Hive News Wednesday: Auckland house prices still firm; Wheeler's 2nd term in doubt; election date due; NZ$ at 2-year high; Jobless rate up

"Euro" toilet paper on sale at gift shop in France. Trump has accused Germany of undervaluing the euro to exploit the US. Copyright Lynn Grieveson/Hive News.

Bill English is expected to announce the election date later today after an all-day meeting with the National Caucus at Premier House in Wellington. September 23 is seen as one of the favoured candidates.

House prices, the economy, the jobs market and the fallout from Donald Trump's blitz of executive orders will no doubt feature in the election campaigning to come, with fresh news on all those to keep the Government occupied.

Trump's actions and words are already having an impact, and not in a way that either the Government or the Reserve Bank would like.

The New Zealand dollar hit a two-year high of 79.94 on a Trade Weighted Index basis this morning and has risen almost 10% since the middle of 2016, including nearly 4% since Trump's election. It's also 4.6% above the Reserve Bank's forecast for the March quarter.

The surge overnight followed inflammatory comments about the US dollar in the FT by Trump's Trade Council head Peter Navarro. He accused Germany of using a grossly under-valued euro to exploit the United States and its EU partners, which shocked many in Europe and drove the US dollar down.

Trump has repeatedly said the US dollar is over-valued -- a reversal of decades of comments by US Presidents about the need for a strong dollar -- which is unnerving many in currency markets.

The New Zealand currency's rise is making it harder for Reserve Bank Governor Graeme Wheeler to achieve his inflation goals. Inflation has only just returned to the bank's 1-3% target band, having been under 1% for most of his current 5 year term, which ends in September. Crunch time is approaching for Wheeler on whether he applies -- or is encouraged to apply -- for a second term under new Finance Minister Steven Joyce and new Prime Minister Bill English.

RNZ's Gyles Beckford reported yesterday there was speculation Wheeler had decided not to apply for a second term and an announcement would be made before next Thursday's Monetary Policy Statement. A Reserve Bank spokesman would only say any announcement would be made in "due course."

Relations between Wheeler and the Government have been less than smooth, given criticism behind the scenes in the Beehive of his first round of Loan to Value Ratio proposals and concerns about unusually low inflation for the last two years.

Wheeler also had to reverse the bank's 100 basis points of rate hikes from 2014 and he has been criticised for his communication style by economists and some in the media. Wheeler did not give a single live television or radio interview in his four years as Governor, which contrasts with the more open policy of his predecessors Don Brash and Alan Bollard.

House prices still strong

Other media highlighted some apparent price falls in Auckland and its surrounds in QV's house valuation measures for January published this morning, but a closer reading shows prices remained very solid on a seasonally adjusted basis in the nation's biggest city, and remained red hot elsewhere despite the Reserve Bank's higher deposit requirements for landlords applied from September.

QV's figures showed average values in the Auckland region rose 0.2% to NZ$1.048 million in the last three months to January and were up 12.8% from a year ago. Average values fell 0.5% in the last three months on the North Shore, fell 0.5% in Manukau and fell 0.1% in the Waitakere region. But values rose 1.3% in Auckland City, rose 1.6% in Rodney and rose 2.9% in Franklin.

Infometrics pointed out Auckland house values actually rose 0.5% in seasonally adjusted terms in January from December and it pointed to a re-acceleration in house price growth around the country.

"House price inflation is still hitting dizzying heights in some parts of the country and accelerating in at least half the country’s local council areas," Mieke Welvaert wrote.

The jury on still well out on whether the Reserve Bank's November moves will slow the housing market for any more than the two or three months of cooling that the previous two rounds of lending controls (2013 and 2015) caused, particularly given record high net migration and strong economic growth.

Households gearing up even more

Reserve Bank figures published yesterday on credit growth also showed household lending growth remains very robust, and much stronger than household income growth.

Total household lending grew by NZ$1.715 billion to NZ$246.812 billion in December from January and the seasonally adjusted monthly growth rate accelerated again to 0.7% from 0.6%, having previously dropped from a high of 0.8% in September. The annualised growth rate also rose to 9.1% from 9.0%.

Unemployment up and wage growth flat

Labour forces figures published this morning showed unemployment rose and wage growth was flat to falling in the December quarter as strong growth in the labour force due to high migration and record-high participation was more than enough to offset solid jobs growth.

The number of people unemployed rose 10,000 to 139,000 in the December quarter from the September quarter, increasing the unemployment rate to 5.2% from 4.9%. That came after the labour force participation rate rose 0.4 percentage points to a record high 70.5%. The size of the labour force rose by 29,000 in the quarter, which was more than the 10,000 increase in employment over the quarter.

The jobs growth of 0.8% for the quarter was slightly above most economist expectations, but so was the increase in the unemployment rate because of the rise in the participation rate. The number of unemployed people rose 15,000 over the year and the unemployment rate has risen from 4.9% to 5.2% over the year, despite the creation of 137,000 jobs over the year. There were 82,673 people migrants granted residence, work or student visas over the last year, up from 79,700 the previous year.

The under-utilisation rate, which includes part-timers wanting full-time work and jobseekers deemed unavailable for work, rose 0.6 percentage points to 12.8% in the quarter. The number of under-utilised people rose 25,900 in the quarter to 354,900. The number of 15-24 year olds who were not in education, employment or training (NEET) rose 16,000 to 91,000 in the quarter, increasing the NEET rate to 13.6% to 11.2%.

Wage growth also remained remarkably subdued, despite repeated talk of skill shortages in an economy growing at close to 4%.

The Labour Cost Index measure of wage rose 1.6% in the December quarter from a year ago, which was unchanged from the previous quarter. The Quarterly Employment Survey measure of average ordinary time hourly wages rose 1.3% in the quarter from a year ago, which was the slowest in six years and down from annual wage inflation of 2.2% in December quarter a year ago.

Tweet of the day:

Brian Klaas:

I wish someone had warned us about the risks of a conspiracy theorist president with authoritarian tendencies and a penchant for revenge.

Have a great day

cheers

Bernard