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
No changes to report today.
TERM DEPOSIT/SAVINGS RATE CHANGES
No changes here either.
MUCH LESS TRADE
In October 2023, goods exports fell by -$552 mln from a year ago (or -9.3%), to $5.4 bn, largely due to sharp falls to China and Australia. Meanwhile goods imports fell by -$1.2 bln (or -14%) on big falls from China, the USA, Korea and the EU, to $7.1 bn. That meant that the monthly trade balance in October was a deficit of -$1.7 bln which was down from -$2.5 bln on October 2022.
RATING DOWNGRADES IF 3 WATERS AXED
International credit rating agency S&P says repealing the Affordable Water Reforms could result in local government downgrades.
FARMERS INVEST MUCH LESS
Among the items we are buying less of are tractors for farms. The number registered in October was -21% lower than year ago levels, extending the weak run, so that for the full year to October only 2545 new tractors were sold, the lowest level since 2012 (apart from the pandemic disruption).
A MODEST RISE ON THE CARDS?
There is another full dairy auction tomorrow morning. The previous one saw prices fall -0.7% on November 7 from the October 17 event. But there have also been intervening Pulse auctions for both SMP and WMP. The five GDT and Pulse events for WMP have delivered a rising trend since mid October. There has also been a rising trend in prices for SMP although that is a shorter set from October 31 (three events). A recently falling USD may also help underpin tomorrow's auction.
AVANTI FINANCE IN NZ AUTO LOAN ABS
Finance company Avanti Finance is raising $200 million via its inaugural NZ issue of vehicle loan asset-backed securities (ABS). The loans were made and are serviced by Avanti subsidiary Branded Financial Services (NZ) Ltd. Of the loans 58% are to consumers, with 42% to commercial obligors. Loans backed by passenger and light commercial vehicles represent 69% and 31% of the securitised loan pool, respectively. The NZ issue follows Avanti completing a similar deal in Australia in August.
CITI NZ CEO RETIRING
Derek Syme, Citibank's New Zealand CEO since 2011, will retire at year's end, Citi says. Syme joined Citi as a relationship manager in the NZ corporate bank in 1994. Citi says Syme will remain at Citi until a replacement is identified.
CREDIT CARD MALAISE I
Credit card balances are very little-changed in October from September and in fact have been virtually unchanged since the start of 2023. And growth there has been was in late 2022, leaving the October levels just +1.3% higher that year ago levels - which means they are going backwards on an inflation-adjusted basis. Balance levels are important to banks, certainly the portion that accrues interest and that is also steady at 52.7%.
CREDIT CARD MALAISE II
And activity on credit cards isn't showing any expansion either. Year on year they are lower. This is important to Visa and Mastercard as they clip a fee off of each time they are used. We may use them for online shopping, and have loaded them to our phones, but that isn't generating more use anymore.
A WORRY A MINUTE - INFLATION THE CRUCIAL CHALLENGE
In Australia, they delay releasing the minutes of their RBA meetings which then becomes a markets and media signaling circus. Today's release refocused attention that they haven't ruled our further rate hikes because their inflation stays stubbornly above their target. In fact, they worry that inflation might rise from here for a while, raising the chance of a rate hike. Not much of this is new, but the delayed minutes release gives it new oxygen. (They would be much better to adopt the RBNZ practice of releasing the meeting minutes at the same time they release the meeting decisions.) The RBA inflation target is 2-3%. The current inflation indicator is 5.6% and rising.
SWAPS UNCHANGED
Wholesale swap rates have probably changed little today. The real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 5.63% and now just +13 bps above the OCR. The Australian 10 year bond yield is down -4 bps from yesterday to 4.45%. The China 10 year bond rate is unchanged at 2.68%. And the NZ Government 10 year bond rate is down -1 bp at 5.01%, and the earlier RBNZ fixing was at 4.94% which was up +1 bp today. The UST 10 year yield is now at 4.42% and down -3 bps from this this time yesterday. The UST 2yr is now at 4.91% so that key curve inversion is more again, now at -49 bps.
EQUITIES MEANDER IN TIGHT RANGES
The NZX50 is down -0.4% in late trade. The ASX200 is up +0.2% in afternoon trade. Tokyo has opened its Tuesday trade down -0.2%. Hong Kong is up another strong +1.4% at its open. Shanghai is up +0.6%. Singapore is down -0.2% at its opening. Wall Street closed its Monday trade up +0.8%. Lackluster trading is probably due to the US's Thanksgiving week slowdown.
GOLD RISES
In early Asian trade, gold is now at US$1989/oz and up +US$6 from this time yesterday and it has been volatile in between. Earlier it closed in New York at US$1978/oz. Earlier still it closed in London at US$1969/oz.
NZD FIRMS FURTHER
The Kiwi dollar is up +40 bps from this time yesterday, now at 60.5 USc. Against the Aussie we at 92.2 AUc and marginally firmer. Against the euro we are up a bit more at 55.3 euro cents. That means the TWI-5 is also up +30 bps at 69.6.
BITCOIN TURNS BACK UP
The bitcoin price has moved back up slightly today, now at US$37,603 and up +0.8% from where we were this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.3%.
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20 Comments
Astonishing article from Aussie MSM on "the uncomfortable truth about record high immigration levels, rents and inflation." I say astonishing because this is actually insightful and shows an application of critical thinking. Too much directness to highlight, but I liked this:
The IMF is a textbook case of how intelligent individuals become consumed by textbook solutions to real-world problems. Who could forget its disastrous stipulation to nations left impoverished by the Global Financial Crisis to embark upon austerity programs?
Its report on Australia a fortnight ago neatly glosses over the nub of the issue. Rather than suggest scaling back the intake of new arrivals, it instead proposes to scale back on the necessary infrastructure needed to accommodate those new arrivals.
https://www.abc.net.au/news/2023-11-21/the-uncomfortable-truth-about-im…
Great article:
Rents have been soaring for most of the past year and vacancy rates, at just 1.1 per cent across the nation, according to property data firm PropTrack, are now at their lowest levels in history.
Our immigration intake, meanwhile, is running at record levels with up to 600,000 arrivals expected this calendar year. If we continued at that rate for four years, there'd be enough people to fill a city the size of Brisbane.
Crazy isn't it? In normal times, I am of the view that rents rise with household incomes. But when you get:
(I) a burst of inward migration - loads of new arrivals willing to live on porridge, do crap jobs, and walk miles to work, and
(ii) major increases in costs for a reasonable % of landlords
... You get exactly the rent boom we are seeing in Auckland and increasingly elsewhere.
The idea that you can let your population swing wildly with no spare housing capacity is just dumbass.
The major increases in costs shouldn't have too much effect over the long term, they should just make the business (house) less valuable. Especially because the biggest increase, mortgage interest and tax deduction, does not apply to all properties in equal amounts as it depends on the amount of debt. Its hard to put your rent up because you are seriously indebted when the guy next door has no debt and does not need to.
Also harder to put your rent up when a huge amount of rental supply (new build townhouses) is still hitting the market. I do also wonder if all these new builds hitting the rental market are distorting average rents (upwards), ie. all things being equal a new 2 bedroom townhouse will rent out for more than an old 2 bedroom flat in the same location.
I agree, but around half of landlords have mortgages, and that is probably enough to create a critical mass around price increases. Also worth noting that for many years rents have tracked incomes - despite total loandlord mortgage payments dropping sharply relative to total rents collected.
The RBA inflation target is 2-3%. The current inflation indicator is 5.6% and rising.
Any amateur (like me) with a passing interest in economics knows the story: the Fed controls the economy by raising or lowering interest rates. Those then affect the banking system's credit impulse which either adds to or takes away from the general economy depending on what CBers wish to accomplish. Of course, almost none of that is true. How did it get to be this way? Answering that question reveals a lot more than you might think. Link
Michele Bullock has warned 4 per cent wage rises cannot be sustained without higher productivity, as the central bank flags the possibility of another rate rise.
Suck it up people.
https://www.afr.com/policy/economy/bullock-issues-wages-warning-as-rba-…
Meanwhile, RBA staff are considering strike action over an 11% over 3 years pay offer.
Sensational.
Australians now need to earn over $300000 per year to comfortably afford to buy their own home, according to new housing data.
Propadee expert says "Building houses or apartments that are $700000 plus doesn't work, we need to be doing everything we can to build under $500000."
https://www.9news.com.au/national/new-research-highlights-australias-ho…
Pretty soon it will be $400k to buy, and $300k to rent.
My expectations of life have plummeted in the last decade. Being on the losing side, I just hope to get through the 20s with a job most of the time and to avoid living in a garage. Beyond that, in my 70s, I don't even have a plan.
No comments of the BoP?
Imports down twice as much as exports. Anyone need more evidence that consumers have shuttered their wallets & purses?
The RBNZ will have much to ponder ... Especially the amount of "friction" that's present in the economy, and has built up at higher rates, and whether they could drop the OCR a tad, while letting "friction" continue to slow inflation further from here.
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