The Reserve Bank held interest rates at record lows and repeated its neutral view that it could either raise or cut rates. Business confidence fell again back to its post-election low. Labour scrapped its KiwiBuild visa policy forcing employers to take on an apprentice for each migrant. Instead, it will streamline the hiring of migrant workers to fill a 30,000 construction workers shortage. Shane Jones said John Key lobbied him to exempt the Te Arai land development from foreign buyer rules.
Low for even longer
The Reserve Bank held the official cash rate at 1.75 percent for the 11th consecutive time this morning and retained its 'neutral' stance, saying monetary policy needed to be stimulatory for "some time to come" and that it could just as easily cut rates next as raise them.
"The Official Cash Rate (OCR) will remain at 1.75 percent for now. However, we are well positioned to manage change in either direction – up or down – as necessary," the bank announced at 9am in a statement. The next full Monetary Policy Statement with forecasts and a news conference is due on August 9.
"The best contribution we can make to maximising sustainable employment, and maintaining low and stable inflation, is to ensure the OCR is at an expansionary level for a considerable period," the bank said.
Business confidence is becoming a bigger problem for the Government and another complication for the Reserve Bank that may nudge Governor Adrian Orr and his monetary policy committee closer to an easing bias in August. The persistent business nerves are also limiting the Government, forcing it to scale back or reverse planned migration cuts and more worker-friendly employment laws.
ANZ reported yesterday that its monthly survey found business confidence about the wider economy fell sharply in June to its post-election lows. Confidence about 'own activity' also fell to its November low, but to a lesser extent. Construction and retail were the weakest.
Economic indicators seen over the last month suggest economic growth slowed in the first half of 2018 to around two percent from three percent late last year as the construction sector ran out of runway to grow because of staffing shortages and cost-overruns.
Employment intentions and profit expectations both fell.
"Policy uncertainty appears to be weighing on business sentiment, but the impact of this should not be overstated," ANZ Senior Economist Liz Kendall said.
"The recent slowing in economic momentum is a result of a broader set of headwinds with which the economy is grappling," she said.
"In addition to policy uncertainty, businesses are facing credit and capacity constraints, along with cost pressures, which are squeezing expected profitability. Firms report that their single largest problem is finding skilled labour – a nice problem to have, as problems go, but a real problem nonetheless."
China allows currency devaluation
The New Zealand dollar dropped to a two-year low of 67.76 USc overnight after China allowed its currency to devalue as part of a package of measures to address slowing growth in the world's second largest economy. The trade-weighted index dropped to 72.73 from 73.07 yesterday. The currency nudged lower after the Reserve Bank repeated its neutral stance.
The People's Bank of China published a weak reference rate for the yuan yesterday, which has seen the Chinese currency effectively devalued by two percent over the past six days, its biggest devaluation in almost three years. Chinese authorities are concerned about the slowing pace of growth in the world's second-biggest economy, and at the same time are contending with the prospect of a trade war with the US. ( Bloomberg )
Another migration loosening
Those concerns about skill shortages and the danger that tighter migration settings would further unnerve businesses were no doubt a factor in the Government's decision yesterday to scrap Labour's KiwiBuild visa election promise of forcing construction sector employers to take on one extra apprentice for every migrant worker.
Instead, the Government is setting up a Kiwibuild Skills Shortage list to streamline the employment of migrant construction workers.
The softening of policy comes weeks after the Government quietly dropped plans to strip work rights from sub-degree level international students and also made it easier for students to work for longer after they have graduated. New temporary migrant and student numbers have risen in the last year, although annual net migration has dropped from over 70,000 to around 66,000 in the last six months as previous temporary migrants and working holiday-makers cycle out of the system.
The changes to make it easier to employ construction worker migrants is the third easing of migration settings. The Government has also increased the size of the Registered Seasonal Employer scheme for fruit and grape pickers and MSD declared official labour shortages in the fruit picking regions of Bay of Plenty, Hawkes Bay and Marlborough, which enabled people on holiday visas to stay and work in the orchards and vineyards.
See more in announcements from Immigration Minister Iain Lees Galloway and Building and Construction Minister Jenny Salesa, , including a cabinet paper warning that building costs would blow out and KiwiBuild would be delayed without the extra migrant workers.
Also see the full details and reaction in Shane Cowlishaw's piece on Newsroom Pro on the Government's plans to address a worker shortfall of 30,000 and to ramp up the KiwiBuild programme to build 100,000 houses in 10 years. And there's more from Nikki Mandow on the changes here on Pro.
Shop trucks targeted
Hard on the heels of Newsroom's investigation into predatory lending by shop truck operators, the Government announced proposals to effectively shut down payday lending and limit unreasonable borrowing fees, aggressive debt collectors and predatory mobile traders.
Commerce and Consumer Affairs Minister Kris Faafoi yesterday anounced the release of a discussion paper with the proposed changes.
Here is Catriona MacLennan's calls via Newsroom for regulation.
Key lobbies Jones
Regional Development Minister Shane Jones pre-emptively revealed in a patsy question in Parliament yesterday that John Key had lobbied him to exempt the Te Arai property development controlled by a US billionaire from foreign buyer restrictions. The Government tried to include the exemption in the legislation, but it was ruled out of order by the speaker.
O'Connor backs Jones on Fonterra
Agriculture Minister Damien O'Connor told a Federated Farmers event in Wellington yesterday that he wanted Fonterra shareholders to have a debate about the issues raised by Shane Jones, and that Jones' call for John Wilson to resign as chairman reflected the views of many in the farming community.
Fonterra needed to "step up to the mark and be a little more astute in some of their management and investment decisions," O'Connor was reported as saying by the New Zealand Herald.
Asked why Fonterra's issues should be debated in public, O'Connor said: "Is that not, in normal circumstances, the responsibility of the shareholders to discuss those issues?"
"If you don't discuss it, we will. This is a company that's too important to New Zealand."
O'Connor denied that Jones' comments were uninformed.
"Like hell it was. It was a very informed comment by my colleague Mr Jones. He comes off a small dairy farm up near Kaitaia. He's been around, he talks to people. What's the counter? Is he right or wrong? What do you think? Haven't heard anything."
The Government clearly wants farmers to debate Wilson's position and Fonterra's strategy in tandem with the Government's own review of the Dairy Industry Restructuring Act, which currently forces Fonterra to collect from all suppliers and to sell milk to its competitors. Some see the debate and a change of chairman allowing Fonterra to look at a breakup into a commodity processing unit and a brands unit that could then be sold off.
Democrats swing left
The increasing polarisation of the US political landscape widened dramatically overnight with the shock win in a Democratic primary by a 28 year old organiser from Bernie Sanders' campaign over a long-time moderate and heir apparent to House leader Nancy Pelosi. ( New York Times )
Trump Putin summit on
The United States and Russia agreed overnight to hold a summit soon between President Donald Trump and President Vladimir Putin , possibly in Helsinki. ( Reuters )
Australia is expected to pass legislation today aimed at preventing interference by other Governments, a move likely to cause further tensions with China. ( Reuters )