it is not written on the wall, with many issues still to be addressed. This
week brings the OCR Review, along with the latest reads from ANZ Business
Outlook and ANZ Consumer Confidence.
Chart of the week
Changes to tax policy could help level the tax playing field between different assets.
Effective marginal tax rate on different asset types
Source: Tax Working Group, ANZ Research
The ANZ heatmap
Variable View Comment Risks around our view
GDP 2.8% y/y
for 2019 Q1
The economy has lost steam. We see growth of around 2½-3%
over the next few years (at, or a bit below, trend).
Unemployment
rate
4.4% for
2019 Q1
Unemployment is expected to move broadly sideways.
Underlying wage pressures are subdued.
OCR 1.75% in
March 2019
We are no longer predicting rate
hikes. In terms of risks, a cut now
looks more likely than a hike.
CPI 2.0% y/y
for 2019 Q1
We expect core inflation will lift, but only gradually, and the
medium-term outlook is not assured.
55.7%
47.2% 47.2%
55.7%
47.2%
55.0%
11.3%
29.4%
0%
10%
20%
30%
40%
50%
60%
Bank
account
PIE Super Company
(distributes)
Company
(doesn'tdistribute)
Foreign
shares- FDR
Owner-
occupiedhousing
- equity
Rental
property- equity
Marg
inal effective t
ax r
ate
Type of saving
Negative
Neutral
Positive
Negative
Neutral
Positive
Down
Neutral
Up
Negative
Neutral
Positive
Economic overview
ANZ New Zealand Weekly Focus | 24 September 2018 2
This week we explore
broader capital gains
taxation
The Tax Working
Group has released
its interim report
Capital gains taxation
was discussed at
length
There are questions
about what might be
taxed…
Summary
The Tax Working Group released its interim report last week. One option that was
discussed is broadening the taxation of capital income. Taxing capital gains would have
benefits: it would increase the tax base, improve fairness and potentially make
property investment less attractive relative to other investments, which at the margin
could lead to higher rates of home ownership. But taxing capital gains is no silver
bullet. It will make our tax system more complicated. It will not fix our housing
affordability problem, could lead to lower investment, may lead to higher rents, and
could have negative implications for saving, depending on other tax changes. These
pros and cons need to be carefully weighed. Our expectation is that the tax working
group will recommend extending capital income taxation in some form, but it is not
written on the wall, with many issues still to be addressed. This week brings the OCR
Review, along with the latest reads from ANZ Business Outlook and ANZ Consumer
Confidence.
Forthcoming events
Overseas Merchandise Trade (Wednesday 26 September, 10:45am). We expect
to see the annual trade deficit narrow.
ANZ Business Outlook – September (Wednesday 26 September, 1:00pm).
RBNZ New Lending – August (Wednesday 26 September, 3:00pm). New lending
has softened recently in tandem with house sales; we may see this continue.
RBNZ OCR Review (Thursday 27 September, 9:00am). We expect the RBNZ will
retain a consistent message, with future OCR cuts on the table if needed.
ANZ Consumer Confidence – September (Friday 28 September, 10:00am).
Building consents – August (Friday 28 September, 10:45am). With building
consents having been pared back, we may see a bounce – but the trend is turning.
RBNZ Sectoral Credit – August (Friday 28 September, 3:00pm) . After recent
stability, moderation in the housing market may start to flow into credit growth.
What’s the view?
The Tax Working Group released its interim report last week outlining various possible
changes to the New Zealand tax system and their costs and benefits. The report makes
some recommendations, but leaves a number of issues unresolved for the final report,
which is due to be released in February, followed by legislation that would not come
into effect until after the next election. The report discusses a broad range of tax policy,
including environmental taxes, tax on retirement savings and much more. Notable
interim conclusions are that the Tax Working Group do not support changes to GST or
company tax and have ruled out recommending a land or a wealth tax.
A key area of focus in the report is the possible broadening of capital income taxation
to include capital gains (rather than introducing a new tax per se). Currently, capital
income is taxed inconsistently in New Zealand. Investments that generate regular
income (like interest) are taxed, but capital gains generally aren’t.
A question that the Tax Working Group mulled over is how broad a capital income tax
might be. It could opt for a targeted approach whereby assets that are easy to tax are
brought into the net. Or it could opt for a broad-based approach, targeting capital
income as far as practicable – fairer but more difficult and expensive to implement. Its
current thinking is to extend capital income taxation to include a wider range of assets
excluding personal assets and the family home (as per the terms of reference of the
review). This would include:
Interests in land (other than the family home), including residential, commercial,
agricultural, industrial and leasehold interests that are not already taxed. Effects on
Maori interests are still under consideration.
Economic overview
ANZ New Zealand Weekly Focus | 24 September 2018 3
…and how and when
It would boost
government revenue
It would make our
tax system fairer…
…but also more
complicated
Intangible property.
All other business assets that are not already taxed (such as plant and machinery).
Shares in companies and other equity interests.
The working group proposes two options for how the tax might be implemented. The
first is extending the current tax net for capital income taxed on realisation (ie at the
time of transfer or sale). There would likely be some exceptions where tax can be
deferred (eg transfer on death). The second option is taxing a risk-free equivalent on
an accrual basis each year, based on the deemed value of the asset. Taxing on an
accrual basis would be problematic for assets where gains have not been realised – it
would require accurate valuations, and the value that is taxed could differ from the
gains (or losses) actually experienced at sale. On the other hand, taxation at the time
of sale could dissuade people from selling assets, potentially leading to reduced
turnover in the housing market, reduced business transactions and inefficiency.
Taxpayers would be able to deduct acquisition and improvement costs, so only net gain
or loss is taxable. The tax would not retrospectively apply to gains on assets purchased
before the extension of the regime.
Costs and benefits
There are pros and cons of expanding taxation of capital income that need to be
carefully weighed. Table 1 summarises the key advantages and disadvantages
highlighted by the Tax Working Group.
Table 1. Extending capital income taxation
Advantages Disadvantages
Make the tax system more progressive (those
who earn capital gains tend to have more wealth)
Efficiency losses if people hold off on selling
assets to avoid capital gains tax.
Improve equity by taxing income whether it is earned from capital gains or otherwise
Tax on capital gains can be deferred, creating a tax advantage relative to other income in real
terms
Reduce tax incentive to invest in assets with
capital gains, potentially improving efficiency
Can discourage saving and investment by
reducing after-tax returns (if other taxes are left unchanged)
Reduce incentive to minimise tax by
transforming income into capital gains.
Taxing gains on shares could result in double
taxing retained profits (already subject to company tax)
Source: Tax Working Group, ANZ Research
In terms of the government’s coffers, extending taxation of capital income would boost
revenue. Broad-based taxation of capital income is fairly common internationally – and
it was noted in the report that New Zealand has an unusually narrow tax base, with
90% of tax revenue coming from only three sources: personal income tax, company
income tax and GST. There is thus scope to expand the tax base to rely more on other
taxes. According to the report, capital income is the single most significant source that
other countries tax but New Zealand largely does not. This is important in the face of
fiscal pressures due to an ageing population.
A key benefit of extending capital income taxation is that it would have fairness
benefits, relative to the current inconsistent system. It would mean that income earned
from capital gains is taxed similarly to income from other sources. It would also
increase taxation on higher-wealth individuals who generally earn more from capital
gains (82% of assets potentially affected by an extension are held by the top 20% of
households by wealth). Levelling the playing field by taxing more forms of income could
also help to reduce tax avoidance, although it would also make our tax system much
more complicated. There would accordingly be increases in compliance and
administration costs.
Economic overview
ANZ New Zealand Weekly Focus | 24 September 2018 4
It could help level the
playing field between
different assets
It could boost home
ownership at the
margin
But it is not a silver
bullet.
To the extent that broadening taxation on capital gains evens out the effective marginal
tax rates on different types of assets, it could lead to increased diversification of
households’ asset portfolios. At present, there is significant variation in the effective
marginal tax rate across assets types, with the rate on housing investment lower than
for other assets, in part because capital gains are not taxed (figure 1). Taxing capital
gains would increase the marginal tax rate on housing and other assets that are
affected, which could make simple saving products like interest-bearing assets more
attractive. But a number of things should be noted:
The tax would likely also apply to non-housing sources of capital gains such as
shares and business interests, which could make these assets less attractive and
reduce investment in business-related assets. And it could result in double taxation,
since retained earnings reflected in the value of a company are already taxed.
The tax benefits associated with owner-occupied housing are in fact increased if the
family home is excluded from the regime. The key tax advantage of owner-
occupied exists because imputed rents are not taxed (as opposed to rents paid to
property investors). Excluding the family home would also create a loop-hole and
could encourage avoidance activity.
The relative attractiveness of different assets would depend on any tax offsets
introduced alongside capital gains taxation (for example, reduced taxation of
retirement savings), which could make other assets more attractive. The scheme
would need to be carefully and holistically designed.
Figure 1. Effective marginal tax rate on different asset types
Source: Tax Working Group, ANZ Research
Taxing capital gains would make rental property investment less attractive, which at
the margin may lead to higher rates of home ownership, which could improve wealth
equality. House prices would likely be lower than otherwise and may even fall, which
would reduce housing overvaluation at the margin. However, overseas experience
suggests it would likely not have a large impact. Debt required to get into the housing
market might also be lower, potentially reducing overall vulnerability of the household
sector. But the effect will be small if owner-occupied housing is unaffected; property
will still be favoured as a vehicle for savings. Housing has been a profitable investment
not only because of its favourable tax treatment, but because population growth in the
context of a supply-constrained market has put significant upward pressure on house
prices.
While taxing capital income could have some benefits, it is by no means a silver bullet.
It will not fix our housing affordability problem. We agree with the Tax Working Group’s
observation that the tax system is not the primary cause of unaffordable housing. A
comprehensive solution to improve housing affordability requires action on multiple
55.7%
47.2% 47.2%
55.7%
47.2%
55.0%
11.3%
29.4%
0%
10%
20%
30%
40%
50%
60%
Bank
account
PIE Super Company
(distributes)
Company
(doesn'tdistribute)
Foreign
shares- FDR
Owner-
occupiedhousing
- equity
Rental
property- equity
Marg
inal effective t
ax r
ate
Type of saving
Economic overview
ANZ New Zealand Weekly Focus | 24 September 2018 5
It will not fix our
housing affordability
problem…
…it could lead to
higher rents
It could reduce
saving…
…but other tax
changes could help
It will not increase
“productive”
investment (a
common
misconception)…
… and is more likely
to reduce investment
fronts, including land and housing supply and/or changes in migration settings. On this
front, the group considers that there is merit in considering taxes on vacant land and
empty houses, which would free up housing supply at the margin.
In fact, it is possible that taxing capital gains could lead investors to charge higher
rents, which would be detrimental for those who do not own their own home. Taxation
of capital gains makes returns less assured and rents might increase in order for
property investment to remain profitable. This could mean that the burden of the tax is
felt by those who are less wealthy, in contrast to the intention. The Tax Working Group
acknowledges this and raises the possibility of using some of the increased revenue to
mitigate the impact on renters (increased accommodation supplements for low-income
earners, for example).
While evening out post-tax returns could result in increased diversification of asset
portfolios, the effect on household savings is unclear. It is possible that taxing capital
gains could increase saving by encouraging people to hold more simple saving products
(like interest-bearing assets), which tend to be more accessible means of saving for
low- to middle-income earners. However, the Tax Working Group highlight the risk that
saving actually decreases because higher tax on investment income creates a
disincentive to save generally. In their report, the Tax Working Group discussed other
tax changes that could help improve saving rates, including recommending reduced tax
on retirement savings (like KiwiSaver). New Zealand generally has few tax concessions
and increased saving could help to make capital more available to firms, enhancing
productivity – so these changes would be a positive development.
Figure 2. Household saving rate
Source: Statistics NZ, ANZ Research
Some argue that making property investment less attractive will divert resources
towards more “productive” investment. That is a misconception. If saving happened to
increase, this could lead to capital deepening and result in more readily available capital
for firms, but as discussed above, the effect on saving is ambiguous. And ultimately,
the amount of real investment undertaken by firms is determined by the incentives
faced in the business environment (with the financial system allocating funds) – not by
how households allocate their portfolios. On the housing side, real investment in the
housing stock still needs to happen. We have a shortage of houses and strong rates of
population growth that require high rates of real investment in housing; who owns the
property doesn’t change that.
If anything, there is a chance that extending capital income taxation actually reduces
business investment, a risk highlighted by the Tax Working Group. Extending capital
income taxation would result in realised gains on assets held by SMEs being taxed
(estimated to be approximately 20% of SMEs’ accounting profits), making it more
-8
-6
-4
-2
0
2
4
6
87 90 93 96 99 02 05 08 11 14 17
% o
f dis
posable
incom
e
Economic overview
ANZ New Zealand Weekly Focus | 24 September 2018 6
But ultimately, the
Tax Working Group
are still mulling
things over
The ANZ Business
Outlook will be
closely watched
Economic momentum
is looking softer and
the RBNZ is prepared
to cut the OCR if
required
difficult for small businesses to operate. Harsher taxation of shares and company
interests could reduce investment in business-related assets, potentially undermining
capital markets and increasing the cost of capital. This could reduce investment and
business ownership. It could also hamper productivity, with our high costs of capital a
key factor that has contributed to our poor productivity record.
Our expectation is that the Tax Working Group will end up recommending an extension
of the capital income taxation regime in some form. But it is not written on the wall.
There are many costs and benefits to consider and progress from here will depend on
how the group weigh up the competing outcomes of increasing revenue and fairness
against administrative costs and the potential harm to business investment and saving.
Whatever the answer, our overall impression is that the issues and complications with
extending the capital income tax net are well understood by the Tax Working Group.
Whether the Government decides to run with the group’s recommendations – and in
what form – and whether voters go for it in the lead up to the election is then a whole
other question.
The week ahead
It’s a busy week ahead on the data front. First up, we have Overseas Merchandise
Trade data for August out Wednesday. An ongoing recovery in milk production should
give growth in seasonally adjusted export volumes a shot in the arm, with prices
broadly stable as softer world prices are offset by the weaker NZD. On the import side,
stable domestic demand should keep imports in a holding pattern. We have pencilled in
an unadjusted monthly trade deficit of $500m, which would see the annual deficit
narrow $0.7bn to $3.8bn.
Our ANZ Business Outlook Survey will be out on Wednesday. Last month we saw
investment and employment intentions in the survey turn negative, pointing to a
softening in GDP growth (figure 3) – with downbeat business expectations at the risk of
becoming self-fulfilling. Whether firms’ intentions remain in the red and activity
indicators remain soft will be closely watched, especially since the RBNZ appears to be
standing at the ready to support the economy with OCR cuts if it deems them required.
Figure 3. GDP growth ANZ investment intentions and capacity utilisation
Source: Statistics NZ, ANZ Research
The RBNZ OCR Review is on Thursday. The OCR is universally expected to remain on
hold, but the statement will be closely watched in light of the possibility of future OCR
cuts. Overall, recent data has been mixed but respectable. The starting point for GDP is
stronger than expected, but forward-looking indicators have been more downbeat.
Strong GDP data gives the RBNZ more breathing room to “watch, worry and wait” but
we don’t think it’s enough to change the RBNZ’s views substantially.
-6
-4
-2
0
2
4
6
8
10
-30
-20
-10
0
10
20
30
40
50
93 95 97 99 01 03 05 07 09 11 13 15 17
Annual %
change
Net
%
Investment intentions adv. 3 months (LHS)Capacity utilisation adv. 3 months (LHS)Annual GDP growth (RHS)
Economic overview
ANZ New Zealand Weekly Focus | 24 September 2018 7
We expect to see a
consistent message
form the RBNZ…
ANZ Consumer
Confidence has
moderated
Building consents
have turned south
We expect that the RBNZ will retain a consistent message that the next move in the
OCR could be “up or down” – leaving cuts firmly on the table. Markets are pricing in
about a 30% chance of an OCR cut by August next year. We think the RBNZ will be
broadly comfortable with this, and therefore will not be setting out to elicit a significant
market reaction in either direction.
Our ANZ Consumer Confidence is out on Friday. Up until recently, much of the
emphasis regarding the activity outlook has been on business sentiment and how firms
are responding to more challenging conditions. So far, households have appeared
reasonably resilient; the housing market has been stable, spending growth has
stabilised after moderating and consumer confidence has held around historical
averages. However, if economic momentum has softened as business surveys predict,
then it is likely that we will see a softening in household spending too.
Building consents data have also shown some signs of softening of late, and we will get
the latest read on these on Friday. It is possible that we see a bit of a bounce, after
July’s sharp fall. But with the trend having turned south and the outlook less assured,
recent data poses downside risk to the outlook for residential investment. Additionally,
recent moderation in investment intentions could start to show through on the
non-residential side.
Figure 4. Nationwide dwelling consent issuance
Source: Statistics NZ, ANZ Research
New lending data from the RBNZ is also out this week, which captures gross (rather
than net) mortgage flows. These have softened recently in tandem with house sales
and we may see this continue, with sales having taken a step down in recent months.
Sectoral credit data is out on Friday. We might see some moderation in line with recent
housing market activity, after a long period of stability.
Local data
GlobalDairyTrade auction. Dairy prices fell 1.3% and are down 14% since May.
Balance of Payments – Q2. The annual current account deficit widened to 3.3% of
GDP on base effects.
Gross Domestic Product – Q2. The economy expanded 1% in Q2, boosted by some
temporary factors, but with underlining broad-based strength.
International Travel and Migration – August. Net migration inflows ticked up in the
month, but continue to trend down on an annual basis (to 63,300).
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
95 97 99 01 03 05 07 09 11 13 15 17
Month
ly n
um
ber
Seasonally adjusted Trend
Data calendar
ANZ New Zealand Weekly Focus | 24 September 2018 8
ate Country Data/event Mkt. Last NZ time
24-Sep GE IFO Business Climate - Sep 103.2 103.8 20:00
GE IFO Expectations - Sep 100.5 101.2 20:00
GE IFO Current Assessment - Sep 106.0 106.4 20:00
UK CBI Trends Total Orders - Sep 4 7 22:00
UK CBI Trends Selling Prices - Sep -- 15 22:00
25-Sep US Chicago Fed Nat Activity Index - Aug 0.20 0.13 00:30
US Dallas Fed Manf. Activity - Sep 31.0 30.9 02:30
AU ANZ-RM Consumer Confidence Index - 23-Sep -- 118.0 11:30
JN PPI Services YoY - Aug 1.1% 1.1% 11:50
GE Wholesale Price Index MoM - Aug -- 0.0% 18:00
GE Wholesale Price Index YoY - Aug -- 3.5% 18:00
26-Sep US FHFA House Price Index MoM - Jul 0.3% 0.2% 01:00
US S&P CoreLogic CS 20-City MoM SA - Jul 0.10% 0.11% 01:00
US S&P CoreLogic CS 20-City YoY NSA - Jul 6.20% 6.31% 01:00
US Richmond Fed Manufact. Index - Sep 21.0 24.0 02:00
US Conf. Board Consumer Confidence - Sep 132.0 133.4 02:00
NZ Trade Balance NZD - Aug -925M -143M 10:45
NZ Exports NZD - Aug 4.40B 5.35B 10:45
NZ Imports NZD - Aug 5.50B 5.49B 10:45
NZ Trade Balance 12 Mth YTD NZD - Aug -4620M -4441M 10:45
NZ ANZ Activity Outlook - Sep -- 3.8 13:00
NZ ANZ Business Confidence - Sep -- -50.3 13:00
UK Finance Loans for Housing - Aug 39700 39584 20:30
UK CBI Retailing Reported Sales - Sep 17 29 22:00
UK CBI Total Dist. Reported Sales - Sep -- 24 22:00
US MBA Mortgage Applications - 21-Sep -- 1.6% 23:00
27-Sep US New Home Sales - Aug 630k 627k 02:00
US New Home Sales MoM - Aug 0.5% -1.7% 02:00
US FOMC Rate Decision - Sep 2.25% 2.00% 06:00
NZ RBNZ Official Cash Rate - Sep 1.75% 1.75% 09:00
CH Industrial Profits YoY - Aug -- 16.2% 13:30
AU Job vacancies - Aug -- 5.7% 13:30
GE GfK Consumer Confidence - Oct 10.5 10.5 18:00
EC M3 Money Supply YoY - Aug 3.8% 4.0% 20:00
EC ECB Publishes Economic Bulletin -- -- 20:00
EC Economic Confidence - Sep 111.2 111.6 21:00
EC Business Climate Indicator - Sep 1.19 1.22 21:00
EC Industrial Confidence - Sep 5.1 5.5 21:00
EC Services Confidence - Sep 14.6 14.7 21:00
EC Consumer Confidence - Sep F -2.9 -2.9 21:00
28-Sep GE CPI MoM - Sep P 0.1% 0.1% 00:00
GE CPI YoY - Sep P 2.0% 2.0% 00:00
GE CPI EU Harmonized MoM - Sep P 0.1% 0.0% 00:00
GE CPI EU Harmonized YoY - Sep P 1.9% 1.9% 00:00
US Advance Goods Trade Balance - Aug -$70.6B -$72.0B 00:30
US Wholesale Inventories MoM - Aug P 0.3% 0.6% 00:30
US GDP Annualized QoQ - Q2 T 4.2% 4.2% 00:30
US Personal Consumption - Q2 T 3.8% 3.8% 00:30
Continued on following page
Data calendar
ANZ New Zealand Weekly Focus | 24 September 2018 9
Date Country Data/event Mkt. Last NZ time
28-Sep US GDP Price Index - Q2 T 3.0% 3.0% 00:30
US Core PCE QoQ - Q2 T 2.0% 2.0% 00:30
US Durable Goods Orders - Aug P 1.9% -1.7% 00:30
US Durables Ex Transportation - Aug P 0.4% 0.1% 00:30
US Cap Goods Orders Nondef Ex Air - Aug P 0.3% 1.6% 00:30
US Cap Goods Ship Nondef Ex Air - Aug P 0.5% 1.0% 00:30
US Initial Jobless Claims - 22-Sep 210k 201k 00:30
US Continuing Claims - 15-Sep 1675k 1645k 00:30
US Pending Home Sales MoM - Aug -0.2% -0.7% 02:00
US Pending Home Sales NSA YoY - Aug -- -0.5% 02:00
US Kansas City Fed Manf. Activity - Sep 17.0 14.0 03:00
NZ ANZ Consumer Confidence Index - Sep -- 117.6 10:00
NZ ANZ Consumer Confidence MoM - Sep -- -0.7% 10:00
NZ Building Permits MoM - Aug -- -10.3% 10:45
UK GfK Consumer Confidence - Sep -8.0 -7.0 11:01
JN Tokyo CPI YoY - Sep 1.1% 1.2% 11:30
JN Tokyo CPI Ex-Fresh Food YoY - Sep 0.9% 0.9% 11:30
JN Industrial Production MoM - Aug P 1.5% -0.1% 11:50
JN Industrial Production YoY - Aug P 1.5% 2.2% 11:50
JN Retail Sales MoM - Aug 0.5% 0.1% 11:50
JN Retail Trade YoY - Aug 2.1% 1.5% 11:50
AU Private Sector Credit MoM - Aug 0.4% 0.4% 13:30
AU Private Sector Credit YoY - Aug 4.3% 4.4% 13:30
CH Caixin PMI Mfg - Sep 50.5 50.6 13:45
GE Unemployment Change (000's) - Sep -9k -8k 19:55
GE Unemployment Claims Rate SA - Sep 5.2% 5.2% 19:55
UK Current Account Balance - Q2 -£19.4B -£17.7B 20:30
UK GDP QoQ - Q2 F 0.4% 0.4% 20:30
UK GDP YoY - Q2 F 1.3% 1.3% 20:30
UK Total Business Investment QoQ - Q2 F 0.5% 0.5% 20:30
UK Total Business Investment YoY - Q2 F 0.8% 0.8% 20:30
EC CPI Core YoY - Sep A 1.1% 1.0% 21:00
EC CPI Estimate YoY - Sep 2.1% 2.0% 21:00
CH BoP Current Account Balance - Q2 F -- $5.8B UNSPECIFIED
UK Nationwide House PX MoM - Sep 0.2% -0.5% 28 Sep – 4 Oct
UK Nationwide House Px NSA YoY - Sep 1.8% 2.0% 28 Sep – 4 Oct
29-Sep US Personal Income - Aug 0.4% 0.3% 00:30
US Personal Spending - Aug 0.3% 0.4% 00:30
US PCE Deflator MoM - Aug 0.1% 0.1% 00:30
US PCE Deflator YoY - Aug 2.2% 2.3% 00:30
US PCE Core MoM - Aug 0.1% 0.2% 00:30
US PCE Core YoY - Aug 2.0% 2.0% 00:30
US Chicago Purchasing Manager - Sep 62.0 63.6 01:45
US U. of Mich. Sentiment - Sep F 100.5 100.8 02:00
30-Sep CH Non-manufacturing PMI – Sep 54.0 54.2 14:00
CH Manufacturing PMI – Sep 51.1 51.3 14:00
CH Composite PMI – Sep -- 53.8 14:00
Key: AU: Australia, EC: Eurozone, GE: Germany, JN: Japan, NZ: New Zealand, UK: United Kingdom, US: United States, CH: China. Source: Dow Jones, Reuters, Bloomberg, ANZ Bank New Zealand Limited. All $ values in local currency.
Note: All surveys are preliminary and subject to change
Local data watch
ANZ New Zealand Weekly Focus | 24 September 2018 10
Though growth in Q2 was solid, the economy appears to have lost some steam since then. We don’t expect that it
will roll over, but we think it will struggle to grow above trend. Inflation is expected to increase gradually, but the
medium-term outlook is not assured. The OCR is expected to be on hold for the foreseeable future. We still see the
balance of risks tilted towards the next move being a cut.
Date Data/event Economic
signal Comment
Wed 26 Sep
(10:45am)
Overseas Merchandise Trade
– August Recovery
The annual trade deficit is expected to narrow on base
effects.
Wed 26 Sep
(1:00pm)
ANZ Business Outlook –
September -- --
Wed 26 Sep
(3:00pm) RBNZ New Lending – August Step down
With house sales having taken a step down, new lending has
softened and we may see this continue.
Thu 27 Sep
(9:00am) RBNZ OCR Review
What would it
take?
A cautious tone is expected; we’ll be looking to understand
what it would take for the RBNZ to cut.
Fri 28 Sep
(10:00am)
ANZ Consumer Confidence–
September -- --
Fri 28 Sep
(10:45am) Building Consents – August Getting real
With building consents having been pared back, we may see
a bounce – but the trend is turning softer.
Fri 28 Sep
(3:00pm)
RBNZ Sectoral Credit --
August Moderation
After recent stability in credit growth, the moderation in the
housing market may start to flow through.
Tue 2 Oct
(10:00am)
Quarterly Survey of
Business Opinion – Q3 Mirror
We’ll be looking to see whether investment and employment
intentions mirror the downbeat pulse from the ANZBO.
Wed 3 Oct (5:00am)
QV House Prices Old news These data are lagged 2-3 months, so won’t give us new information. Expect continued moderation in line with REINZ.
Wed 3 Oct
(10:00am) ANZ Job Ads – September -- --
Wed 3 Oct
(1:00pm)
ANZ Commodity Price Index
– September -- --
Tue 9 Oct
(10:00am)
ANZ Truckometer –
September -- --
Tue 9 Oct
(1:00pm)
ANZ Monthly Inflation
Gauge – September -- --
Wed 10 Oct
(10:45am)
Electronic Card Transactions
– September Looking
Spending growth has stabilised after recent softness; we will
be looking for moderate growth in coming months.
10-14 Oct REINZ Housing Market
Statistics – September Contained
After ticking up over the past two months, house price
pressures are likely to remain contained or even moderate.
Tue 16 Oct
(10:45am) Consumer Price Index – Q3 Fuelled
Higher fuel prices are expected to contribute to rising CPI
inflation in the quarter.
Fri 19 Oct
(10:45am)
International Travel and
Migration – September Easing
Net migration flows are expected to continue easing, with
departures to Australia lifting further.
Thu 25 Oct (10:45am)
Overseas Merchandise Trade – September
Recovery Exports are expected to lift on the back of the weaker NZD and solid milk production.
Wed 31 Oct
(10:45am)
Building Consents –
September How far?
We will start to get a sense regarding the extent of the recent
downward trend.
Wed 31 Oct
(1:00pm)
ANZ Business Outlook –
October -- --
On balance Data watch The short-term data pulse may improve, but the
medium-term picture is looking less assured.
Key forecasts and rates
ANZ New Zealand Weekly Focus | 24 September 2018 11
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20
GDP (% qoq) 1.0 0.6 0.5 0.7 0.7 0.6 0.6 0.6 0.6 0.6
GDP (% yoy) 2.8 2.8 2.6 2.8 2.5 2.5 2.6 2.5 2.4 2.4
CPI (% qoq) 0.4 0.5 0.3 0.7 0.5 0.5 0.2 0.5 0.4 0.5
CPI (% yoy) 1.5 1.5 1.8 2.0 2.0 2.0 1.9 1.7 1.6 1.6
LCI Wages (% qoq) 0.6 0.6 0.5 0.4 0.7 0.6 0.5 0.5 0.7 0.6
LCI Wages (% yoy) 2.1 1.9 2.0 2.0 2.1 2.1 2.2 2.3 2.4 2.4
Employment (% qoq) 0.5 0.4 0.4 0.5 0.5 0.4 0.4 0.4 0.4 0.3
Employment (% yoy) 3.7 1.9 1.9 1.8 1.7 1.7 1.7 1.6 1.5 1.5
Unemployment Rate
(% sa) 4.5 4.4 4.4 4.4 4.4 4.3 4.3 4.3 4.3 4.2
Current Account (% GDP)
-3.1 -3.4 -3.5 -3.3 -3.4 -3.5 -3.5 -3.6 -3.6 -3.6
Terms of Trade (% qoq) 0.6 -1.2 0.3 0.3 0.2 0.2 0.3 0.1 0.2 0.2
Terms of Trade (% yoy) 1.4 -0.5 -1.6 0.6 -0.3 1.0 1.0 0.8 0.8 0.8
Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18
Retail ECT (% mom) 1.3 0.3 1.2 -0.3 1.7 -2.3 0.8 0.8 0.2 1.0
Retail ECT (% yoy) 5.0 3.8 4.1 4.0 6.7 1.4 4.2 4.9 3.8 6.3
Credit Card Billings
(% mom) 0.9 0.6 -0.6 0.7 1.0 0.6 -1.4 2.0 -1.3 2.6
Credit Card Billings
(% yoy) 9.1 6.3 4.6 7.0 7.3 6.9 3.7 5.9 3.3 7.7
Car Registrations
(% mom) 0.9 -4.7 3.2 -8.9 -3.7 -1.0 13.2 -6.2 0.1 3.1
Car Registrations (% yoy)
7.3 4.7 6.2 -4.2 -11.9 -9.0 -0.6 -4.9 -0.7 -4.7
Building Consents
(% mom) 9.3 -9.1 -0.2 6.4 12.8 -3.8 6.7 -8.2 -10.4 --
Building Consents
(% yoy) 13.3 4.5 4.1 -0.8 18.3 15.2 23.1 11.9 -5.8 --
REINZ House Price Index
(% yoy) 3.6 3.7 3.5 4.0 4.1 3.7 3.6 3.8 4.8 4.1
Household Lending
Growth (% mom) 0.4 0.6 0.4 0.5 0.5 0.5 0.5 0.5 0.5 --
Household Lending
Growth (% yoy) 6.2 5.9 5.8 5.7 5.7 5.8 5.8 5.8 6.0 --
ANZ Roy Morgan
Consumer Conf. 123.7 121.8 126.9 127.7 128.0 120.5 121.0 120.0 118.4 117.6
ANZ Business Confidence -39.3 -37.8 .. -19.0 -20.0 -23.4 -27.2 -39.0 -44.9 -50.3
ANZ Own Activity Outlook 6.5 15.6 .. 20.4 21.8 17.8 13.6 9.4 3.8 3.8
Trade Balance ($m) -1222 614 -662 188 -151 200 202 -288 -143 --
Trade Bal ($m ann) 55999 56476 57252 57451 58071 58675 58979 59698 60662 --
ANZ World Comm. Price
Index (% mom) -0.9 -1.9 0.7 2.8 1.2 1.0 1.5 -0.9 -3.3 -1.1
ANZ World Comm. Price
Index (% yoy) 6.0 3.2 4.1 5.0 5.8 7.1 5.4 2.3 -0.2 -0.5
Net Migration (sa) 5650 5670 6230 4870 5350 4900 5080 4850 4750 5010
Net Migration (ann) 70354 70016 70147 68943 67984 67038 66243 64995 63779 63288
ANZ Heavy Traffic Index
(% mom) 1.1 -4.2 4.1 -2.5 -0.3 1.4 3.0 -1.5 -0.4 1.1
ANZ Light Traffic Index
(% mom) 1.5 -1.7 -0.5 -0.2 2.2 -0.5 1.1 0.7 0.4 0.9
ANZ Job Ads (% mom) -0.2 -0.1 3.0 -1.3 0.7 -1.9 2.4 -1.2 3.2 0.6
Figures in bold are forecasts. mom: Month-on-Month; qoq: Quarter-on-Quarter; yoy: Year-on-Year
Key forecasts and rates
ANZ New Zealand Weekly Focus | 24 September 2018 12
Actual Forecast (end month)
FX rates Jul-18 Aug-18 Today Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NZD/USD 0.681 0.662 0.67 0.65 0.62 0.61 0.61 0.61 0.61 0.62
NZD/AUD 0.919 0.920 0.92 0.90 0.89 0.87 0.87 0.87 0.87 0.89
NZD/EUR 0.581 0.570 0.57 0.57 0.53 0.50 0.49 0.48 0.48 0.48
NZD/JPY 76.00 73.45 75.07 69.6 65.1 62.2 60.4 59.2 58.6 59.5
NZD/GBP 0.518 0.510 0.51 0.51 0.48 0.46 0.45 0.44 0.44 0.43
NZ$ TWI 71.3 69.9 72.4 68.7 65.4 63.2 62.3 61.8 61.5 62.2
Interest rates Jul-18 Aug-18 Today Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NZ OCR 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75
NZ 90 day bill 1.91 1.91 1.91 1.95 1.98 2.00 2.00 2.00 2.00 2.00
NZ 10-yr bond 2.76 2.54 2.66 2.60 2.70 2.75 2.80 2.85 2.90 2.95
US Fed funds 2.00 2.00 2.00 2.25 2.50 2.50 2.75 2.75 2.75 2.75
US 3-mth 2.35 2.32 2.37 2.75 2.95 2.95 3.20 3.20 3.20 3.20
AU Cash Rate 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.75 2.00 2.00
AU 3-mth 1.96 1.95 1.93 2.05 2.05 2.05 2.00 2.30 2.50 2.50
21-Aug 17-Sep 18-Sep 19-Sep 20-Sep 21-Sep
Official Cash Rate 1.75 1.75 1.75 1.75 1.75 1.75
90 day bank bill 1.90 1.88 1.89 1.89 1.89 1.91
NZGB 05/21 1.75 1.69 1.71 1.74 1.77 1.78
NZGB 04/23 1.96 1.91 1.93 1.97 1.99 2.00
NZGB 04/27 2.42 2.40 2.42 2.46 2.48 2.49
NZGB 04/33 2.75 2.77 2.79 2.83 2.85 2.85
2 year swap 2.03 1.99 2.00 2.01 2.04 2.02
5 year swap 2.39 2.33 2.35 2.38 2.42 2.40
RBNZ TWI 71.99 71.47 71.68 71.57 72.16 72.40
NZD/USD 0.6667 0.6569 0.6593 0.6608 0.6667 0.6687
NZD/AUD 0.9057 0.9157 0.9149 0.9111 0.9166 0.9168
NZD/JPY 73.52 73.60 73.93 74.29 74.80 75.27
NZD/GBP 0.5196 0.5012 0.5017 0.5013 0.5037 0.5107
NZD/EUR 0.5786 0.5633 0.5643 0.5653 0.5688 0.5686
AUD/USD 0.7362 0.7174 0.7206 0.7254 0.7273 0.7290
EUR/USD 1.1522 1.1662 1.1683 1.1690 1.1721 1.1749
USD/JPY 110.27 112.03 112.13 112.42 112.19 112.59
GBP/USD 1.2833 1.3108 1.3140 1.3182 1.3235 1.3072
Oil (US$/bbl) 67.35 68.91 69.85 71.12 70.80 70.78
Gold (US$/oz) 1193.95 1197.83 1200.20 1202.99 1203.36 1200.04
NZX 50 9116 9272 9316 9345 9361 9376
Baltic Dry Freight Index 1736 1357 1356 1373 1396 1413
NZX WMP Futures (US$/t) 2940 2725 2715 2725 2695 2690
Important notice
ANZ New Zealand Weekly Focus | 24 September 2018 13
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