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
The Cooperative Bank has raised its fixed rates by +10 bps for terms 6 months to 18 months, and by +6 bps for a two year fixed term. Update: Westpac has tweaked all its fixed rates higher. More here.
TERM DEPOSIT/SAVINGS RATE CHANGES
China Construction Bank raised most TD rates today, now offering 6.10% for six months and 6.30% for 1 year. Heretaunga Building Society also raised rates today competitively. Update: Westpac has launched an 8 month special at 6.10%.
LABOUR MARKET REMAINS STRONG (EARLY INDICATIONS)
The September employment indicator report from Stats NZ has revealed some rather juicy detail. First, there were a strong +3.1% (+71,860) more filled jobs in September 2023 than the same month a year ago, now up to 2.39 mln in total. Actual gross earnings were $14.9 bln, up +$1 bln or +7.2% higher than a year ago. The largest number of filled jobs was in Auckland, up +4.1% from a year ago, or +31,805. But some of this increase will relate to temporary hiring for the election. And we seem to be leaking jobs for those under 35 years, which is a worry. It is also worth noting that employment in primary industries fell to 94,650 in September as the rural sector suffers a hard cost squeeze. That is its lowest level since September 2019. It is hard to see this overall data undermining the Q3-2023 labour market results when they are released on Wednesday. The number of rural businesses also keeps on falling, the only main sector like this.
TOUGH METRICS
The chief BNZ economist is pointing out that 'the average cost of building a house relative to buying an existing one has never been higher'. They say the currently wide cost gap between building and buying a house should reduce, but much of this is expected to come via higher existing house prices.
"WE COMPAE FAVOURABLY"
The RBNZ continues to drip-feed 'special topics' out ahead of its Financial Stability review on Wednesday. The latest one looks at how financial stability in advanced economies has been affected by higher interest rates and how we compare. Their conclusion? "We find that New Zealand has many similarities to other advanced economies and compares favourably overall, although we do find that mortgage borrowers in New Zealand are relatively more exposed to higher interest rates. This is because of higher household debt levels and the relatively short fixed-rate periods of New Zealand mortgages."
TOUGH SECTOR TO BREAK IN TO
PwC has been appointed voluntary administrator of Supie, with initial estimates suggesting creditors are owed about $3 mln. Meanwhile the grocery watchdog reveals 'top 3' on his fix-it list for the supermarket sector.
CATCHING THE RBA'S EYE
In Australia, September retail sales rose more than expected to be +2.0% higher than a year ago, pumped by the +0.9% rise in September from August. The year-on-year result is far less than inflation but the more recent rise is sharpish and may encourage the RBA to hike, thinking that along with earlier +5.6% monthly inflation indicator data, the risks of waiting for are not worth taking.
SWAPS HOLD
Wholesale swap rates have probably held little-changed today at the short end, may up a little at the long end. The real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is -1 bp softer at 5.64% and now +14 bps above the OCR. The Australian 10 year bond yield is up +6 bps from this morning to 4.88%. The China 10 year bond rate is down -1 bp at 2.73%. The NZ Government 10 year bond rate is up +3 bps at 5.57% from this morning, but still above the earlier RBNZ fixing of 5.46% which was down -4 bps from yesterday. The UST 10 year yield is up +2 bps from this morning to 4.87% and back to Friday's level. The UST 2yr is back down -3 bps to 5.06%, so the curve inversion has narrowed today, now only -19 bps.
EQUITIES LOWER
The NZX50 is still in a negative phase, down -0.5% in late trade today. The ASX200 is also down -0.5% in early afternoon trade to start their week. Tokyo has opened down -1.1%. Hong Kong is starting its Monday down -0.2%, and that is the same for Shanghai. Singapore is down -0.3%. The S&P500 futures suggest Wall Street will open tomorrow up +0.8% which is quite a different perspective from all the other markets we follow.
GOLD SLIPS SLIGHTLY
In early Asian trade, gold is now at US$2003/oz and down -US$3 from where we opened this morning.
NZD HOLDS
The Kiwi dollar has risen slightly to 58.2 USc that at today's open and back to where were this time on Friday. But against the Aussie we are marginally softer at 91.7 AUc. Against the euro we marginally firmer at 55.1 euro cents. That means the TWI-5 is little-changed at 68.4.
BITCOIN UNCHANGED
The bitcoin price is little-changed today, now at US$34,486 and up +0.2% from where we opened this morning. Volatility over the past 24 hours has been modest at just on +/- 1.2%.
GO THE ALL BLACKS
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58 Comments
"We find that New Zealand has many similarities to other advanced economies and compares favourably overall, although we do find that mortgage borrowers in New Zealand are relatively more exposed to higher interest rates. This is because of higher household debt levels and the relatively short fixed-rate periods of New Zealand mortgages."
Besides "no-sh*t Sherlock", what do we actually take away from this? I would think a relevant insight would come from how the "compares favorably overall" balances out the higher level of h'hold debt.
I'm left none the wiser from the intellectual power of Team RBNZ.
"...We find that New Zealand has many similarities to other advanced economies and compares favourably overall, although we do find that mortgage borrowers in New Zealand are relatively more exposed to higher interest rates. This is because of higher household debt levels and the relatively short fixed-rate periods of New Zealand mortgages...."
Figured that out ages ago. Been reading interest.co.
Yeah, a lot of words and no answers or directions.
Downside risks remain if unemployment rises or if financial conditions tighten
In part this reflects robust macroeconomic fundamentals, such as low unemployment rates, and past regulatory tightening across many jurisdictions after the GFC.
Key downside risks to global financial stability are potentially weakening labour markets and persistently high inflation rates, raising the risk of further policy tightening.
And yet aren't they complaining about low unemployment rates and we're already seeing persistently high inflation rates and tightening financial conditions. Sack the lot of them and let's go back to reading the stars, tarot cards and runestones.
European equity markets have profited recently from declining energy prices that increased corporate profits.
That's an interesting one - inflation stays high because the decrease in inputs isn't being passed onto the consumer?
It's not though. Here's my take on what is actually going on:
- More people are arriving into the country to take up jobs that residents won't do - often for very good reasons, like not wanting to leave their kids and family to go and sleep in a shed or a 6-bunk shared room in Queenstown, or minimum wage work in care services with unsociable hours and bedsit accommodation.
- The number of people arriving is running at around twice the growth in jobs - so the people that are on the edge of the labour market are being shut out. This is showing up in the reduced number of younger people in jobs, and the number of people with health conditions and disabilities joining the dole queue. You can see this trend clearly in higher jobseeker claims - now ticking up at around 500 per week.
- The variation across the country is also significant - with parts of the east coast, nelson, and wellington all seeing job growth well below-population growth. Auckland is booming because it is where migrants go first, and there are lots of jobs that you can only afford to do if you share a house with loads of other people trying to get a foothold in the promised land (note rents there have gone nuts as a result - up over 9%)
We get the labour market data on Wednesday. I am still betting on a 3.9% unemployment rate and an under-utilisation rate nudging 11% (or at least above pre-COVID levels). But, let's see.
Interested in any anecdotes people have on performance bonuses ie. are they disappearing or being heavily reduced?
I think they are an under-considered economic factor. Many people almost rely on them, I know that was essentially the way for me when I worked for a large consultancy way back in the day.
Our performance bonuses are 1/3rd company profit and 2/3rd individual KPI. The company profit portion scales from 85% of target reached = 50% payout.
So worst case we still receive 2/3rds bonus assuming all individual KPIs are met, which are just basically "doing your job" tasks.
Agree with most of this but I think there might be another explanation for fewer young people in jobs: massive emigration for delayed OEs and/or economic opportunities, at a time when there are very few returning OEs to balance them out. The migration data won't show this yet because the stats department still thinks these people are on holiday.
That's possible I guess. But the young people taking on work tended to be in relatively low socioeconomic areas - suggesting that it's unlikely that the same people are now bobbing off on an OE. Anyhow, we will see in next few months. My guess is unemployment is going to climb significantly.
Random 'state of the economy' anecdote for the day - I'm currently laid up owing to a medical issue, and so can only do very light exercise.
I normally frequent an F45-style gym (it's another Aussie, maybe American franchise I'm not sure but doing a similar thing) as it works well for me with no set class times, and I have enjoyed good results.
Not cheap at about $50 p/w but I consider it worth the cost.
Anyway, my periodic membership rolled over a couple of weeks ago and I hadn't renewed (as I can't go back to the gym until January at the earliest).
I got a phone call today from the franchisee, whom I've got to know fairly well. He straight up said he's ringing around because new inquiries/membership "leads" have dried right up over the past month and existing members are cancelling or not renewing - not because the product is no good but simply because people are feeling the pinch.
Asked me to renew (with an unpaid pause) as opposed to looking like the membership has finished as it looks good back to head office.
Catching up with a couple of retail business owners over the past week, they are also reporting the going much tougher in the past month or so.
Will be fascinating to see how peak retail season performs.
When writing my comment, what you are saying was directly on my mind (in fact I think I had just read a comment of yours higher up about the low unemployment rate).
This whole situation is weird, because things feel like a "struggle" for many businesses and individuals that I am personally connected to, and the general tone of the word on the street feels quite negative but the data isn't bearing it out yet.
Will be interesting to see what pans out.
Had 2 cold call emails in the space of 2 days last week from a potential supplier in the civil infrastructure space.
Got a price from them 3 months ago for a project. Didn't go ahead. Asked them for a generic pricelist, pretty much got fobbed off wasn't too worried. Last week they were practically begging for some jobs to price, so threw them a couple of bones. Like for like products 40% down on price on 1/10th the value of the previous project.
I have cancelled about $200 of subs a month myself in the last week.... not getting enough value....
I was paying for multiple xero companies moved 2 to spreadsheet, and had some other services not using, also lost about 4 kg in 2 months simply by working harder and eating less.
I thought it was a terrible game, on all fronts. Skill wise, officiating. I can’t believe a decent number of people thought it was an ‘epic’ game. Including Gregor Paul, the great AB apologist who was saying the ABs had ‘turned it all around’ after thrashing three minnows in group play and beating ONE very good team in ONE game.
As for Sky, the sooner they get rid of the godawful Nisbett, the better.
Still, I pocketed some decent little winnings that will pay for all the Xmas things.
When Barnes admitted to Ardie that he shouldn't have penalised him fo illegally scrabbling for the ball, and then didn't reverse the penalty for the SAFA on the ground under Ardie illegally holding on to the ball, I was a tad non plussed. Same when the SAFA's headbutt was yellow, and the Kiwi's was red. Two real simple obvious instances of bad stuff.
When will the anecdotes show up in the stats? We still have very low unemployment and good GDP growth, probably the two most important indicators. I agree with the anecdotes, it does seem very quiet out there, but the NZ economy seems to keep chugging though it...
Sounds like tough times manifesting in good service.
Can go the other way. I recently changed dentists after some really bad head office type behaviour. Got chatting to a few clinicians and they are getting squeezed to book a certain number of procedures and have to explain down to each 15 mins. Same for an optometrist friend.
4 Seasons gone out of business too, a sign retail etc is drying up.
Then again, food prices (especially fruit/veggies) seem to have taken a big tumble. 5 Avos for $1, 2 cauli's for $5, 2 telegraph cucumbers for $3, cheap fruit, cheap other veggies at PaknSave on the weekend. Eggplants still expensive, but thats about it.
The price of lettuce is more to do with weather than anything else. I also wonder if the supermarkets are trying to look competitive to avoid regulation (the threat of regulation normally works quite well).
Food growers tend to work for nothing in the hopes of capital gains, much like landlords.
I don't think you are right Jimbo but if you are we are screwed in the future as prices will only sky rocket.
When prices do get to the point of being worth while growing vegies, only then will local producers step up. In other words if you want local produce pay the price.
4 Seasons is an interesting one.
Did some accounting work for them back in 2012 on behalf of one of the shareholders and they seemed to be hemorrhaging back then. Hard to know what's happened since but it looks like previous owners sold out in time.
Maybe that particular retail market and their niche just didn't work against the bigger players?
The competitive free market ay. Built by small independent local suppliers, overtaken and dominated by the big chain stores.
“may encourage the RBA to hike, thinking that along with earlier +5.6% monthly inflation indicator data, the risks of waiting for are not worth taking”
Well – the RBA should certainly know now all about waiting and the associated risks:
“RBA governor Philip Lowe in 2021 gave forward guidance that the bank believed economic conditions would not warrant an interest rate rise until at least 2024”
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