Economic Week - January 15

by Nick Clark

Farm Confidence Survey – thank you
Federated Farmers’ January 2020 Farm Confidence Survey has closed, with responses now being analysed by Research First.  A big thank you to the 1,431 farmers who responded to the survey.  Results can be expected at the end of January or start of February.

Dairy prices rally
After falling twice in December, dairy prices bounced back at last week’s Global Dairy Trade auction.
On 7 January the GDT Price Index lifted 2.8% compared to the last auction on 17 December.  All the products on offer posted increases, including the two biggest by volume - whole milk powder up 1.7% and skim milk powder up 5.4%.
The average selling price was $US3,371 and 33,050 tonnes were sold. 
The GDT Price Index was up 14.9% compared to the same time last year.

Food prices slip in December but up annually
Statistics NZ’s monthly Food Price Index showed food prices falling 0.2% in the month of December 2019, although they were up 0.4% after seasonal adjustment.
Fruit and vegetable prices rose 2.1%, with fruit up 2.4% and vegetables up 1.6%.  Meat, poultry, and fish prices fell 0.3, with beef and veal up 1.0% and mutton, lamb and hogget down 0.9%.  Grocery food prices fell 1.0%, with bread and cereals down 0.7% and milk, cheese and eggs also down 0.7%.
On an annual basis food prices increased 2.4% for the year ended December 2019. 
Fruit and vegetable prices increased 3.6% annually, with fruit up 6.3% and vegetables up 1.2%. Meat, poultry, and fish prices increased 4.2%, with beef and veal up 7.7% and mutton, lamb and hogget up 6.7%. Grocery food prices increased 0.8%, with bread and cereals up 4.5% and milk, cheese and eggs up 1.4%.

Business confidence improves
NZIER’s Quarterly Survey of Business Opinion (QSBO) showed an improvement in business confidence in the final quarter of 2019 but it still remains in negative territory.
In the December quarter a net 26% of businesses felt pessimistic about general economic conditions, a 9-point improvement on the September quarter.  Meanwhile, businesses’ reported trading activity remained soft, with a net 11% of businesses reporting reduced activity, unchanged from September.
The QSBO does not measure farming but it does measure industries that rely on farming for their business, especially in the regions.  Most regions were downbeat with only one (Hawkes Bay) having more optimists than pessimists.
NZIER estimates that annual GDP growth would only have been about 1% in the December quarter.  Forward indicators were a bit better though.

Housing market roars into life
In stark contrast to farms, the housing market appears to be back on the up, according to the Real Estate Institute’s latest monthly Residential Market Statistics.
Median house prices across New Zealand increased by 12.3% in December to $629,000 up from $560,000 in December 2018.  In Auckland, median house prices increased by 3.5% to $890,000, while outside of Auckland median prices increased by 11.5% to $480,000.
There were particularly large annual increases in median sales prices for Southland (up 32.0%), Manawatu-Wanganui (up 27.8%), Gisborne (up 21.3%) and Otago (up 21.2%).  West Coast was the only region where the median house price fell over the year.
In terms of sales volumes, the number of residential properties sold across the country increased by 12.3% from the same time last year.  Meanwhile, in December the median number of days to sell a property decreased by 4 days from 35 to 31 compared to the same time last year – the lowest days to sell in 3 years.
The Government’s decision earlier this year to scrap its plans for a capital gains tax removed a black cloud hanging over the housing market, the Reserve Bank’s cuts to the OCR helped reduce mortgage interest rates, and a continuation of strong immigration and population growth has kept demand strong.

House consents up, farm buildings down
Statistics NZ’s monthly Building Consents Issued statistics show the number of new homes consented reaching 37,010 in the year ended November 2019, up 12.9% on the year to November 2018.
This is the highest annual number of residential building consents since late 1974 but it is still well short of the record 40,025 recorded for the year to February 1974.
Meanwhile, non-residential buildings to the value of $7.4 billion were consented in the year to November 2019, up 4.9% on the previous year.  However, there was a 23.3% decline for farm buildings, with their consents dropping to $287 million.  Although down on 2018’s $374 million, this is still higher than 2015, 2016 or 2017’s amounts.

Retail slips in December but remains solid
Retail sales retreated in December 2019, after a very strong November, according to Statistics NZ’s monthly Electronic Card Transactions.
When adjusted for seasonal effects, retail spending fell 0.8% in the month of December, after a strong 2.9% rise in November when sales had been boosted by Black Friday and Singles’ Day promotions.  Sales of furniture, hardware, appliances, and sports and recreational goods (durables) fell 2.5%.  This was the group which had enjoyed the biggest increase in November.
On an annual basis, retail card spending was up 3.9% compared to December 2018.

NIWA Soil Moisture Data
NIWA’s latest soil moisture maps (as at 9am Thursday 16 January) show the country’s soils drying out and over the past week more areas have become dryer than usual.  The most parched soils relative to usual conditions for this time of year remain in the Northland, Auckland, and Waikato regions.  Southland’s soils remain relatively wetter than usual but less so than last week.

Exchange Rates

Over the course of the week the NZ Dollar was down against the Trade Weighted Index and down against most of our major trading partners, except the UK Pound and the Japanese Yen.



NZ Dollar versus

This Week


Last Week (9/1/20)

Last Month (16/12/19)

Last Year (16/1/19)

US Dollar





Australian Dollar










UK Pound





Japanese Yen





Chinese Renminbi





Trade Weighted Index





Source: Reserve Bank of NZ


Wholesale Interest Rates

Over the course of the week the 90 Day Bank Bill interest rate was up 6 basis points and the rate for 10 Year Government Bonds was down 1 basis point.  The OCR is next reviewed on 12 February.



This Week


Last Week (9/1/20)

Last Month (16/12/19)

Last Year (16/1/19)






90 Day Bank Bill





10 Year Government Bond





Source: Reserve Bank of NZ