By Byron Kaye

SYDNEY (Reuters) -Two top Australian banks said the number of home loan customers missing repayments remained below pre-COVID levels as a spike in living costs slows their discretionary spending, a sign that concerns of widespread financial distress may not materialise.

After 400 basis points of interest rate hikes in 14 months, the fastest tightening in a generation in the country, economists have warned one million customers with expiring fixed-rate mortgages would struggle as their loans reverted to higher variable rates from 2023, a scenario widely referred to as the "mortgage cliff".

But the CEOs of National Australia Bank (OTC:NABZY) and ANZ Group, the No.3 and No.4 lenders, told a parliamentary hearing on Wednesday that they were seeing only a slight increase in borrower stress in the A$2 trillion ($1.34 trillion) mortgage market.

"We have been pleasantly surprised at the resilience that has been shown to date," NAB CEO Ross McEwan told the House of Representatives economics committee hearing which bank bosses are required to face periodically.

"We are starting to see an uptick ... where customers have not been able to make a payment, but the levels that we're seeing are still below the 10-year average."

NAB had recently telephoned 8,600 mortgage customers it considered most vulnerable to higher borrowing rates and just 14 requested support, McEwan told the committee.

Almost half of NAB's fixed-rate mortgage customers had reverted their loans to variable without incident, and the bank did not expect much change as the rest did the same, he said.

ANZ CEO Shayne Elliott told the inquiry just A$6 of every A$1,000 owed to his bank for a mortgage repayment was more than 90 days late, which was "better than it was before the pandemic".

"Good incomes mean that people absorb bigger expenses," Elliott said.

Borrowers coming off low fixed-rate mortgages were "less stressed than the average customer," he added. "They're prepared for it. They know it's coming, it's not a surprise."

Heads of Commonwealth Bank of Australia (OTC:CMWAY) and Westpac, the nation's top two lenders, will speak at the hearing on Thursday.

ANZ, meanwhile, broke with rivals and said it supported regulator-recommended mortgage buffers to measure a customer's borrowing capacity, citing uncertainty around the direction of interest rates.

After the hefty rate hikes, ANZ's three larger rivals have started considering lending without applying a regulator-recommended 3% buffer, saying it is disadvantaging borrowers.

"Of course we should build in buffers," Elliott said. "I think 3% feels about right. We don't know what the future holds."

($1 = 1.4905 Australian dollars)

By Lucy Craymer

WELLINGTON (Reuters) - New Zealand's central bank held the cash rate steady at 5.5% on Wednesday, hitting pause as expected and flagging rates would be on hold for some time, with most economists still expecting rate cuts to come in 2024.

With the country in a technical recession, the RBNZ said the official cash rate (OCR) had constrained spending as anticipated but would need to stay high, as inflation is expected to fall into its target range only by the second half of next year.

"The Committee agreed that the OCR will need to remain at a restrictive level for the foreseeable future," the RBNZ statement said, following the decision which had been unanimously expected in a Reuters poll of 25 economists.

The New Zealand dollar is currently trading 0.6% higher following the decision, but this is largely on broader weakness in the U.S. dollar.

A front-runner in withdrawing pandemic-era stimulus among its peers, the RBNZ has battled to curb inflation, lifting rates by 525 basis points over 20 months in the most aggressive tightening since the official cash rate was introduced in 1999.

ASB Bank chief economist Nick Tuffley said ASB remains of the view that the RBNZ has done enough to get inflation under control but will remain wary for the time being.

"We don't expect OCR cuts until May next year, give or take," Tuffley said in a client note.

New Zealand's annual inflation has come off in recent months and is currently just below a three-decade high at 6.7%. Minutes from the monetary policy committee meeting said the committee expects inflation to decline to within the central bank's 1% to 3% target by the second half of 2024.

"Consumer spending growth has eased and residential construction activity has declined, while house prices have returned to more sustainable levels," the RBNZ's statement said.

Capital Economics sees weakening economic conditions driving inflation down to the central bank's target band in the first half of 2024, and as a result expects the RBNZ to start cutting rates in the first quarter of 2024, economist Abhijit Surya said in a note.

By Rae Wee

SINGAPORE (Reuters) - The dollar sank to a two-month low against its major peers on Wednesday in the lead-up to a key U.S. inflation reading, while sterling scaled a 15-month top on expectations the Bank of England (BoE) has further to go in raising rates.

U.S. inflation data is due later on Wednesday, with expectations core consumer prices rose 5% on an annual basis in June. The figures should also provide further clarity on the Federal Reserve's progress in its fight against inflation.

Ahead of the release, the U.S. dollar fell to a two-month low of 101.45 against a basket of currencies, extending its losses from the start of the week after Fed officials said the central bank was nearing the end of its current monetary policy tightening cycle.

The euro rose 0.07% to $1.1018, flirting near Tuesday's two-month high of $1.1027.

"We're already seeing markets move in anticipation of a softer U.S. inflation report," said Matt Simpson, senior market analyst at City Index. "That runs the risk of a 'buy the rumour, sell the fact' reaction if the figures come in around expectations."

Elsewhere, sterling peaked at a 15-month high of $1.2940 in early Asia trade, bolstered by bets the BoE will have to tighten monetary policy further to tame British inflation that is running at the highest rate of any major economy.

Data out on Tuesday showed that a key measure of British wages rose at the joint fastest pace on record as basic earnings in the three months to May surged 7.3%, higher than expectations of a 7.1% rise.

"The (BoE) will have their heads in their hands following the latest employment and wages figures, as it likely forces them to hike by another 50 basis points (bps) at their next meeting and have a terminal rate above 6%," Simpson said.

Current market pricing indicates roughly another 140 bps of rate hikes from the BoE.

The Japanese yen strengthened past the 140 per dollar level on Wednesday to peak at a one-month high of 139.54 per dollar, drawing some support from expectations that the Bank of Japan (BOJ) could tweak its controversial yield curve control (YCC) policy at its upcoming meeting this month.

"Although steady policy appears to be the most likely outcome for the July policy meeting, it is widely expected to bring upgraded inflation forecasts and the market will continue to hope that the BOJ may offer some signal as to when YCC could be adjusted," said Jane Foley, head of FX strategy at Rabobank.

"Speculation of a possible tweak could allow the (yen) some support ahead of the BOJ meeting this month."

In other currencies, the New Zealand dollar rose 0.34% to $0.6219 ahead of a monetary policy decision from the Reserve Bank of New Zealand (RBNZ) later on Wednesday, though expectations are for the central bank to keep rates on hold.

"While we continue to see the balance of risks tilted toward the RBNZ eventually having to do more, that's not expected to happen today," said Susan Kilsby, an agricultural economist at ANZ.

The Aussie gained 0.39% to $0.6713.

By Chiara Elisei

LONDON (Reuters) - Companies around the globe took on a record $456 billion of net new debt in 2022/23, although higher interest rates should reduce appetite for new borrowing ahead, Janus Henderson said in a report published on Wednesday.

The net new debt taken on in 2022/23 pushed outstanding net debt up by 6.2% on a constant-currency basis to $7.80 trillion, surpassing a previous peak in 2020/21, at the height of the COVID pandemic, Janus Henderson's annual corporate debt index showed.

The index, which monitors 933 large listed non-financial corporates globally, showed that U.S. telecoms group Verizon (NYSE:VZ) became the most indebted firm in 2022/23 for the first time, while Google owner Alphabet (NASDAQ:GOOGL) remained the most cash-rich company.

One fifth of the net-debt increase reflected companies such as Alphabet and Meta, which owns Facebook (NASDAQ:META) and Instagram, spending some of their "vast cash mountains", Janus Henderson said.

This suggested the rise in debt was "not as worrying," said James Briggs, fixed-income portfolio manager at the firm, which has $310.5 billion in assets under management.

The report noted that the increase in total debt was more contained at 3% on a constant-currency basis.

While corporate credit quality has held up well so far, it was likely to decline going forward, the report added.

Briggs said the pace of decline would depend on strength in labour markets and the services sector.

Higher interest rates were also expected to dampen appetite for further corporate borrowing and Janus Henderson said it expected net debt to decline by 1.9% in 2023/2024, falling to $7.65 trillion on a constant-currency basis.

The time lag for interest rate increases to filter through also meant that companies were yet to feel a significant impact on their cost of borrowing, the report said.

U.S. firms, that largely rely on fixed-rate bonds as a source of financing, have been particularly shielded so far, with the collective interest bill being flat year-on-year, it added.

In Europe, where a larger part of financing comes from banks, firms have started feeling the pinch from the fastest tightening cycle in a decade and the amount spent on finance costs rose by a sixth at constant exchange rates.

"The increase in interest rates will feed through into the weaker cohort of credit quality much quicker than in investment grade (bonds)," Briggs said.

"We're also expecting more distress in private markets and leveraged loans compared to high yield."

By Anant Chandak

BENGALURU (Reuters) - The Bank of Korea (BOK) will keep its key policy rate unchanged at 3.50% on Thursday and for the rest of the year as inflation continued to ease, a Reuters poll of economists predicted, but rate cut forecasts were pushed back by a quarter to early 2024.

While inflation in major economies remains elevated, prompting the U.S. Federal Reserve and European Central Bank to pursue policy tightening, it fell to a 21-month low in South Korea last month, bringing it closer to the central bank's 2.0% target.

That is good news for the BOK, one of the first to start raising rates in August 2021, which had paused tightening in February as its total 300 basis-point hikes weighed on an economy with some of the most heavily indebted households globally.

All 46 economists in the July 4-10 Reuters poll expected no change at the conclusion of the BOK's meeting on July 13 to the 3.50% base rate, already the highest since late 2008.

"With monetary policy settings already in restrictive territory, inflation easing and the KRW (Korean won) stabilising, there is little impetus for the central bank to hike rates further," said Irene Cheung, senior Asia strategist at ANZ.

"That said, with the U.S. Fed still hawkish and domestic inflation expectations elevated, we believe the BOK will continue to push back expectations for a quick easing pivot."

Median forecasts showed interest rates would remain on hold until the end of this year, followed by a 25 basis-point cut in the first quarter of 2024.

In a May poll the quarter percentage-point cut was expected to come by end-2023.

The BOK's stance was likely to put pressure on the won, already down about 3% against the dollar this year.

But a rate cut will depend on how quickly inflation falls. It was not forecast to drop below the central bank's 2% target until the third quarter of next year, averaging 3.3% this year and 2.1% next.

The survey also predicted South Korea's economy would grow 1.2% this year and 2.3% in 2024, the same as the previous survey.

By Tetsushi Kajimoto and Leika Kihara

TOKYO (Reuters) - Japanese consumers may finally be shedding their decades-old frugal mindset, spending more on items that retailers were once too afraid to raise prices on and paving the way for the central bank to finally unwind its massive monetary stimulus.

The world's third-largest economy is seeing early signs of demand-driven inflation with an increasing number of hotels, restaurants and retailers now charging more for services - without losing consumers who are willing to pay more on prospects of higher wages.

At Ougatou Hotel in northern Japan, the fastest selling rooms are the luxury suites with a private bath overlooking the mountainous surroundings - despite costing double the fee for a standard room and a 5% increase in charges that began in May.

"Thankfully, higher prices haven't affected our business much with rooms fully packed through November," Hiroki Wakita, a staff at the hotel, told Reuters.

French restaurant Robuchon in Tokyo has a waiting list of two months even though it hiked the price of its set menu dinner, which now costs up to $400 per person.

Ukai, a traditional Japanese restaurant near the landmark Tokyo tower, now charges up to 22,000 yen ($156) for its set menu, 24% more than last November.

"There's no doubt rising wages and bonuses are among factors prodding customers to come dine with us despite the price hikes," said Ukai manager Yuka Hoshino. "Our customers no longer think price hikes are something special."

The broadening in price increases from goods to services highlights a turning point in Japan's economy, where stagnant wage and services price growth has kept inflation subdued for more than two decades.

It is also drawing the attention of the Bank of Japan (BOJ), which is shifting away from its view the recent cost-driven inflation will prove temporary.

The BOJ is starting to drop signs that inflation is increasingly driven by improving consumer demand which, if sustained, could give new Governor Kazuo Ueda justification to pivot away from his predecessor's massive monetary stimulus.

"Consumption and wages are rising. The mood is clearly changing," said a source familiar with the BOJ's thinking.

"Japan is seeing early signs of progress in achieving inflation accompanied by higher wages," another source said, a view echoed by two more sources. "The next key question is whether this becomes a trend."

DIFFERENT KIND OF INFLATION

Japanese wages have barely risen in the past decade, bogged down by entrenched expectations of weak inflation.

However, those views have since changed after firms began passing on a spike in raw material costs, which pushed inflation above the BOJ's 2% target and kept it there for more than a year.

Services prices rose 1.7% in May from a year earlier with the cost of dining up 7.1% and leisure by 3.1%, data showed.

In a survey in April, 86 dine-out chains - or 70.4% of the total - hiked prices at least once since 2022, citing rising raw material and labour costs, Tokyo Shoko Research said.

Workers' pay is also starting to rise. After agreeing to hike wages at the fastest pace in three decades this year, firms will remain under pressure to keep hiking pay next year due to a tight job market, analysts say.

A survey in April showed 85.2% of hotels and 78% of restaurants complained of labour shortages, up from 77.3% and 56.1%, respectively, from a year ago, Teikoku Databank said.

Prospects of higher wages are emboldening consumers.

Akihito Sato said the food company he works for had hiked wages this year. "I bought a new set of golf clubs. That was a big treat to myself," he told Reuters while strolling the upscale shopping district of Ginza.

"I certainly feel the positive effect of wage hikes is spreading. My dad, for one, got a pay raise this year and bought a new car for himself and another for my brother," said Shohei Kanai, a 21-year-old student who himself expects a pay hike.

The BOJ is changing its tone on the drivers of inflation and how they see progress made in sustainably hitting 2% inflation.

Deputy Governor Ryozo Himino said recent price rises were stronger than previously projected and inflation expectations were moving up - and import costs weren't the only reason.

At the BOJ's June meeting, some board members saw upside risks to inflation with one saying increases in prices and wages are "becoming more embedded in corporate behaviour," a summary of their opinions showed.

"It's clear the nature of inflation is beginning to change with more and more service-sector firms raising prices, something we haven't seen up until the past few months," said former top BOJ economist Seisaku Kameda.

"The rise in service prices is broadening, probably more than the BOJ had expected. Japan may be on the cusp of seeing the wage-inflation cycle the central bank had hoped to achieve."

($1 = 140.7800 yen)

By Clare Jim

HONG KONG (Reuters) -Shares of Chinese property developers rose on Tuesday after regulators extended some policies in a rescue package introduced in November to shore up liquidity in the embattled sector.

Analysts said while the extended policy could ease the short-term financial pressure on property developers and ensure their home project completions, new measures would be needed to tackle the cash crunch in the sector.

The sector has been hit by many company defaults amid a debt crisis since mid-2021, triggered by non-repayments of China Evergrande Group, the world's most indebted property developer.

The central bank on Monday said it would give developers an extra 12 months to repay loans due this year, with many private firms still struggling to access new capital despite policymakers' aggressive support measures.

Markets expect more stimulus to be rolled out soon.

By 0316 GMT, Hong Kong's Hang Seng Mainland Properties Index gained 1.8%, while China's CSI 300 Real Estate Index edged up 0.1%.

Sunac China, Logan Group and KWG Group listed in Hong Kong were among the top gainers, rising 4%-5%.

Last November, the People's Bank of China (PBOC) put in place 16 measures to support the cash-strapped sector, including loan repayment extensions, to ease a deepening liquidity crisis.

On Monday, the PBOC said it would allow loans due this year to be repaid before the end of 2024.

Separately, it said the risk classifications of loans issued to support the delivery of unfinished projects before the end of 2024 will not be downgraded during their loan terms.

CGS-CIMB Securities estimated those loans could account for 30%-40% of developers' total debts, so the measures could help their near-term liquidity.

"(They) are however not sufficient to solve the whole liquidity problem of developers," the brokerage said.

Nomura said the "band-aid-style" policy support on Monday is unlikely to revive property sales, which have been weak for months, as it does little to restore home buyers' confidence.

By Suban Abdulla

LONDON (Reuters) - Unusually hot weather boosted sales of sun screen and barbecue food in Britain last month, a British Retail Consortium survey showed on Tuesday, but consumers spent less on big-ticket items as high food prices continued to squeeze their budgets.

The BRC said retail spending increased by 4.9% in annual terms in June - roughly in line with its average this year, though stronger than May's 3.9% and a 1.0% drop a year earlier.

Last month was Britain's hottest June since modern records began, and the BRC said this drove sales of swimwear, beach towels and outdoor games as well as garden furniture.

However, the BRC data is not adjusted for inflation, so last month's increase in spending still reflects a fall in the volume of goods purchased.

Previous BRC data showed prices among its members were up by an annual 8.4% on average in June, rising to 14.6% for food, despite a drop in the cost of some food products.

Over the second quarter as a whole, food spending was up 9.8% while non-food spending grew just 0.3%.

Paul Martin, UK head of retail at accountants KPMG, who sponsor the data, said stubborn food inflation was reducing shoppers' ability to spend on non-essential items.

"Consumers have so far remained resilient, but the triple threats of further interest rate hikes, resolute double digit food inflation and an economy recovering at slower rate than predicted, could hamper a return to much needed profitable growth across the retail sector," Martin said.

Official figures showed consumer price inflation held at 8.7% in May, and financial markets are betting the Bank of England will raise rates as high at 6.5% early next year, up from 5% now.

The BRC said like-for-like retail sales - a measure favoured by equity analysts which adjusts for changes in retail space - were 4.2% higher on the year in June, up from 3.7% in May.

Separate figures from Barclays (LON:BARC) on Tuesday showed consumer spending on debit and credit cards rose 5.4% year-on-year in June, with spending on groceries up 9.5%, the most since February 2021.

However, Will Hobbs, chief investment officer at Barclays' UK wealth management division, said Britain's economy remained in a precarious spot.

"Inflation contagion is perhaps furthest advanced here," Hobbs said. "There is more work for central bankers yet, even as the creaks and strains on the mortgage and other borrowings become increasingly audible."

By David Morgan and Richard Cowan

WASHINGTON (Reuters) -More than 20 U.S. House Republican hardliners warned Speaker Kevin McCarthy on Monday that they will try to block their party's fiscal 2024 appropriations bills unless spending levels are cut below levels that McCarthy and Democratic President Joe Biden agreed to in May.

The hardliners, including members of the House Freedom Caucus, also called on McCarthy to delay appropriations votes in the House of Representatives until all 12 government funding bills have been finalized and can be subjected to a side-by-side review.

The threat comes in the face of a looming showdown between the Republican-controlled House and Democratic-led Senate, potentially complicating efforts to avoid a government shutdown after the current fiscal year ends on Sept. 30.

"We expect all appropriations measures ... to be in line with the enacted FY 2022 topline level of $1.471 trillion," the 21 lawmakers said in a letter, led by Representatives Scott Perry and Chip Roy, both prominent House Freedom Caucus members.

"Absent adhering to the $1.471 trillion spending level ... we see an impossible path to reach 218 Republican votes on appropriations or other measures," the letter said.

The group includes lawmakers who shut the House floor down last month to protest McCarthy's May deal with Biden that averted default on U.S. debt.

McCarthy's office did not respond to a Reuters query seeking comment on the letter.

In the meantime, Senate appropriators are aiming for bipartisan deals -- all of which point to difficult negotiations ahead -- as Congress returned on Monday from the two-week July 4 recess.

A host of hot-button issues ranging from abortion to transgender rights are expected to be pulled into upcoming debates, further complicating matters. If lawmakers fail to agree on a budget before the next fiscal year begins on Oct. 1, the United States could see its fourth partial government shutdown in a decade.

Senate negotiators, who were largely sidelined during the recent talks between House Republicans and the White House over the federal government's $31.4 trillion debt ceiling, were working on bills that are attracting strong bipartisan support.

"We are determined to continue working together in a bipartisan manner to craft serious funding bills that can be signed into law," Democratic Senator Patty Murray and Republican Senator Susan Collins said in a joint statement.

Republicans hold the House by a narrow 222-212 majority, while Democrats hold a razor-thin 51-49 majority in the Senate, meaning that nothing can pass into law without votes from both parties.

CONFLICTING TARGETS

Leaders of the two chambers don't even agree on the spending targets they are aiming at.

Senate negotiators plan to hold to the $1.59 trillion discretionary spending target that Biden and McCarthy agreed to in the May deal.

House Republicans last month voted on a lower target of $1.47 trillion, which would cut spending for the environment, public assistance and foreign aid.

The House target does not take into account $115 billion in existing funding that Republican leaders could redirect to party priorities to compensate for cuts.

House Republicans are also trying to use the legislation to rescind key Biden priorities in areas such as climate change and tax collection. They also seek to eliminate or alter some existing programs involving workforce diversity, transgender protections and women's access to abortion that Democrats are fighting for.

"I am ready to end this charade of considering extreme Republican funding bills and join my colleagues in both chambers and on both sides of the aisle in working toward a final agreement" on government spending for next year, Democratic Representative Rosa DeLauro said in a statement on Friday.

DeLauro, the senior Democrat on the House Appropriations Committee, noted that House Republicans "know and have said publicly, that in the end they are going to need Democratic votes to keep the government open."

Failure to agree on appropriations could lead to a partial government shutdown into the autumn and winter that could hobble many federal activities, including air traffic control, military pay increases and the operation of national parks.

Representative David Joyce, who chairs the Republican Governance Group, or RG2, a more moderate group of 42 lawmakers concerned with House governance, said there could be scope for a short-term funding deal to maintain government operations while talks continue into the fall.

"I'm not a big fan at all of shutdowns, and I don't think anybody in RG2 or our groups are really thinking about that," Joyce told Reuters. "We're trying to think how to make things work."

TORONTO (Reuters) - Talks in Pacific Canada between striking dock workers and their employers have resumed after four days away from the negotiation table, a statement on Saturday by the British Columbia Maritime Employers Association (BCMEA) showed.

The BCMEA and the International Longshore and Warehouse Union Canada (ILWU Canada) met on Saturday, supported by federal mediators, the statement said. The talks had stalled on Tuesday and the two sides broke off negotiations.

Some 7,500 port workers went on strike on July 1 for higher wages, upending operations at the Port of Vancouver and Port of Prince Rupert - key gateways for exporting the country's natural resources and commodities as well as for bringing in raw materials.

Canada's federal and provincial governments had urged the parties to restart talks, while on Saturday Alberta Premier Danielle Smith in a statement said her province supports an immediate recall of parliament to consider legislation to resolve the work stoppage.

BCMEA said it tabled a revised proposal to resolve skilled trades shortages and address ILWU Canada's demand to expand their jurisdiction over regular maintenance work on terminals, which was rejected by ILWU Canada.

ILWU Canada did not immediately reply to a request for comment. The union is due to hold a rally on Sunday in Vancouver.

The Canadian Manufacturers & Exporters (CM&E) industry body said the strike is disrupting C$500 million ($377 million) in trade every day. That could lead to supply-chain disruptions that fuel inflation, economists say.

($1 = 1.3271 Canadian dollars)