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/LOAN RATE CHANGES
Nothing to report again today.
TERM DEPOSIT/SAVINGS RATE CHANGES
Heretaunga Building Society raise some key rates with their 6 month offer rising to 5.90%, and their 12 month up to 6.10%. Sharesies Save call account has been raised from 4.60% to 5.00% for the month of August.
NEW RECORD HIGH
The number of new homes being completed in Auckland is now at a record high as recorded by Auckland Council's Code Compliance Certificates. 1742 CCCs were signed off in June. Given that there are about 620,000 rateable dwellings in the City, that is an increase of +2.5% over the past year alone.
'A COUPLE OF WINS'
Commerce Commission presses on its retail payments work as one telco and a ticketing firm agree to review surcharges.
INFLATION PRESSURE STILL FIERCE, JUST LESS SO
Infometrics monitoring of the Foodstuff database shows that their Grocery Supplier Cost Index rose at a +7.5% annual pace in July, the fifth month in a row that these cost increases have moderated. Despite this, monthly costs still rose at a pace consistent with an annual trend increase of 5-6% pa, which is around triple the pace of cost increases pre-pandemic. They noted: "A higher number of items increasing in cost reinforces the view that underlying pricing pressures persist, but are less intense than in 2022. Some global issues remain, with rice, cocoa, and sugar prices internationally having an effect on New Zealand costs. Higher input costs for suppliers also appear to still be working their way through the system, with higher packaging and energy prices being persistent. Transport and freight costs are also set to push higher."
SEVEN BRANCHES TO BE CLOSED
TSB said it is closing branches at Ōpunake, Eltham, Newmarket, NorthWest, Napier, Nelson and Palmerston North.
OPPORTUNISTIC CAMPAIGNING
The Health Coalition is calling out a "dangerous and cynical" campaign fronted by some dairies but funded and "proudly supported" by the tobacco giants BAT and Imperial Brands. It is being pitched as a "save our stores" campaign but the intent is to try and undermine the health commitments the tobacco industry has already made. (They probably think this is a good time to press given that Chris Bishop is ranked #3 for the National Party in Parliament and before entering Parliament he worked as a Corporate Affairs Manager for the tobacco company Philip Morris.)
FAST PULLBACK
The RBNZ C70 data release today for June shows that new commercial property lending fell a rather sharp -20.2% to $540 mln in June from in May. In June a year ago, this was $922 mln, so an even sharper -41% from from a year ago. Of that, new lending for investment property was down -30% while new lending for property development was down -70%. Bankers are no doubt asking themselves, why lend for property projects when the values are falling now? and rather fast. The new lending pullback is a reaction to market signals.
DAIRY FARMERS LOAD UP ON DEBT
Going the other way, this C70 data shows that dairy farmers are borrowing heavily again. In fact, they borrowed more than +$1.5 bln in June, the most in any month since this series began in April 2021. In June 2022, the new lending to dairy clients was $1.352 bln so a +12% rise from then. From June 2021 it is up from $1.021 bln or +48%. We are not seeing anything like this by sheep, beef, arable or horticulture farmers - in fact they are pulling back.
ELECTION POLICY UPDATES
Updated: Today we updated our policy comparison resource with the following additions: Act Party - Youth Justice. Youth justice will be lowered from 18 to 17; Act Party - Secondary Education. Introduction of the traffic light system; Green Party - Health Policy. Free dental care; Te Pāti Māori - Income Tax. Tax brackets are released; Te Pāti Māori - Tax. Tax details and implementation are explained; Te Pāti Māori - GST. Remove GST from all kai; National - Fisheries. Establish a Minister for Hunting and Fishing. Guarantee access to public land for fishing. Support Fish & Game New Zealand and protect trout and salmon fishing. Not introduce recreational licences for game animal hunting or sea fishing. We also added The Opportunities Party 2023 Election candidate List.
"DON'T BE NEGATIVE"
In China, seven well-regarded economists told the Financial Times that their employers had told them some topics were off-limits for public discussion. The China Securities and Regulatory Commission, the stock regulator, has accused brokerage analysts of playing up risks facing the economy, which is suffering from weak consumer demand, declining exports and an ailing property sector. Two think-tank scholars and two brokerage economists, all of whom serve as government advisers, said there was pressure to present economic news positively to increase public confidence.
A FAST TURN NEGATIVE
Meanwhile, 48 Chinese Local Government Financing Vehicles (LGFVs) were overdue on commercial paper in July, up from 29 in June, according to a report that referenced data from the Shanghai Commercial Paper Exchange. Their missed payments amounted to ¥1.86 bln (NZ$423 mln), versus ¥780 mln in June. This will aggravate concerns about the financial health of LGFVs, which are mostly tasked with building infrastructure projects that may take years to generate investment returns.
SWAPS LOWER & FLATTER
Wholesale swap rates are probably slightly lower. 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 5.64% and now +14 bps above the 5.50% OCR. The Australian 10 year bond yield is unchanged from this morning at 4.06%. The China 10 year bond rate is down -2 bps at 2.66%. And the NZ Government 10 year bond rate is down -7 bps from this time yesterday at 4.81%, and still higher than the earlier RBNZ fix which was down -8 bps bps at 4.74%. The UST 10 year yield is at 4.06% and up a minor +2 bps from this morning.
EQUITIES WAITING FOR NEW YORK
The NZX50 is down -0.2% in late trade today. The ASX200 is down -0.3% in afternoon trade. Tokyo has opened unchanged in morning trade. At their open, Hong Kong is also unchanged, but Shanghai is down -0.5% at their open. The S&P500 futures suggests that Wall Street will open up +0.8% tomorrow.
GOLD STILL STABLE
In early Asian trade, gold is at US$1943/oz and unchanged from where we opened this morning.
NZD LITTLE-CHANGED
The Kiwi dollar is marginally firmer at just on 61.1 USc. Against the Aussie we are holding at 92.7 AUc. Against the euro we also holding at 55.5 euro cents. That means the TWI-5 is at 69.6 and also little-changed.
BITCOIN STILL ESSENTIALLY ON HOLD
The bitcoin price is very little changed from this morning, now at US$29,125 and up a mere +0.3%. Volatility has been very low at just over +/- 0.3%.
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61 Comments
Massey Uni is looking to offshore its education exports to Singapore while cutting jobs in NZ. Let's see how many international students show up without the attraction of an easy NZ residency pathway.
The post-study work visa eligibility criteria in Singapore includes a minimum salary of ~SGD 54k (NZD 66k) a year. No such criteria for post-study work in NZ (minimum wage if the government can enforce it).
Massey now ranked 601-800 in world unis, approx half what it was a decade ago. Why would any Singaporean ever consider attending this without a nz residency perk attached.
https://www.timeshighereducation.com/world-university-rankings/massey-u…
The Health Coalition. Cannot argue with any organisation that is promoting better life choices, diet, activities, you name it. But what mandate does the Health Coalition actually possess? And if it is tax payer funded should it not be entirely neutral politically?
It wouldn't get any airtime if it wasn't a chance to mention Chris Bishop used to work for Big Tobacco.
Crims will be loving the planned dairy restrictions.
"Right now, smokers pay more than enough tax to cover associated health system costs. But if Labour follows through with plans to slash nicotine content and availability of legal cigarettes, or if National pursue a signalled vaping crackdown, the tobacco black market will boom, cratering tax revenues and normalising crime."
https://www.scoop.co.nz/stories/AK2307/S00147/black-markets-share-of-sm…
https://www.scoop.co.nz/stories/PO2307/S00088/one-in-eight-cigarettes-n…
Second harbour crossing: https://www.greaterauckland.org.nz/2023/08/07/the-harbour-crossing-boon…
"If we really wanted a “bold plan for Auckland’s future”, for the projected cost of these tunnels and the one planned for the City Centre to Mangere line, you could build about 300km of surface-running light rail all over the region (or indeed the country).
To put that in perspective, Melbourne’s entire tram network – the longest in the world – is about 250km. For another comparison, combined with Auckland’s nearly 100km of heavy rail network, 300km of surface light rail would give Auckland a network about the same length as London’s 11 underground lines. That would be bold, deliver world class PT for Auckland, have significantly more capacity than this one line from Albany to the Airport ever could, and importantly, deliver us an entire network."
Have you read Croaking Cassandra's analysis of the teacher pay increases?
But it is a little curious to contemplate the sight of a left-wing government, of a party long quite closely aligned with teacher unions, asking teachers to agree to significant real wage cuts relative to what was envisaged when the previous agreement was signed in 2019.
He was a paid up member of the unobserved natural interest rate cult.
But he certainly undertakes other useful tasks.
Noticed that someone had OIAed a list of all RBNZ titles. Given the way staff numbers have blown out, there is likely to be lots of fat, but this collection of titles look like highly-paid roles largely free of any core functional content https://rbnz.govt.nz/-/media/projec Link
Sure he stuck to his guns, based on his experience and his education. That's good, even if that experience and education led to horrendous outcomes in the housing market. And his education and experience made him criticise the LSAP and it's hideous cost to the taxpayer, which is also good. It balanced out the bad interest rate call.
That doesn't mean he isn't capable of insightful analysis too. I mean, I disagree with most of what Bomber writes on TDB, but he's still capable of good analysis, so I still read him. It's not just about what tickles your ears, but what is useful. So I still read Croaking Cassandra.
Nurses,like Fire Officers and Policemen are entirely deserving of any and all pay rises they receive.
They are by and large not who you wish to come across in your everyday life,but when you need them,in my experience,I would gladly have them at the very top of NZ's salaried professionals.
Salaries are set by supply and demand
These are theoretical laws written for the industrial age. The pre-cursor to this law is all else being equal.
All else is never equal because we live in complex economies, not basic textbook scenarios.
There are also entire chapters on public goods such as healthcare and schooling that we're all happy to give a miss.
Meh it’s still all supply and demand, maybe quite manipulated at the minimum wage level I admit. And in this case there is a monopoly employer (the government), but luckily it’s an international market these days so they can’t take too much advantage.
But I do find the “xyz are important and need better pay” argument quite silly, wages are not and should not be set like that. If enough people are willing and able to do the job at the current wage, than that wage is appropriate.
Demand isn't the same as desire. There's also the ability (and willingness) to pay at play here.
There's a shortage of good ECE teachers because of the difficult job that is to look after screaming toddlers. Yet the pay is abysmal because most parents can't pay a fair wage.
The ratio for teachers to under 2s is 1 to 5. That's each household bearing 1/5th the staff cost plus business overheads of each teacher per child.
Wife works with under 2's in a private center. The big issue with pay parity is the Government funding Kindergartens vs private.
As you say, 1:5 ratio where families are paying (I'd have to check) $7-$8 p/h? per child. So $40 p/h per teacher. Some centers even go 1:4 ratio. When they opt into Pay Parity they may need to let staff go to and wind back to 1:5 to meet the various "pay steps" and balance books.
Do not lump police and firemen with nurses! Nurses self fund a three year degree.
There are not shortages of wanna be fiireman - very hard to get in as it is known as a great job, great pay, time off and zero entry qualifications or skills to get in.
Nursing is in a class if it’s own - as far as skill levels, work stress and shyyt work conditions etc.
It turns out that the nurses employed by community trusts who run hospitals and health centres for the government, do not participate in the new pay rises. Only those employed by DHBs do. These trusts were all formed at the insistence of the government , as they could see that this was the best way to do health in smaller centres. The obvious question is; did the Union reps know this during pay negotiations? Were they incompetent, or did they collude with the government whilst being paid by their union members to look after their interests? This does not look good for the reps.
Going the other way, this C70 data shows that dairy farmers are borrowing heavily again. In fact, they borrowed more than +$1.5 bln in June, the most in any month since this series began in April 2021.
Well this isn't good considering the payout bomb dropped by Fong-terror.
Bloke to Barman: "What do the CCP and the NZ MSM and RE lobby have in common".
Barman: "A deep seated vested interest in retaining power in order to further their own self-interest?"
Bloke: "Nobody likes a smart alec. But yes, that is exactly what they have in common."
"NEW: Republican Senator Mitch McConnell gets humiliated during a speech as Kentuckians completely drown him out, telling him to ‘retire’ Mitch McConnell is the definition of ‘The Swamp.’ McConnell is 81 years old, has spent nearly 4 decades as a Senator and has a net worth of $35M. He has nothing in common with the average American and is still a Senator, not because he is a ‘public servant’ but because he is addicted to power. Retire, Mitch"
https://twitter.com/CollinRugg/status/1688334965732454400?s=20
The Trumps, Pelosis, Bidens are in the same boat as McConnell. They've had their shot...time to move on and let other generations have their say and it is best to do that gracefully....unlike what we're seeing from McConnell, Biden and Trump. They now look like silly old fools who don't know when to quit. Do they think they are the modern day Winston Churchill?
Biden is a default President. He was down and out in the initial primaries, had packed up and gone home, and then the Dems had a sudden light bulb moment - hey none of the others can win the Presidency. And so the old bloke does then win it for them but equally dumb witted, they had chosen a Vice President who is unelectable. Liz Cheney was and is dead right when she exclaimed, about both parties, “we’re electing idiots.”
US strategic petroleum reserves per day - it looks like we might be approaching a breaking point of some description (but I'm not sure what yet).
https://pbs.twimg.com/media/F23-YP0XgAEn8yV?format=jpg&name=900x900
"US 30-Year Mortgage Rates Hit A 23-Year High, Raising Concerns According to data, the 30-Year fixed-rate mortgage reached 7.39% on Thursday, the highest rate since November 2000. This increase was driven by a surge in US Treasury yields. A flood of new US Govt debt is being issued to cover deficit spending. As a result, yields are going higher"
https://pbs.twimg.com/media/F23YOWjXwAANJ0V?format=jpg&name=small
Research study from Duke (January 2023) shows widespread fraud in the U.S. residential property market. Conclusion is that the 2008 housing crash wasn't really caused by subprime mortgages - that was just the scapegoat used to hide the real issues. The research suggests the 2008 housing crash was caused by prime borrower speculation/investment. Same phenomenon as now.
https://www.philadelphiafed.org/consumer-finance/mortgage-markets/owner…
Maths here is not correct:
"1742 CCCs were signed off in June. Given that there are about 620,000 rateable dwellings in the City, that is an increase of +2.5% over the past year alone.
By my calculation, that is an increase of 0.28%.
Order of magnitude less.
How can anyone (infometrics) be talking about increased costs for food suppliers without recognising that the biggest driver of increased costs for many is high interest rates? Over half of cost increases for horticulture are due to high credit costs
The average yield on business loans is now nearly 8% - around $10bn a year - that is about a months worth of electronic card spending, or like giving *all* workers a 7% pay rise! So where are the economists talking about inflationary interest rate rises?
Remember:
- Labour costs go up = inflationary
- Fuel prices go up = inflationary
- Regulation costs go up = inflationary
- Credit costs go up = yes, that's how you slow price rises!!
Got to destroy that aggregate demand there Jfoe!
Just as central bankers felt the need to stimulate aggregate demand back in 2020 because they got a bit scared about the possibility of deflation destroying their debt ponzis.
Over doing it in one direction, requires equal action in the opposite direction.
A good, thought-provoking read.
The economy clearly isn’t reacting in the usual way to the Fed’s tightening; it is much stronger than normal and stronger than expected. There was a big government-engineered shift in wealth from 1) the public sector (the central government and central bank) and 2) holders of government bonds to 3) the private sector (i.e., households and businesses). This made the private sector relatively insensitive to the Fed’s very rapid tightening to a more normal monetary policy. As a result of this coordinated government maneuver, the household sector’s balance sheets and income statements are in good shape, while the government’s are in bad shape.
https://www.linkedin.com/pulse/whats-happening-economy-great-wealth-tra…
...
Higher input costs for suppliers also appear to still be working their way through the system, with higher packaging and energy prices being persistent. Transport and freight costs are also set to push higher."
The price of energy sets the cost of goods and services. If you want to plough a field, harvest or transport food you need diesel. You want to make fertilizer you need natural gas. If you want to want to process, refrigerate or freeze foods you need electricity.
The Health Coalition looks like another one of these faux grass-root sock-puppets that the Labour government pays to lobby itself. They’re laying it on thick with the Te Tiriti doc on the first page. “ … guaranteed Māori signatories, and their hapū and iwi, control over their lands…. Māori organisations: Governed or owned by no less than 50% Māori…”
Virtue signalling aside, the tragic irony is that tobacco price elasticity seems to be directly proportional to socioeconomic status. It's the Maori and Pacifica community have been financially decimated by these do-gooder tax-smoking-to-death policies. Yes, tobacco consumption is down but at a terrible cost to society in terms of poverty and deprivation. It’s going to get even worse if the government goes after vaping products like they did in Australia.
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