Rego error doubles inflation
Another bank’s profit drops
Shareholders are likely to be getting antsy about a fall in bank profits, one commentator says. Westpac is the latest bank to report its results for the 2016 financial year, with a 7 per cent fall in annual group profit to A$7.44 billion ($7.78 billion). New Zealand’s cash earnings dropped 4 per cent to $872 million. It follows a 9 per cent fall profit for ANZ, and Bank of New Zealand reporting a 3.4 per cent fall in cash earnings for the year. Westpac said its result had been hit by an investment in customer service transformation, which had affected core earnings by 2 per cent. Claire Matthews, of Massey University, said it was likely that some shareholders would start getting nervous.
SkyCity appoints new boss
SkyCity Entertainment Group has appointed experienced casino executive Graeme Stephens as its new chief executive. The 53-year-old is currently the chief executive of Sun International, a casino, resorts and entertainment company listed on the Johannesburg stock exchange. Former SkyCity chief executive Nigel Morrison resigned in April. SkyCity chairman Chris Moller said Stephens had extensive experience in developing casinos. Stephens is expected to start in May 2017.
Big price rises expected
Many New Zealanders are banking on the house price rises seen over recent years continuing into the future – and that has prompted a warning. BNZ has released new research that shows 62 per cent of Kiwis think house prices in their area are now too high. But that does not stop them expecting the upward trajectory to continue. Overall, New Zealanders expect house prices to increase 21 per cent over the next year, well up from the 12.7 per cent recorded by QV in October.
Gift card terms changed
Hallensteins, Macpac and Bike Barn are the latest retailers to drop expiry dates on their gift cards. Consumer NZ has been running a ‘‘drop the dates’’ campaign to ask retailers to remove the end dates. Head of research Jessica Wilson said 25 retailers had responded. Eight had dropped the dates altogether and 17 had agreed to extend the expiry date. But some, including Event Cinemas, Just Jeans, Mobil Oil and Repco, were sticking with 12-month dates. ‘‘Some of these retailers have said they offer grace periods, will honour expired cards or issue replacement cards in certain circumstances. But these practices beg the question, why have a date at all?’’ Wilson said.
Cow comments ‘sickening’
Animal rights supporters are calling for an independent watchdog to take over animal welfare responsibilities from the Ministry for Primary Industries following more allegations of farm animal abuse. Comments made by members of a dairy farming Facebook group about how to stop a cow from kicking and to get it to let down milk have been called ‘‘sickening’’. Complaints based on the Facebook comments have been made to the ministry, which has started ‘‘several investigations’’ as a result. Some have already been completed. Some of the suggestions included inserting a hose into the cow’s ‘‘fanny’’ and blowing into it (called ‘‘tubing’’ in the industry), which is a breach of the Dairy Cattle Code of Welfare. Human error has been blamed for a mistake in official figures about the cost of living, creating a new headache for the Reserve Bank on whether to cut interest rates.
Yesterday Statistics New Zealand blamed a ‘‘manual processing error’’ for its decision to correct its estimate of the increase in inflation in the year to September, from 0.2 per cent to 0.4 per cent.
The mistake related to how much the agency believed the cost of licensing a small car – commonly referred to as registration or ‘‘rego’’ – had dropped in the September quarter.
Although the correction may appear minor, and inflation remains below the official target, it adds weight to the arguments against the Reserve Bank lowering the official cash rate (OCR) on Thursday to a new all-time low of 1.75 per cent.
The Reserve Bank is tasked with aiming to keep inflation between 1 per cent and 3 per cent, and targeting 2 per cent.
To achieve this it moves the OCR, in a bid to reduce or encourage spending, as well as having an impact on the strength of the New Zealand dollar.
Inflation has been below 1 per cent for about two years. But a series of increases in the price of petrol in recent weeks (although the national price of petrol was cut for the second time in recent days yesterday) has economists tipping that inflation will quickly return to 1 per cent.
Added to this, unemployment has dropped to the lowest level since 2008, according to other figures from Statistics NZ, while the economy grows at 3.6 per cent.
Most bank economists were already questioning the need for a further cut even before the correction was announced.
ANZ chief economist Cameron Bagrie said the Reserve Bank’s previous statements that it was likely to cut interest rates put pressure on it to carry this out, or risk sending the dollar ‘‘skyward’’.
However, he said recent economic figures showed inflation was
"I still think the Reserve Bank shouldn't be cutting rates. If it were me, I'd be biased towards holding." ANZ chief economist Cameron Bagrie
‘‘heading in the right direction’’.
‘‘I still think the Reserve Bank shouldn’t be cutting rates. If it were me, I’d be biased towards holding [the OCR at 2 per cent]. But I think [the Reserve Bank’s] forward guidance has been so strong that they’re going to find it hard to step away [from cutting].’’
On Friday HSBC Australia and New Zealand chief economist Paul Bloxham said there needed to be a debate over whether the Reserve Bank should be cutting.
Bloxham, who famously labelled New Zealand the ‘‘rockstar‘‘ of Western economies in 2014 and is now hailing its ‘‘revival’’, said the economy was strong, unemployment low and the strong dollar was making New Zealanders wealthier, without appearing to constrain growth.
‘‘You’ve got to be asking the question about whether the dollar’s actually constraining your ability to grow the economy. It doesn’t appear to be at this stage,’’ Bloxham said.
Meanwhile the Reserve Bank should be mindful of the fact that low interest rates were helping to fuel the housing market, leading to a rapid buildup of household debt, he said.
Bank of New Zealand, which has been questioning whether there was any point in cutting interest rates for more than 12 months, warned yesterday that it not only expects Wheeler to cut on Thursday, but that the Reserve Bank would signal that it would probably go further in 2017.
‘‘The only reason we are still expecting the Reserve Bank to cut … is that the bank has strongly indicated it is going to do so,’’ BNZ senior economist Craig Ebert wrote yesterday. ‘‘The economic case for such a low cash rate was always difficult to justify. However, the [Reserve Bank] seems committed to easing further.’’