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
Today it was BNZ who raised fixed rates, following ANZ late yesterday.
TERM DEPOSIT/SAVINGS RATE CHANGES
The Cooperative Bank raised rates, also following ANZ and Westpac yesterday.
TRACKING THE POPULATION FLOWS
Stats NZ reported that the country's population grew by +105,900 people in the year to June, with Auckland's population up +47,000. Migration was responsible for three-quarters of the Auckland growth. Net internal migration flowed out of some cities, especially Auckland, Wellington and Christchurch. The one city gaining big from internal migration was Tauranga.
IMMIGRATION NOT GIVING MUCH PUSH
The ANZ monitoring of traffic flows via their Truckometer series was headlined "Spring pothole". They see tame heavy traffic activity, and tamer-than-expected light traffic activity given the strong immigration data. While we may not be stick in a pothole exactly, the low demand potholes are going to be reflected in weak local growth outcomes in Q4-2023.
HIGH STREET IS STRUGGLE STREET
This lackluster outlook matches what retailers are seeing and saw in Q3-2023. Their Retail Radar Report didn't find confident retailers, although more than half suggested/hoped Q4 would be better. Worryingly, more than 10% of retailers doubt they will survive the next 12 months. Another 30% say it is touch-n-go.
FARMERS GET THE MESSAGE, DOCTORS NOT SO MUCH
A new report from NZ Food Safety shows agricultural antibiotic use has fallen by a quarter (except for horses), but human use is still dangerously high.
A LICENSING FIRST
The first Financial Institution Licence has been issued by the FMA. This licensing system was established following the joint FMA and RBNZ review into the conduct and culture of banks operating in 2018, in the shadow of the Aussie Haynes Report. The first institution granted this licence is Christchurch-based Gold Band Finance.
UPWARD PRESSURE RETURNS
In Australia, inflation is rising again. Their monthly inflation indicator came in at 4.9% in July, 5.2% in August,and that rose again to 5.6% in September (5.4% was expected). This locked in the Q3-2023 CPI at 5.4% and although down from 6.0% in Q2, it is clearly on the rise again. Fuel, electricity, housing and insurance all are keeping the pressure on. The AUD rose on the news, in the expectation of a higher chance the RBA will raise rates there on November 7. That comes just a few hours after Westpac Australia economists set their forecast as a no change, followed by reductions from September 2024 (see page 19).
YOU CAN STAND UP TO CHINA'S PRESSURE
On the trade front, Australia seems to have won a range of backdowns from China, opening the door to a visit to Beijing by the Australian prime minister soon (from November 4 to 7). And all this comes after Australia shored up its security arrangements with Washington, Tokyo - and New Delhi.
SWAPS HOLD
Wholesale swap rates have probably held little-changed today at the shorter end. But the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is -1 bp lower at 5.64% and now only +14 bps above the OCR. The Australian 10 year bond yield is up +2 bps from yesterday to 4.73%. The China 10 year bond rate dipped -1 bp to 2.74%. The NZ Government 10 year bond rate is down -7 bps at 5.50% from yesterday, but still above the earlier RBNZ fixing of 5.44% which was down another -7 bps from yesterday. The UST 10 year yield is down -6 bps from this time yesterday at 4.81%.
EQUITIES QUITE MIXED
The NZX50 is down -0.6% in late trade today compounding yesterday's dip. The ASX200 is down -0.3% in afternoon trade. But Tokyo has opened up +1.1% in its Wednesday trades. Singapore is little-changed at its open. Hong Kong has opened up +2.2% following President Xi's apparent renewed interest in reviving the Chinese economy. Shanghai has opened up +0.9%. Wall Street closed up +0.7% on the S&P500 in its Tuesday trade.
GOLD MARGINALLY SOFTER
In early Asian trade, gold is now at US$1973/oz and down -US$4 from this time yesterday. Earlier in New York it closed at US$1971/oz, and earlier still in London it closed at US$1964/oz.
NZD HOLDS THROUGH SHIFTING CHANGES
The Kiwi dollar has inched up from this time yesterday and is now at 58.7 USc. But against the Aussie we sharply lower (post their CPI data), now at 91.7 AUc and more than a -½c drop. Against the euro we are up +½c at 55.4 euro cents. That means the TWI-5 is marginally firmer at 68.5.
BITCOIN HIGHER
The bitcoin price is higher again today, now up at US$34,178 and up +1.4% from where we were this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.8%.
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53 Comments
In Australia, inflation is rising again.
RBA expecting 0.9bps, printed 1.2% to 1.3% in Sep quarter; core inflation was 5.2% last 12mths (vs 2.5% RBA target); trimmed mean last quarter revised up from 0.9% to 1.0%. Last 6mths core annualised is 4.3% vs RBA forecast of ~3.6%.
Their forecasts are woefully understated.
They should hike in November. But the RBA has a kind of Stockholm Syndrome because of the property ponzi lobby - which is massive. Basket case.
TBH, I think it's a house of cards so I understand their fears and would not want to be in their shoes. But they're the architects of their own sh*tshow. My analyst mate reckons there could be multiple rate hikes over the next few months (given Bullock said ‘low tolerance’, anything short of multiple rate hikes will crash AUD).
And,
One in five Western Australians are going hungry according to food relief charity Foodbank. Thousands of families are skipping meals to make ends meet, with some needing the service for the first time as we head into an expensive part of the year.
Good heavens. Comments before the CPI data released from ex-RBA pointy head Luci Ellis who moved to Westpac.
The next RBA rate move will be down, says Westpac
The next move in interest rates will be down, says the bank’s economics team, which is now led by a highly regarded former Reserve Bank assistant governor.
https://www.afr.com/companies/financial-services/the-reserve-bank-is-do…
Here is what the head of the largest US Bank by asset size had to say about Central Bankers: https://www.cnbc.com/2023/10/24/jamie-dimon-rips-central-banks-for-bein…
And he warned to be prepared for anything next year.
Japan's running out of workers. Almost everyone in the working-age population is employed, leading the country to steps like recruiting 80-year-olds to drive taxis. Strangely, this might actually be a good thing for the economy.
Just as well Japanese like to work.
https://www.bloomberg.com/opinion/articles/2023-10-24/what-80-year-old-…
Interesting article. Quote: "[Economists] expect the higher labor costs that will inevitably result [from labour scarcity] to spur company investment in raising Japan’s unusually low labor productivity and lift economic growth".
Here in NZ we have low labour productivity and low economic growth and how do we deal with the problem...ramp up imported labour to keep labour costs low which suppressed productivity growth and economic growth per capita...
It's a fascinating juxtaposition. Their exports and export receipts have been going gangbusters because of the weak yen. I think our minimum wage is 60-70% higher than Japan's yet their cost of living is arguably better. Look at rents. One week of student rent in Auckland is a month's rent in Osaka and / or Tokyo (the latter is usually higher).
When I went to Japan in the 90 things were really expensive. But now comparing prices, prices look so cheap, especially for things like meals out. Even new build houses aren't too bad in price on the outskirts of Tokyo, although the quality of things like window frames seem to suck on new builds compared to NZ.
Their electronics and cars are some of the best, but I have seen windows and doors on a new build in Japan, and compared them to those in NZ, and they were pretty poor. Thin flimsy aluminum frames, and walls very thin. Maybe that wasn't typical, but Japanese houses aren't generally made to last as long as NZs (partly due to earthquakes so very light weight construction) , and people over there don't like to live in older houses and prefer new. In NZ I understand they must be designed to last at least 50 years. I understand houses over there depreciate in value the older they get and you can pick up some really cheap houses out of the cities.
This is another quirk of Japan. Their houses are only built to last a couple of decades
"An unusual feature of Japanese housing is that houses are presumed to have a limited lifespan, and are often torn down and rebuilt after a few decades, generally twenty years for wooden buildings and thirty years for concrete buildings – see regulations for details."
https://en.wikipedia.org/wiki/Housing_in_Japan#:~:text=An%20unusual%20f….
I lived in an 80s era apartment block in Japan for a few years and it was single glazed, but offset by extensive use of air con all year.
It seems to still be the case that in some parts of the country single glazed is used. Probably a wheels within wheels thing based on the power of the power companies
https://neojaponisme.com/2008/05/07/ask-an-architect-insulation/
Sometimes Japan is weirdly backwards e.g. still the biggest user of fax machines.
But I agree on Sekisui etc. They do make many excellent housing units cheap and could insulate well if they needed to by regulation. We need some more group builders like them. Whatever happened to the factory builds promised a few years ago?
The globally synchronized recession is showing up in Japan, too, where everyone seems convinced the Japanese is in such an inflationary boom the BoJ is somehow going to have to raise rates. Jibun's comment instead says at all. https://buff.ly/46KnqQ0 Link
So...
- Auckland rents going bananas (up 9.4%) as new migrants turn up and pay top dollar with their precious savings - leaving residents with no choice but to ship out.
- Residential construction on the floor - murdered by high interest costs. So, tiny increases in supply swatted aside by demand.
- Benefit numbers flying up, accommodation supplement back on a relentless march to the sky, job vacancies plummeting.
- Consumer demand continuing to plummet - been going on for a year but the bank economists that dominate our media have consistently described the economy as overheating (they seemingly forgot how to adjust spending data for inflation)
- Inflation not coming down because businesses are managing huge increases in interest payments, which are running at $1.3bn per month (around 10% of consumer spending!) We are also seeing huge increases in rents, insurance, and Local Govt rates, and reintroduction of fuel excise etc - all helping us sustain a higher CPI while other countries glide down into target bands.
The new Govt and RBNZ are looking at this looming disaster and they think the answer is: higher rates for longer, tighter benefits, more power to landlords, lower Govt spending, and an innovative, exciting future of selling milk powder and logs. Not that the departing lot had much more to offer to be fair.
National seem to be looking at using austerity, which is often bad for lower income and vulnerable in society. But also giving tax cuts to higher income people and landlords, which is inflationary as higher income people spend more, and so may result in interest rates rising further.
National tax cuts were only really targeted at the middle. 39% rate hasn't changed (even for trusts it will stay the same). The benefit of the tax cuts maxes out at 70k
As for land-lords - they aren't really tax cuts. They just reduce the tax they were paying on a cash flow loss - so no those land lords don't have any extra money in their pockets
Cutting govt spending to fund tax cuts for people who either won't spend it all or will use the extra $ to pay down debt is net negative stimulation.
I strongly believe that Govt should be planning a targeted deficit spending programme - infrastructure, native tree planting, community solar etc, but by the time Govt realises that it will be too late.
I think this is misguided. They are changing the mix, from consultants to front line. Interestingly I saw a headline calling out the mass-migration of consultants into full time roles in government. Honestly the trough that the welly beauracrats have been swimming in needs draining, at least occasionally.
NZS is a poor performer.
AUS is nice and has the same tax benefits.
USD and others (Asia etc) are roaring but a slight tax issue.
Housing is crap as an investment and has terrible tax treatment (even under national)
Crypto is an incredible investment but with bad tax.
Looking at the above, why pick property? There is a reason why rental property investment is at a low.
Rymans, Sommerset and Oceania shares all still falling. I would strongly suspect this to be a leading indicator of the near-term fortunes of the housing market. The current easy on the eye returns on TD's also play a part. Investors are waking up to easier and more dependable ways to make one's money work harder.
Why people don't just buy what they will need in the future - non-perishable or storable, of course - instead of 'investing'?
It was all clearly a ponzi - as been for at least since 2008, arguably since Clinton repealed Glass-Steagall, even arguably since the need to privatize (because of scarcity of opportunities) via Reagan/Thatcher/Chicago.
Reconciliation is an interesting word. So benign, yet not...
Maybe this is what you are after? RBNZ has a bunch of series.
https://www.rbnz.govt.nz/statistics/series/exchange-and-interest-rates/…
This maybe helpful too: https://www.rbnz.govt.nz/statistics/series/exchange-and-interest-rates/…
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