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
TSB has raised some key fixed home loan rates. Kāinga Ora/HNZ has raised its floating rate to 8.50% but trimmed two fixed rates slightly.
TERM DEPOSIT/SAVINGS RATE CHANGES
Co-operative Bank added +10 bps to its 6 month rate taking it to 5.60%.
STILL WORRYINGLY LARGE
Our current account deficit shrank to -8.5% of GDP in the first quarter of 2023 as funds flows from international tourism start to return. In Q4-2022 this deficit was -9.0% of GDP. Although this is 'good', we should recall that since 1990 this deficit didn't fall below -7.8% of GDP until June 2022. The current -8.5% level is still the second worst in those 33 years. We are very lucky overseas creditors will still lend to us and in NZD (so they take the currency risk). If they stop doing that, it could get tricky fast.
PRESSURE RELIEF
Part of the balance of payments improvement and pressure-easing has been from a spike in funds flowing in from reinsurers for the recent storm events. In fact, this inflow was the most since the Christchurch earthquake events in 2011 (and actually more than for the Wellington/Kaikoura quake events in 2016).
LEVERAGING MARKET DOMINANCE
This fast increase in insurance claims has the dominant general insurer in New Zealand (IAG) toughening up its approach. In briefings to investors, it promised in New Zealand it would "protect margins" and "optimise its cost base", both code for ensuring higher premiums and restrained service levels are coming for its clients. It is working from a high 92% customer retention level and battling claims that are ~60% higher due to the weather events, car claims ~16% higher, house and contents claims ~12% higher. Clients will notice "more automation" in the way they interact with the company, and more AI. They signaled car premiums will rise about 20%, commercial premiums will rise "15-20%", home premiums will rise "20-30% - adjusted for [the] EQC impact". Investors may be reassured; it is unlikely customers will be.
TWELVE PERCENT MORE
Food prices continued to climb in May led by fruit and vegetable prices, according to the May update from Stats NZ. Prices were up +12.1% from the same month a year ago, and up. After adjusting for seasonal effects, they were up +0.5% (an annualised 6% rate) so recent trending is lower. This recent slowdown is broadly confirmed by the slight slowdown in the Infometrics Grocery Price monitoring.
AUCKLAND RENT INCREASES RISE
Rent index data for May was +3.8% higher that the same month a year ago, on a national basis. This was the same increase for recent bond transactions as it was for the overall stock of rental houses. But there is a noticeable acceleration in the rate of increase in the Auckland region. In 2022 Auckland increases were notably low. They started 2023 in january with a +2.8% annual rise. But by May that had steadily rised to +6.8% above year ago levels. Only provincial South Island is seeing faster rent growth (+8.0%).
BUSTED MARKET
For a second successive quarterly auction, there were no more carbon credits (NZ Units) sold by the Crown today because the offer prices were too low. 8.9 mln units were on offer, none sold. There is a review underway of this broken market and until it is completed, participants will have little confidence in trading this market. Meanwhile in secondary trade, a NZU currently goes for just $60, what it was in October 2021. NZU auctions started in March 2021.
"NOT COMMERCIAL WITHOUT CROWN INVESTMENT"
Ruapehu Alpine Lifts is in Administration. PwC is the Administrator, and they report the best option to save the business and amenity is for the Government to take a 25% cornerstone shareholding of a reconstituted company "and with Crown loans for working capital requirements".
BIG BANK BALANCES, HUGE MOVEMENTS
The Crown Settlement Account at the RBNZ fell a massive -$18.4 bln, its largest since this data series started in December 2001. The comings and goings of NZGB bond maturities have previously seen this move between +$8.5 bln and -$9.5 bln month-on-month, but never something as large as -$18.4 bln before. If you know why, please note it in the comment section below. Meanwhile, "Settlement institutions' balances" (all banks together) saw their balances rise by +$8.9 bln in the month. The highest ever for a month was +$14.2 bl in March 2020, and the biggest outflow was -$8.4 bln (in January 2023). After these movements, the April Crown balance was down to $17.4 bln, and the total of all bank balances was up to $54.7 bln as at April 30, 2023. Together, there was $72.0 bln in these RBNZ Settlement Accounts - which ts $10 bln lower than the record high in November 2022.
SWAPS UP
Wholesale swap rates are likely higher today on international influences. 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 down -1 bp at 5.68% and +18 bps above the 5.50% OCR. The Australian 10 year bond yield is up +8 bps at 3.98%. The China 10 year bond rate is down another -3 bps at 2.64% and a new 8 month low. And the NZ Government 10 year bond rate is at 4.60%, and up +7 bps, but that is still higher than the earlier RBNZ fix which is up +4 bps to 4.55%. The UST 10 year yield is now at 3.70% and up +8 bps from this time yesterday.
EQUITIES LED BY WALL STREET & TOKYO
Wall Street ended today's session higher again, with the S&P500 ending its Tuesday session up +0.7%. Tokyo has opened its Wednesday session up a strong +0.9%. However, Hong Kong has opened down -0.2%. Shanghai is little-changed in its opening Wednesday session. The ASX200 is up +0.3% in its afternoon session. The NZX50 is down -0.1% in late and uninspiring trade.
GOLD LOWER
In early Asian trade, gold is at US$1947/oz and down -US$10 from where we were this time yesterday. Earlier, gold closed in New York at US$1943/oz and in London earlier again at US$1954/oz.
NZD FIRMER
The Kiwi dollar is up almost +½c from this time yesterday at 61.6 USc. Against the Aussie we are firm at 90.9 AUc. Against the euro we are also firm at 57.1 euro cents. That means the TWI-5 is up +20 bps at 69.6.
BITCOIN LITTLE-CHANGED AGAIN
The bitcoin price is little-changed again today, now at US$26,022 which is up a mere +0.2% from this time yesterday. Volatility has again been modest at +/- 1.3%.
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104 Comments
So today I finally decided to look at my USA equities and see how its all going.
My Kiwisaver (the worst performing of them all last year) – is up this year 50% (110% annualized).
The Nasdaq is up 40% this year. I have a few winners (Netflix, Nvida, Meta) -Netflix is up 80% since my buy. Even my tesla buy is almost in the green.
NZX chart looks like an altcoin scam (I may be exagerating a little)
Tech is beating the pants against almost everything else this year except crypto (and even then it’s a close race). Take tech out of the SNP500 and its flatlining
Who wants to be a property investor when you can run the AI boom?
I posed your comment to Chat GBT:
The AI boom and the tulip boom are two distinct historical events that occurred in different contexts. While there may be some superficial similarities, it is important to understand their differences.
The tulip boom, also known as Tulip Mania, took place in the Netherlands in the 17th century. During this period, the price of tulip bulbs soared to exorbitant levels, driven by speculation and a speculative bubble. People were buying and selling tulip bulbs at incredibly high prices, often with the expectation of reselling them for even higher prices. Eventually, the tulip market crashed, leading to a severe economic downturn.
On the other hand, the AI boom refers to the rapid development and adoption of artificial intelligence technologies in recent years. AI encompasses various technologies and applications, such as machine learning, natural language processing, and computer vision. It has had a significant impact across multiple industries, including healthcare, finance, transportation, and more.
While both events involve periods of excessive enthusiasm and speculation, there are crucial differences between them. The tulip boom was centered around a single commodity, tulip bulbs, and its economic impact was limited to the Dutch economy of the time. In contrast, the AI boom is characterized by the advancement of a broad range of technologies and their integration into various aspects of society, with a global impact.
Additionally, the AI boom is driven by technological progress, increased computing power, and the availability of large datasets, among other factors. It has led to tangible developments in areas such as autonomous vehicles, voice assistants, and medical diagnostics, transforming industries and improving efficiency and convenience in many areas.
While it's important to remain mindful of potential risks and ethical considerations associated with AI, it is not accurate to compare the AI boom to the tulip boom as they are fundamentally different in nature and scope.
but has ChatGPT really nailed it ?
The sense of that GPT analysis relies on the 'investors' buying after a careful evaluation. Or rather are they buying because of the expectation the herd behaviour will provide a bigger share price in the future.
I am thinking it's the herd behaviour that leads it. (And for a while it pays off) It could be a tulip scenario. GPT assumes not.
Who wants to be a property investor when you can run the AI boom?
You da man Wolfie. Druckenmiller is also bullish on AI. Missed the boat on Marvell.
https://www.digitimes.com/news/a20230523VL211/marvell-ic-design-distrib…
How is your Kiwisaver possibly up 50% this year? None of the major indicies are up that much, many as you mentioned like the NZX50 or FTSE100 are flat. Is your Kiwisaver personally chosen equities?
My Kiwisaver Growth fund returns are 8.7% since Jan 1 (After fees and before tax).
My individual investments like BTC +62% YTD, or Tesla +139% YTD of course have done exceptionally well.
Power went out this morning, the EV owners that charged overnight woke up with a full charge. Anybody with an ICE that was running on empty had to hope they had enough to get to somewhere with electricity to power the pumps.. or hope the lawnmower gas can wasn't empty. :)
Renault has announced the new 5 will have V2G. So rather than an extension lead and the ability to plug a couple of appliances in like the current V2L that sparrow mentioned, you'll just plug your charger in (and flip an isolation switch?) and power the whole house.
I think I'd take Netflix and Chill over Gin Rummy and Freeze.
If it's a Honda about 5 seconds. Treat it like trash, still works every time.
It's a cool feature, but like most of the extra bells thrown into some EVs, pretty superfluous.
Hey look, we got rid of the internal combustion components, but made the door handles 10x more complicated!
They're mostly still at the higher end, wow them by trying to look like a more futuristic version of the same thing stage
Makes sense. As they get closer to ICE costing they'll get more utilitarian. There's that Citroen Oli I quite like
The Crown Settlement Account at the RBNZ fell a massive -$18.4 bln, its largest since this data series started in December 2001
The $16.195 billion 5.50% 15/04/23 government bond issue was redeemed by Treasury in the month of April - hence the bank created deposits associated with it's initial issuance had to be extinguished.
Can you provide a link to details of this bond activity?
My assessment is that about half of the 18.4 billion relates to net bond activity between the Government and the RBNZ, and the other half is due to the Government using its settlement account to finance current operations. This is why the L2 settlement accounts held by the commercial banks have risen by about 9 billion.
KeithW
That was my take. You can see that RBNZ bond holdings (LSAP) and the Crown Settlement Account have been marked down by the same amount (basically tearing up the big April 23 bond). I suspect that the rest is Govt marking down the Crown Settlement Account and instructing banks to mark-up Govt bank accounts. Institutional Settlement Accounts are now around $55Bn - all earning 5.5% interest.
When the Australian Government borrows from the banking sector, it holds the borrowed funds as a deposit at the Reserve Bank until the funds are spent. As the Australian Government spends these funds in the economy, such as in the form of JobKeeper payments to businesses, it adds to deposits held by businesses and, subsequently, to deposits of the household sector through employees of those businesses. Link
When the Australian Government pays down what it borrowed from the banks, what happens?.
"smart" people will already know they'll likely have to wait until the next nosedive in interest rates. During the GFC, the Federal Reserve cut the funds rate from 4.75% in late 2007 to essentially 0% by 2009 and left rates near zero for the next six years.
Gold prices rallied almost 50% during the period.
https://www.forbes.com/sites/cme-group/2023/06/02/how-does-gold-perform…
In times of ultra low interest rates the cost of holding Gold is obviously much lower.
Not a race Dr Y and agree that gold has nothing on the ol' rat poison. But let's give it some perspective.
- Up 100%+ from pre-Covid to now (assume Jan 2020 as Covid start).
- Up 160% in 10 years so even better than your 7-10 year theory.
- Up 260% from the pre-GFC hype (16 years). Not bad for something with no yield.
- In NZD
- Up 62% YTD
- Up 294% from pre-Covid to now (assume Jan 1 2020 as Covid start).
- Up 402% in 5 years (June 2018)
- Up 36,897% in 10 years (June 2013)
Not bad considering we are arguably still in a bear phase.
No point looking back to inception as it was such a small market. But the numbers are mind bending.
First official sale in 2009 was at $0.0009 USD.
What's the ol' rat poison?
Bitcoin. It's got it's own insider name and secret handshakes. Then names of outsiders, 'Normies', 'Water-Cooler crew', that sort of thing.
If you tell enough people about ol ratty you get promoted to diamond exclusive status. Or is that Amway, I forget now
Warren buffet calls the best performing asset of the last decade rat poison. I guess you would too if it threatens the single thing that gives you an unfair advantage to wealth.
I'm betting big that gold will not perform well, Bitcoin is eating much of golds market as a hedge asset. I don't know a single person under 30 that cares for the gold rocks.
Confused, is that saying putting their wealth in btc is bad or good?
Im 24 but came to the conclusion there is no other way to build my wealth once I earn dollars. Stock market is a joke (0 trust after robinhood gamestop), housing is over valued and huge barrier to entry and TDs aren't worth talking about.
I work with plenty of early 20's tradies etc over here in Aus who are pretty bloody good at their jobs.
But that is the point of Bitcoin, it is a savings vehicle, so if your contribution to society is a net positive and you spend less than you make, you can actually maintain some savings purchasing power into the future. Imagine saving in fiat currency for the next 10 years, your purchasing power is guaranteed to reduce by AT LEAST 3% a year. and thats 100% certain.
Talking to an Auckland Council planner today, their resource consent application volumes down about 25%. But more importantly, applications for multi unit residential development applications down more than 40%. More of the ‘rats and mice’ applications (variations and extensions to consents, extensions and alterations etc) coming in to limit the drop away. But the drop away in applications for multi unit development is worth noting, as an earlier leading indicator than building consents.
https://www.barfoot.co.nz/property/residential/auckland-city/mt-eden/84…
so this house sold for 1.36 today, only 100k more then it last sold for in 2017.
"Stunning Starter". If that equate to a FHBer, then that's still the problem. Sure FHBers come in at all levels, but $1,360,000 for a 3 bdr first home must still be repayments of a couple of grand a week ~$100,000 a year after tax.
Still a long way to go to get to some sort of sanity.
I think 100k more than the 2017 RV? (and 140k less than the ridiculous 2021 RVs). I didn't see a sale for 2017.
Anyway, I'm not really making much of a point. They may feel like they've got a good deal, especially if they have young kids getting ready to start school.
All the Aussie h'hold savings built up during Covid has gone or been pissed up against a wall. And sharpest ever decline in disposable income.
https://twitter.com/Yes4CommonSense/status/1668733938100211713
It's a racket as Goldman spelled out 10 years ago.
I love electric vehicles – and was an early adopter. But increasingly I feel duped
Study: Manmade CO2 'much too low to cause global warming.' Carbon-14 dating debunks the climate hoax. Soaring in Altmetric rating. Now ranked #315 out of ~24 million studies. So popular, no paywall. Make it #1. https://journals.lww.com/health-physics Link
It was a well-calculated move by Labour to scrap fuel subsidies after 30 June. September quarter CPI results won’t be out until after election day in October.
That and the $4.8 billion in new govt lolly spending to buy more votes from 1 July will be an election afterthought. Well played Robbo!
You should have a diminishing market the more expensive something gets, sure.
My point is there's an irrational ceiling to what most people will pay for things they could easily substitute for far less outlay. Waters effectively free involving minimal effort and people will pay $4, so $15 tomatoes aren't probably motivating for most people to go to the effort or sourcing their own.
True, so people go without tomatoes and they rot on the shelves, so the market finds a way to adjust to say $10 tomatoes or no longer supplies tomatoes. Maybe farmer's markets flourish?
I had a look at our local farmer's market Facebook page just now, $1kg fresh Braeburn apples. $4kg + for apples at Countdown.
In season from a grower should always be cheaper than aggregated pricing at the supermarket.
You'd be weighing up whether the separate trip is worth it.
"Hey look, I saved $2.50 on apples, and it only cost me $6 in gas plus I bought a Coffee and a Danish from the cutest food truck"
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