What happened Wednesday

Business / news

A review of things you need to know before you sign off on Wednesday; ANZ & Kiwibank raise savings & borrowing rates, dairy prices slip, consumer sentiment stays very low, jail for corruption, swaps up, NZD down, & more

22nd Mar 23, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES
None to advise so far today.

TERM DEPOSIT/SAVINGS RATE CHANGES
ANZ raised its online savings account rate by +30 bps to 2.25%. They applied the same increase to their Business Premium Call Account, also to 2.25%. Kiwibank raised its 1 year TD rate to 5.60%. It raised a few other shorter terms as well, but not their 6 month rate which stayed at 5.00%.

BUSINESS BASE RATES RISE
ANZ also raised its business base lending rates today by +25 bps. That takes their Business bank Indicator Rate to 12.90%, their Agri Current Account rate to 11.10% and their Business Overdraft Base rate to 14.90%. For most clients, risk margins will apply on top of these base rates which usually range from +2.4% including a facility fee, to +6.4%. (Home loan borrowers don't know how lucky they are.)

DAIRY PRICES SLIP AGAIN
Today's dairy auction was something of a surprise. It fell when a small rise was anticipated. North Asia (China etc) was present and buying at this event; however South East Asia/Oceania bought less product than both the last event and the equivalent event last year. This region has been the driver of pricing activity more than North Asia lately. Of special note was that cheddar chees fell more than -10% from the prior event two weeks ago. This line isn't a big proportion of the overall dairy price index but you rarely see a fall as large as this. That takes its year-on-year fall to -37%, which compares to the dominant WMP component of just under -30%.

A PAYOUT RE-THINK
Westpac's analyst has been reading the dairy price tea leaves and has cut their 2022/23 payout forecast by -35c to $8.40/kgMS. This is now the lowest level of any of the main analysts. But they also see the next season as stronger, leaving their 2023/24 payout forecast at $10/kgMS (and the highest any any analyst). All analyst forecasts are here.

IN THE DOLDRUMS
You might be surprised to learn that the Westpac McDermott-Miller consumer sentiment survey reported a small improved result in the March quarter, even though confidence continues to languish at extremely low levels. The rise comes with a backdrop of higher living costs, higher mortgage rates and a deepening downturn in the housing market.

JAIL FOR CORRUPTION
The SFO advises that prison sentences were imposed on a corrupt former council executive and his associate today reflecting the serious nature of their crime and the widespread harm that can be caused by corruption. Former Westland District Council Group Manager of District Assets Vivek Goel was sentenced to three years and eight months’ imprisonment in the Christchurch High Court after being found guilty in December on multiple corruption and deception charges brought by the SFO. His associate, Amar Singh of ANA Group, was sentenced to three years and seven months’ imprisonment after being found guilty of deception, obstructing an SFO investigation and paying $70,000 in bribes in exchange for being awarded a series of asset management contracts valued at almost $500,000.

SOME LOCAL PERSPECTIVE
The First Union has gotten some good media coverage on their campaign to get a special tax on "excessive bank profits". They made the point that NZ bank profits are higher than in many other developed countries, using World Bank data. While that may be true, it doesn't account for the small-country risk lenders lump on New Zealand generally because we are so exposed to soft commodity exports. Investors expect a premium for that risk. And it is out of context of what other large New Zeland companies achieve for their return on equity. Here is a broader comparison of our big five banks and the top ten companies listed on the NZX.

WHAT IS IT WITH BIG AUSSIE CORPORATES & DATA INSECURITY?
Latitude's investigation of its massive cyber-breach is getting worse the more they investigate. "... regrettably our review has uncovered further evidence of large-scale information theft affecting customers (past and [present) and applicants across Australia and New Zealand." Remember Medibank's similar breach?, and Optus? Well there will thousands of people now facing their third data breach disaster, having to cancel and replace key identity documents yet again. On Tuesday, the Department of Internal Affairs said 1342 New Zealanders have had their passport details stolen in this hack.

SWAP RATES TURN UP
Wholesale swap rates have probably bounced back up today, recovering some of the decreases from earlier in the week. However, the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +2 bps at 5.15% and now +40 bps above the current OCR. The Australian 10 year bond yield is now at 3.32% and up +9 bps from this time yesterday. The China 10 year bond rate is little-changed at 2.89%. And the NZ Government 10 year bond rate is now at 4.23% and up +5 bps from yesterday and slightly above the earlier RBNZ fix at 4.21% which was up +3 bps from yesterday. The UST 10 year yield is a higher again today from this time yesterday at 3.59% with a +9 bps rise ahead of tomorrow's US Fed review which is widely expected to raise it official rate by +25 bps to 5.0%. The real interest however will be in how they see the next few months paying out. Is their focus financial stability more than fighting inflation? Or the other way around?

EQUITIES MOVE UP STRONGLY
In New York, the S&P500 ended its Tuesday session up a relatively strong +1.3%, so it is up +2.2% so far this week and up +3.7% since the start of last week - a period when there were major stresses in global banking stability. Tomorrow will be all about reaction to the US Fed's policy statements. Tokyo has opened up +1.8% after yesterday's public holiday. Their broader Topix index is up more than +2%. Hong Kong is up +2.3%, and Shanghai has opened up +0.5%. The ASX200 is up +1.0% in early afternoon trade. The NZX50 isn't quite so bullish, up only +0.3% in late trade today.

GOLD FALLS BACK
In early Asian trade, gold is down -US$36 from this time yesterday at US$1945/oz.

NZD SLIPS AGAIN
The Kiwi dollar has eased more from this time yesterday, now at 61.9 USc and down -40 bps. Against the Aussie we are softer again at 92.7 AUc and also down -40 bps. And against the euro we are down -¾c to 57.4 euro cents. That means the TWI-5 is down to 69.9 and a confirming -40 bps drop in a day.

BITCOIN HOLDS HIGHER
The bitcoin price has resumed it small but steady rise today, now at US$28,104 and up another minor +0.5% from yesterday. Volatility has been modest today at +/-1.9%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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47 Comments

by IT GUY | 22nd Mar 23, 4:02pm 1679454159

Tony Alexander: Will the US banking crisis spark a faster housing market revival?

Got to ask yourself what the comb is smoking..... The old adage "When in trouble, double down",

if House prices keep falling, that's the end of his property Spruiking career.

Oh look dear, US Banks are failing, lets rush out and buy a house.

by dumbthoughts | 22nd Mar 23, 4:05pm 1679454320

In other words, he's saying the NZ housing market is like Obi Wan Kenobi from the original Star Wars film "If you strike me down, I shall become more powerful than you can possibly imagine".

by IT GUY | 22nd Mar 23, 4:10pm 1679454650

More ..... Monty Python Black Knight

by bw | 22nd Mar 23, 4:22pm 1679455327

Tony is smart enough to realise that just like the tobacco industry, no one is going to pay him for research that they don't want to hear.

Just like Hugh Hendry, everyone wanted his opinion; wanted him on TV, whilst he forecast further market deterioration. But the second he decided "I've got this wrong!" and went off buying; even though it was the right thing to do, no one needed him any more.

(PS: Just checked HH's latest, and maybe he's turned again?! "There simply isn't a price that would have enticed me into the dark pool of CS and its many misadventures. Ignore those that tell you CS was bought on the cheap No such thing in the world of risk")

by IT GUY | 22nd Mar 23, 4:24pm 1679455447

Which proves that its a Ponzi not a market.... in markets you have and expect pullbacks etc that are tradeable as intrinsic value is reconsidered....

In a Ponzi its critical that confidence is never lost, as there is actually nothing holding it up but new entrants.

Tony will never say sell its topped...

by bw | 22nd Mar 23, 4:28pm 1679455714

I'm not sure Ponzi does it justice. Filial Cannibalism seems a better fit.

by HW2 | 22nd Mar 23, 5:41pm 1679460071

"Which proves that its a Ponzi not a market.... in markets you have and expect pullbacks etc that are tradeable as intrinsic value is reconsidered....

In a Ponzi its critical that confidence is never lost, as there is actually nothing holding it up but new entrants.

Tony will never say sell its topped..."

Just stop trading houses! IT GUY you're part of the problem.

by Zachary Smith | 22nd Mar 23, 6:17pm 1679462257

Housing is so obviously not a Ponzi. It's so tiresome how supposedly intelligent people keep repeating this claim.

by JimboJones | 22nd Mar 23, 6:31pm 1679463072

It’s more like a pyramid scheme where the last ones in lose everything to the first ones.

by sit23 | 22nd Mar 23, 6:49pm 1679464198

It is not. A house goes up in value, goes down in value, and stays at the same value, at various times in it's life. It gets lived in, either by the owner, or by people who pay to live in it, or it remains empty. Explain which bit is stealing money off investors and paying them back with new investors' money.

by Pa1nter | 22nd Mar 23, 8:24pm 1679469872

It's really like neither, although there's obviously biases people dont like:

- someone with 50 years employment under their belt is going to inherently have more than someone with 10

- last mover disadvantage; finite land with few desirable undeveloped spaces for new players

- constantly increasing costs of new replacement houses

People can call it a ponzi or a pyramid scheme, but this implies there's going to be a point where the ruse is uncovered and people stop entering - except this is houses instead of a pure investment scheme or MLM program. With the latter two you're actually winning by not participating, but you're always up for renting or buying a house. Or a tent or under a bridge I guess.

by Rob Reid | 22nd Mar 23, 9:31pm 1679473863

The fact that there are fundamentals (like land limitations) does not negate calling it a ponzi, because it (the ponzi) is all about the availability of credit, which is entirely conjured and not in the least bit constrained by fundamentals.

by Pa1nter | 23rd Mar 23, 6:26am 1679506010

Is availability of credit the defining hallmark of a ponzi?

by Audaxes | 22nd Mar 23, 7:07pm 1679465250

“Ultimately there’s no natural income streams to be able to service and repay loans. What you have is capital gains which are contingent on the game continuing. So it’s a Ponzi scheme. says Werner. - https://wire.insiderfinance.io/richard-werner-qe-infinity-707e2c627e03

by aucklandproper… | 22nd Mar 23, 4:40pm 1679456426

He's just incredibly ridiculous.

His surveys are riddled with anecdotes pretending to be data.

by IT GUY | 22nd Mar 23, 4:54pm 1679457272

More people at open homes..... More interest from first home buyers..... agree, the truth is in the tape, follow the actual prices being paid, everything else is noise. the comb ignores this as its clearly still failing.

by NZGecko | 22nd Mar 23, 5:52pm 1679460751

Tony tosspot........."my surveys indicate strong demand from new buyers", "more immigrants arriving daily" , "banks need to lend" ........the ultimate witless straw clutcher, my god!!

This guys wheels are constantly spinning to reinflate the superbubble that he promised "would rise another good 5%"

Someone should help him put a sock in it! - the reaper has schreadded the housing balloon to ribbons....

Bring on another 30% housing deflation and Tony hanging by his own petard. Then 3.5x DTI to finally stake the vampires!

by Yvil | 22nd Mar 23, 6:18pm 1679462312

"Tony tosspot"

There's no need to be rude, to people you disagree with.

by JimboJones | 22nd Mar 23, 6:32pm 1679463166

It might be a compliment. A tosspot is potentially useful.

by sit23 | 22nd Mar 23, 6:57pm 1679464632

Your argument, such as it is, is with the respondents to his surveys, not him. These are people, myself included, who work and invest, in the areas he is conducting his surveys. Your saying his mother dresses him funny, is the work of someone who is a serial envyist, and not someone who can be taken seriously.

by HouseMouse | 22nd Mar 23, 6:04pm 1679461496

Desperate and sad.

He always had Spruiker tendencies, but in the past at least he provided some reasonably rational analysis much of the time.

by JimboJones | 22nd Mar 23, 6:34pm 1679463278

In the past he was always right as housing always went up. Kind of like a weatherman predicting sunny weather every day in California; he might be right most of the time but he’s also completely pointless.

by Rob Reid | 22nd Mar 23, 9:24pm 1679473492

I guess TA's point is that the banking crisis has scared the Fed/Govt so much they have immediately spat out massive bailouts, and will seriously back down on tightening monetary conditions. It's revealed their darkest fear, darker even than out of control inflation. Bank implosions.

So what may well be on the way is an improvement in the availability/price of finance, and we borrow as much as we can and "invest" it in property. But how are the banks going to change their lending policies in this increasingly risky environment. Are they going to lend to someone like 7 Houses Luxon who doesn't need the money, or some battler trying to get out of their rental? I think we know the answer.

by Squishy | 22nd Mar 23, 4:28pm 1679455719

Remember Medibank's similar breach?, and Optus?

Until companies are forced to compensate customers for the inconvenience of breaches it's unlikely that anybody will make data security a high priority.

by IT GUY | 22nd Mar 23, 4:56pm 1679457376

Apple where offering zero interest rate purchases through Gem powered by Lattitude, just sayin...

by Rhumline | 22nd Mar 23, 6:41pm 1679463689

Interesting.,, so the rush to branded product is partly-fuelled by usurers and bottom feeding finance companies?

by Tim Depositor | 22nd Mar 23, 4:28pm 1679455720

Who cares if the property market is "a ponzi"? Eventually it'll crash/correct.

I personally made an easy bucket load, like many many other people have. Happy days. Gotta know when to fold em.

by J.C. | 22nd Mar 23, 4:34pm 1679456070

however South East Asia/Oceania bought less product than both the last event and the equivalent event last year. This region has been the driver of pricing activity more than North Asia lately. Of special note was that cheddar chees fell more than -10% from the prior event two weeks ago.

Anchor cheddar already the lowest prices for food service channel in SEA. Shelf prices were jacked up higher in Q4 22 approx 25% min. European producer prices much higher for some reason.

by Audaxes | 22nd Mar 23, 4:38pm 1679456317

Fed rate hike tomorrow but another collateral run matters so much more. Bill yields dropping big again today. Even though everything "feels" much better. 4w rate just 4.07%, less than the current RRP let alone a higher rate for Thursday. 8w rate just 4.50%, less than RRP, too. Link

Bloomberg report yesterday, FHLB selling $300 - $400b in debt to fund advances. How bad are they expecting? It took a year during 07-08 crisis to reach $360b. Nine months last year to get $450b. They're talking $400b in a matter of *weeks*. https://youtube.com/watch?v=0EZpM- Link

by J.C. | 22nd Mar 23, 4:39pm 1679456372

US Studies How To Guarantee All $18 Trillion In US Bank Deposits.

Or the equivalent of approx 75% of GDP.

https://www.zerohedge.com/markets/us-studies-how-guarantee-all-18-trill…

by IT GUY | 22nd Mar 23, 4:52pm 1679457171

The only way to do this is to debase your currency..... Otherwise it's first out of the banking system, best dressed.

by Jonny.Foe | 22nd Mar 23, 4:56pm 1679457382

Both 'sides' of the bank profits debate are being rather disingenuous.

Firstly, Return on Equity is not the same as 'Profit Margin' and using either measure to compare companies and banks together is flawed as they are very different enterprises. For example, if you use Net Profit Margin, which is a standard measure for companies, NZ banks have a net profit margin of 60% on average compared to the NZ average of around 12%! If you use Return on Equity to look at companies you will get some properly weird results depending on the set-up of the company, share price etc.

Also, for NZ banks, RBNZ basically dictates how much equity banks need to hold relative to their balance sheet. So if all NZ banks have customer deposits of $600bn and RBNZ require 10% equity then total equity required will be about $60bn. If banks are on average aiming to provide a 13% return to equity investors then profits after tax will be $7.8bn (or $10bn before tax, which is about right). Everything works back from this Return on Equity % target - banks simply adjust their interest rates to achieve their equity return goal. That is why banks provide about the same return on equity every year - they make it so.

Now, David notes above that investors simply must have this return on their equity because we are a small island, with cows, green grass and a 'Z' in our name. This sounds nice, but how can that be true when the Return on Equity provided by our main banks ranges from 5% (TSB) to an eye watering 16% (ASB)? Are we really saying that banks would struggle to find equity investors if they targeted 10% returns in NZ rather than 16%? Or, could it be that private equity funds are milking the country through our banks and bank execs are rewarded handsomely for playing their part in keeping the milk flowing?

by J.C. | 22nd Mar 23, 5:00pm 1679457647

Great stuff and insight Jfoe.

by whakahokia mai | 22nd Mar 23, 6:15pm 1679462114

Great post.

by HW2 | 22nd Mar 23, 5:29pm 1679459342

During the GFC the Dow fell from March to December 2008.

It then catapulted 45 percent in 2009. While the doomsters were still sitting it out and waiting for further carnage, they missed out on the easy cash.

For the record Bear Stearns happened Q1 2008 and Lehman Bros in late Q3 2008

by J.C. | 22nd Mar 23, 5:44pm 1679460256

It then catapulted 45 percent in 2009. While the doomsters were still sitting it out and waiting for further carnage, they missed out on the easy cash.

Warren Buffet got first digs handed to him on a plate. Much easier to buy Berkshire Hathaway now. All you need is an app. Not clear if you really own it though.

by HW2 | 22nd Mar 23, 6:13pm 1679462019

Berkshire-A shares are nearly 6 times the prices of those deep and tough times.

Is that sex-tupled. 4 times higher is quadrupled

by J.C. | 22nd Mar 23, 6:44pm 1679463885

Pfft. Rookie numbers. You could have 6x+ on ol' ratty in the space of 3 years to now.

by Pa1nter | 22nd Mar 23, 8:41pm 1679470918

Except one is fire and forget, and the other requires more active involvement and dollar cost averaging.

6x is rat piss if you're having to work for it.

by HouseMouse | 22nd Mar 23, 6:12pm 1679461928

You need to try harder. D for effort and D for grade.

That was off the back of the Fed cutting its rate from more than 5% to nearly zero %.

You reckon that’s going to happen this time too with such high inflation?

by HW2 | 22nd Mar 23, 6:20pm 1679462456

All you say is monosyllabic, do you realise that. Obviously you do not learn from history. You need to be spoon fed. Let me guess, in 2008 you didn't say it was a dead cat bounce. You just recently learned that phrase and probably think you coined it yourself.

by HouseMouse | 22nd Mar 23, 6:25pm 1679462721

‘Monosyllabic’ lol.

You’re an idiot pal.

by HW2 | 22nd Mar 23, 6:39pm 1679463566

Good grief. You are offensive, screenshot taken

Just stop commenting on my comments like you promised you would.

by HW2 | 22nd Mar 23, 7:49pm 1679467744

Housemouse/Fritz you have to move with the times but your strategy is always behind the times, what say above you should have said in 2019. Here I was spoon feeding you and all you could see was doom and gloom.

RBNZ shocks with double cut: OCR down to 1.00% | interest.co.nz https://www.interest.co.nz/bonds/101078/stunning-decision-rbnz-delivers…

by Fritz | 7th Aug 19, 2:12pm Not surprised at all. There's a whole host of domestic and global headwinds.

Of course, I don't think it will achieve much...

by Houseworks | 7th Aug 19, 6:02pm I dont know if my friend who has a property for auction would agree with you. Skyrocket!

by Fritz | 7th Aug 19, 6:52pm why?

by Houseworks | 7th Aug 19, 8:11pm Yields will drop for properties bought on yield, with more to follow. Same reason the power company shares have gone up.

by IT GUY | 22nd Mar 23, 6:46pm 1679464003

Auckland is the seventh least affordable housing market in the world, despite a year of falling prices, a new report shows.

The annual Demographia international housing affordability report assesses affordability using the "median multiple", a measure of median house price divided by median household income.

Each year it ranked 94 major housing markets, with populations of more than one million in Australia, Canada, Hong Kong, Ireland, New Zealand, Singapore, UK and the United States.

This year it found that Auckland had a "median multiple" of 10.8, which meant house prices were 10.8 times the median household income.

That was an improvement on last year when the price to income ratio was 11, and Auckland’s median price had fallen 15.2% annually to $1 million in February, according to the latest Real Estate Institute figures.

But the report noted the price to income ratio was still up the equivalent of two years in median household income from pre-pandemic 2019.

In early 2020, Auckland’s price to income ratio was 8.6, and back in 2010 it was 6.4.

Markets with house prices more than three times the median regional income were considered unaffordable by the report authors.

Auckland is the seventh least affordable housing market, according to the Demographia report.

Those with prices more than five times the median income were severely unaffordable, and Auckland’s median multiple put it in that category.

by Yvil | 22nd Mar 23, 8:39pm 1679470742

The article you're linking is one year old IT, it's dated 12 March 2022

by Poppyc | 22nd Mar 23, 9:22pm 1679473349

he screwed up the post syntax. The new story is here

https://www.stuff.co.nz/life-style/homed/real-estate/131564094/new-repo…