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
BNZ raised fixed rates for 18 months, and three and four years.
TERM DEPOSIT/SAVINGS RATE CHANGES
None to report today.
HOUSING SLUMP DEEPENS INTO WINTER
REINZ figures for May show the housing market remains in a deep slump as it heads into winter. The May 2023 sales volumes were the lowest for any May month in twelve years. Prices continue to decline. However, a number of industry analysts seem to be able to find 'recovery' signals in this otherwise downbeat data.
RECESSION FROM THE CYCLONE NUDGE
Stats NZ said the economy contracted, just, down -0.1% in the March quarter - the second quarter in a row of contraction. Cyclones and storms were not positive for expansion. Household spending retreated -0.2% from a year earlier in a clear signal of household pressure. It was the biggest since 2009, pandemic excepted. The NZD dropped on the news. Benchmark bond yields slipped too.
RBNZ OPENS REVIEW OF SETTLEMENT ACCOUNTS
The Reserve Bank has launched a review of its Exchange Settlement Account System (ESAS) access policy and criteria, with the issuing of a consultation paper. The RBNZ is mulling a new risk assessment framework proposed to evaluate applications to bank with it directly. The RBNZ says the ESAS helps ensure stability in the financial system and provides a direct way for its monetary policy decisions to influence the economy as it pays interest on ESAS balances at the OCR. With balances having surged on the back of QE, and the OCR risen sharply, this has led to questions over whether account holders should continue being paid at the OCR. Those with ESAS accounts include ANZ, ASB, ASX, BNZ, Bank of China, China Construction Bank, Citibank, HSBC, ICBC, Kiwibank, NZX, the RBNZ, TSB, CLS (Continuous Linked Settlement), the LGFA, Treasury's Debt Management Office, the NZ Super Fund, Rabobank and Westpac. The RBNZ says it receives regular approaches from a variety of institutions seeking access to ESAS, noting broader access could enable and encourage welcome innovation in the financial system but may also pose risks. Those interested in obtaining an account include non-bank deposit takers and non-bank payment service providers. The RBNZ is seeking feedback on its consultation paper by July 27, after which it'll consult on a revised ESAS access policy before the end of September, announce the final policy by the end of 2023, and be processing applications using it in early 2024.
RECORD HIGH FARM EXPORTS
MPI reported record sales of farm products for the 12 months to June 2023 but sees a lingering impact in future years from Cyclone Gabrielle.
CANTAB BUSINESSES OVERWHELMINGLY POSITIVE
According to the local business lobby group, 8% of businesses in Canterbury expect their own earnings to be the same or better in the next 12 months, 76% expect to invest in their business over the next 12 months, 64% intend to hire new staff within the next three months, up from 61% last quarter, and now 39% expect the Canterbury economy to worsen over the next 12 months, down from 48% in the last quarter.
CONFLICT OF INTEREST FRAUD
Staying in Christchurch, the Serious Fraud Office has filed charges against a former Oranga Tamariki property manager for allegedly awarding more than $2 mln of work to her husband’s construction company without OT’s knowledge. Neha Sharma and her husband Amandeep Sharma face charges of obtaining by deception and money laundering. Mrs Sharma also faces charges of using a forged document. Mr Sharma appeared in Christchurch District Court today. Mrs Sharma is currently in India and police expect extradition. Money laundering charges faced by the couple relate to almost $800,000 which was transferred to overseas bank accounts in India. The Police Asset Recovery Unit has been working in close co-operation with colleagues in India and as a result has located and restrained the funds. Proceedings are underway to ultimately return the funds. The High Court has issued a restraining order over the couple’s local properties upon application by the Commissioner of Police, pursuant to the Criminal Proceeds (Recovery) Act 2009.
JAPAN MOVES UP
Somewhat unexpectedly, Japanese exports edged higher in May. That may be because Japanese machinery orders rose in April, according to data released today.
AUSSIE JOB MARKET NOT SLOWING
There was an unexpectedly large surge in employment in Australia in May, with more than +76,000 new jobs added. Analysts had expected a gain of +15,000. Their jobless rate dipped to 3.6% (from 3.7%). +62,000 of those new jobs were full time, +14,000 were part-time. Analysts now think the RBA will raise rates again to rein in the expansion.
AUSSIE BORDERS ARE WIDE OPEN
Meanwhile, migrants are pouring into Australia. Their 2022 population topped 26.2 mln, up a fast almost +½ mln in the year or +1.9%. That's their fastest growth since 2008. +387,000 of them were migrants. (In New Zealand, +24,200 migrants arrived here in the same year. We got our surge at the start of 2023. Our population was 5.15 mln at the end of 2022.)
CHINA DATA NOT STRONG, TRIGGERS RATE CUT
China released a set of May economic activity data and it was relatively weak for them. Even the retail sales gain of +12.7% from year ago levels needs to be seen in context of the very low year-ago base. Real estate investment fell -7.2% year-on-year. But electricity production rose +5.6%. While their jobless rate remained unchanged at 5.2%, their youth jobless rate worsened, hitting 20.8% at the end of May, up from 20.4% in April. The weak data triggered another unexpected cut to a key interest rate tied to their property development sector. The People's Bank of China announced it is trimming the rate on ¥237 bln (NZ$53 bln) worth of one-year, medium-term lending facility loans to banks by -10 basis points to 2.65%.
SWAPS UNCHANGED
Wholesale swap rates are likely little-changed today as the local influences cancel out the 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 unchanged at 5.68% and +18 bps above the 5.50% OCR. The Australian 10 year bond yield is up +2 bps at 4.00%. The China 10 year bond rate is has recovered +3 bps at 2.67%. And the NZ Government 10 year bond rate is at 4.55%, and down -5 bps, but that is still higher than the earlier RBNZ fix which is down -5 bps to 4.50%. The UST 10 year yield is now at 3.81% and up +11 bps from this time yesterday.
EQUITIES LOSE DIRECTION
Wall Street ended today's session virtually unchanged on the S&P500 after volatile trading in its Wednesday session. Tokyo has opened its Thursday session up +0.2%. Hong Kong has opened up +0.6%. Shanghai is little-changed in its opening Thursday session, up just +0.1%. The ASX200 is up +0.3% in its afternoon session. The NZX50 is up +0.1% in late and more uninspiring trade.
GOLD LOWER AGAIN
In early Asian trade, gold is at US$1933/oz and down another -US$14 from where we were this time yesterday. Earlier, gold closed in New York at US$1942/oz and in London earlier again at US$1955/oz.
NZD JUMPS AROUND BUT ENDS UNCHANGED
The Kiwi dollar rose when the US Fed released its decision, but lost all its gains on the GDP data, now back at 61.7 USc and virtually unchanged from this time yesterday. Against the Aussie we are moved similarly, but now back at 90.8 AUc. Against the euro we are holding at 57 euro cents. That means the TWI-5 is net little-changed at 69.6.
BITCOIN RETREATS FURTHER
The bitcoin price is a sharpish -3.8% lower today, now at US$25,047. At one point at 9am this morning it got down to US$24,855. Volatility has again been moderate at +/- 2.5%.
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62 Comments
I read one account the other day that this youth unemployment issue is more structural than just a simple outcome of current struggles. There isn't a shortage of factory jobs in China but these young people with their university degrees don't want to work in those jobs, rightly or wrongly.
Here it is. The unemployed university grads. Apparently it's a thing in third world countries. (perhaps that includes New Zealand. ???)
But China certainly.
Somewhat unexpectedly, Japanese exports edged higher in May. That may be because Japanese machinery orders rose in April, according to data released today.
Machine tool exports to China down quite substantially. But cyclical.
https://twitter.com/JeffSnider_AIP/status/1668452747723649024
(House) Prices continue to decline. However, a number of industry analysts seem to be able to find 'recovery' signals in this otherwise downbeat data.
Could it be because median house prices actually rose +0.5% to $995,000 in Auckland and were even +/- 0.0% at $780,000 in all of NZ, from April.
Few things you need to learn about basic measures of dispersion Dr Y: mean, median, variance, and skew.
Dust off the old school textbooks and when you can master those, we can move to the next lesson. Many people are graduating from university without a basic grasp of statistical application these days.
Meanwhile in the real world our neighbours sold their place a couple weeks ago for 1.25
- 180k less than an identical house in our development went for 14 months ago. So more of less 13k a month decline each month since then.
- 300k under RV and 70k less than one roof “estimate”.
Since I often get misquoted, and told that I never predicted things which I did predict, I thought I would be proactive and link to my comment just over two weeks ago on HPI vs median (ie. median would stabilise while HPI keeps falling). Comment is about two-thirds of the way down at 8.52am. But what do I know.
https://www.interest.co.nz/property/121659/average-value-auckland-homes…
Incredible story about how shifty and corrupt the U.S. govt and its agencies scheming in relation to crypto regulation. This has it all. Even a link with Eric Watson's crooked Long Island Iced Tea scam.
In a nutshell, dodgy crypto companies are being filled with ex-SEC / govt agency staff and a host of assorted grifters to collaborate with what picture the ruling elite wants to paint. Democracy, transparency, and free markets in the Anglosphere look completely broken.
Highly recommended 1-hour interview with entrepreneur Matt Barrie on the Aussie property ponzi and how the economy is effectively broken. Matt weaves an incredible story with plenty of eye-catching examples. A few that caught my attention about the education rort:
- Even though the Aussie govt is running an education as a work visa scam for cheap labor, basically the universities in NSW are broke.
- University classes are often scheduled to fit with the work schedules of foreign students.
https://watch.adh.tv/the-other-side-interviews-1/season:1/videos/aussie…
Thanks J.C.- Werner warned.
Banks have migrated away from lending to productive business enterprises because the risk weights can be as high as 150%. Thus around 60% of NZ bank lending is dedicated to residential property mortgages owed by one third of already wealthy households
Many don't take Werner seriously. Ideas are too contentious for the status quo. He wouldn't be the first for Princess Xindy to approach when she's working the room. Remember, he was one of the first advisors to the WEF but was let go after asking uncomfortable questions to ECB bigwigs.
I’m working with Dirk Bezemer and others on an article where we calculate how much of the GNP, the reported product, is actually overhead. In other words, what is Gross Domestic Product (GDP) without the FIRE sector (finance, insurance and real estate)? A strict classical economist would say, let’s take out the monopolist rent. How much of American industry’s reported profits, e.g., in healthcare, are really monopoly rent? The idea of industrial development today is to carve out a monopoly where there’s no competition and get super profits. This is a concept that has been dropped, really, ever since World War One, about a century ago. There’s no distinction between productive and unproductive labor, between wealth and overhead. John Bates Clark said that if somebody’s wealthy, they earned the wealth; there’s no such thing as unearned wealth. Today wealth is mainly achieved by asset-price inflation; by capital gains. You won’t find a single wealthy family that made money simply by saving up what they earned. They make money by increasing the price of their stocks and bonds and real estate holdings, not by saving up their earnings. Yet, capital gains, i.e., asset-price inflation, are left out of the statistics of almost every country. So it is very hard to explain how wealth is achieved, and yet that was the purpose of economics in the 19th century and centuries before. But suddenly the idea of wealth has been suppressed as sex was in the day of Sigmund Freud Link
PricewaterhouseCoopers began work on a top-level consulting contract with the federal government's regulator of tertiary colleges 24 hours before agreeing to acquire a $5.5 million stake in one such college, the controversial Top Education Group.
JC basic stats is beyond most least we talk the div and curl, laplace transformations required for an engineering degree, what does the s stand for..... AI is so removed from most .... its a sad reality
I like the analogy of AI being a tool for a project manager when you don't really need to delegate, but you still have to understand the functions and how it all fits together.
Cluster meet my mate fark
An ugly night of data from China tonight suggests the 're-opening' is not gathering pace:
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China May Retail Sales disappointed, rising 12.7% Y/Y; Est. 13.7% - which is a flashing red indicator. Given the boost from the Golden Week holiday, May retail sales rising just 0.4% from April speaks to how consumer sentiment has yet to show any significant improvement.
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China May Industrial Output slowed to a 3.5% rise Y/Y; Est. 3.5%
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China Jan.-May Fixed Investment rose less than expected, up 4% Y/Y; Est. 4.4%
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China Jan.-May Property investment tumbled 7.2% from a year earlier with the value of new home sales by the 100 biggest developers falling 14.3% in May.
Borrowers who bought a home in 2021 when prices were peaking are coming off loans priced about 2.5 per cent and onto new loans priced about 7 per cent.
On the RBNZ’s own figures, the impact on family finances is staggering, with an estimated 46 per cent of these borrowers facing the prospect of paying half their after-tax income to interest payments. But the tail in this is ugly, with 13 per cent of these borrowers spending more than 70 per cent on interest payments.
Banks analysts say the big four are well capitalised in New Zealand, well regulated and well aware of the potential for pain from the property sector. Given the small business sector is a big driver of the New Zealand economy, and small business loans are typically secured with property, there’s an extra incentive to be cautious.
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