Here are the key things you need to know before you leave work today:
MORTGAGE RATE CHANGES
No changes to report. However, ANZ pointed out we had an error on our Business Borrowing Rates page and that is updated now.
TERM DEPOSIT RATE CHANGES
No changes here either.
UNHAPPY BUILDERS
Low business confidence is not going away. Some had thought it would revert back higher to pre-election levels as consumer confidence did, but in fact it is consumer confidence that is moving - down. Today's ANZ-Roy Morgan survey results point to further weakness. A net -23% of businesses are pessimistic about the year ahead, down -3 points from March. All sectors are in the red, with services the least pessimistic and agriculture the most. Agriculture did manage a small gain on March, but construction plummeted to its lowest level since 2008. Firms’ views of their own activity (which has the stronger correlation with GDP growth), eased from +22 to +18. Manufacturing and agriculture lifted; construction fell a startling -38 points.
PREFERRING LOCAL
The latest data on our online buying habit shows March was an unusually slow month for growth, mainly due to weak growth in purchases from offshore sites. Total online spending in March was only up +5% on March last year. Spending at domestic sites was up +7% compared to the prior year, in line with the growth in spending at local bricks-and-mortar stores. Online spending at international merchants was up a mere +2% compared to March last year. The international growth rate has been trending down, but this is the lowest we’ve seen. It is difficult to pinpoint a single driver. This data is from BNZ and Marketview.
MOBILE TRADING IS EXPENSIVE
In the biggest fine so far handed down against a mobile trader, Mobile Shop Limited has been fined $330,000 for breaches of consumer laws. The sentence brings the total fines handed down in 13 Commerce Commission prosecutions of mobile traders to more than $1.5 mln.
WHAT LESSON?
The chairman of AMP has been forced out over the issues raised at the Australian Royal Commission into their financial services industry. Key issues relate to the integrity of financial advice, and the sales incentives offered in the industry. The resignation of Catherine Brenner follows that of CEO Craig Meller. But in an odd move, the company has appointed Mike Wilkins as a joint Chairman and CEO: "executive chairman". Wilkins is the ex CEO of IAG, the giant Aussie insurer, a company where broker advice and commission selling are at the heart of how they interact with customers. These features challenge the integrity of customer relationships and fair dealing. Another 'fox' in the henhouse?
BIG NEW TAXES COMING
Auckland Council today voted 15-2 to push ahead with a 11.5c/L regional fuel tax. Today's average U91 petrol price in the region of $2.055/L would become $2.187/L if the tax was in place now. (Don't forget the new fuel tax will have GST added to it.) That would be a +6.4% rise. It is a rise that is expected to generate $1.5 bln in new 'revenues' for the Council (and $225 mln in GST for Wellington) over ten years.
THE FITCH STRESS TEST
In Australia, Fitch Ratings released a stress test showing that the mortgage portfolios of Australia's four major banks could withstand a significant housing market downturn without experiencing losses that - in isolation - threaten the banks' viability. However, ratings would be likely to come under pressure in severe scenarios where banks also suffer from large second-order economic effects, including a fall in consumer spending and higher losses from banks' business loan portfolios. You can read more here. The full report suggests things get serious only when house prices fall -30% or more and default rates climb to 16% or more. None of that has started yet.
THE DEBT PERSPECTIVE
As at March 2018, new RBNZ data shows there was $421 bln in debt to banks in New Zealand, +5.0% more than a year ago. That is 97.2% of all debt. Mortgage debt is up +5.8% in the year, other personal debt is up +7.5% (although it only amounts to a minuscule 3.8% of all debt), business debt is up +4.6%, and rural debt is up +2.7%. Households owe 60.9% of all debt. 70.6% of all mortgages are due for a rate reset in less than 1 year.
WHAT THEY OWE US
Banks now owe their depositors $330.7 bln. Just over half of that (51.1%) is to households. They owe 21.4% for transaction balances, 25.6% for at-call savings accounts, and 53.0% for term deposits. Less than 10% of all balances are owed to non-residents. 78.5% of all bank lending is covered by bank deposits. That is the highest ratio we have seen since full RBNZ data started in December 2016 when it was 75.6%.
BENCHMARK INTEREST RATES LOWER
Local swap rates are lower and flatter today. The two year is down -1 bp, the five year is down -2 bps, and the ten year is also down -2 bps. The UST 10yr yield is now at 2.96%, down -1 bp and waiting for Wall Street to open again. The Aussie Govt 10 yr is now at 2.79% (down -4 bps). The China 10 yr is up +1 bp to 3.65%. The NZ Govt 10 yr is down -4 bps at 2.87%. The 90 day bank bill rate is unchanged at 2.02% today.
BITCOIN HIGHER
The bitcoin price is now at US$9,396 which is up +1.5% from this time on Friday.
NZ DOLLAR HOLDS
The NZD is ever so slightly firmer today and now at 70.8 USc. We are marginally stronger on the cross rates however where we at 93.5 AUc and at 58.4 euro cents. That has the TWI-5 at 72.8.
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23 Comments
The great superannuation fee-for-all
Our pollies love to boast about our world-class super system. Except, the only thing world-class about it is in the amount of fees our money managers manage to rake off the top.
In the past decade, a little under a quarter of a trillion dollars has been siphoned off our retirement savings: $230 billion in the years since the financial crisis.
That's from a total pool of around $2.3 trillion. It's an extraordinary number and nothing short of a national scandal.
In 2016 alone, total fees amounted to $31 billion, according to research house Rainmaker.
Of that, about 26 per cent, or $8 billion, was for administration, $7.8 billion went to investment managers and a whopping $8.4 billion for insurance sold through superannuation funds.
As for the rest, financial advisors took around $5.9 billion while $600 million went towards asset consultants.
http://www.abc.net.au/news/2018-04-30/the-banks-the-government-and-the-…
HO, I would be interested to know what you do for a living. From your many comments, shooting down many professions, you must work in an impecable industry, free from any corruption, greed, incompetence, delays, laziness... etc... What superior occupation is that?
HO - as someone who is diectly involved in the building industry I resent your blimmin stupid comment.
In fact I bypassed it earlier and thought your comment is exactly what is wrong with NZ!
Builders don't charge a bomb. They do the work their clients want and that is what is called meeting the market!
If you think builders are charging a bomb then you have no idea what the overhead costs are.
The constant training and skills management, health and safety in constant changing conditions, then there is the legislation and codewords etc which is beyond a joke. I don't think you have any idea!
Builder charge out rates in NZ are cheap by comparison to every other western country.
Builders are not being paid enough in NZ and their charge out rate should be in excess of $90 per hour. But guess what most don't charge anywhere near that!
Builders get paid lower than all the trades that appear on any site yet the LBP is responsible for those other higher paid tradies. Builders have to work very hard physically and mentally on a daily basis.
What do you do? Because if it isn't feeding or housing people then it can't be important.
Less than 10% of all balances are owed to non-residents. 78.5% of all bank lending is covered by bank deposits. That is the highest ratio we have seen since full RBNZ data started in December 2016 when it was 75.6%.
Great to see that that banks are functioning as an intermediary whereby banks' lending books are "almost" fully funded by customer deposits. The devil lies in the details and definitions I guess.
This concerns me, I want them to be able to weather a damn sight more than 30% given how overpriced house prices are.
‘The full report suggests things get serious only when house prices fall -30% or more and default rates climb to 16% or more. None of that has started yet.’
The reality is that consumers spending in Australia is in the doldrums already. If there is a causal link between sentiment and consumer spending, things could get well bad before house prices fall 30%. On the whole, Fitch cannot quantify how lower propensity to consume will feed back into and drive lower house prices.
https://www.businessinsider.com.au/australia-household-debt-low-wages-e…
The commission has heard that Australian banks have adopted actual lending practices (as distinct from their official lending policies) that claim so much household income for contract payments that borrowers are left without enough money to fund basic consumption levels: they are living in poverty.
https://www.smh.com.au/business/banking-and-finance/new-type-of-poverty…
The commission has heard that Australian banks have adopted actual lending practices (as distinct from their official lending policies) that claim so much household income for contract payments that borrowers are left without enough money to fund basic consumption levels: they are living in poverty
This is a real issue considering the high cost structures of the retail economies in Australia and NZ. The US, Japan, and Europe have already made the transition to discount retail models (for example, store brands), but there are huge barriers to the business in our part of the world, including scale and the relative expensiveness of route to market. And given so much of NZ's FMCG industry is focused on "added value" (think of all the high-cost products and brands vying for the "convenient premium" space), the impacts could be devastating for many businesses and product portfolios.
Bob Dylan advises do be careful out there:
“Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin.”
Interest rates, debt levels, exchange rates, rules and regulations, lending limits, tax changes, unitary plan, credit availability, immigration levels, trade tariffs et al…
I wonder if we are being simply far too complacent.
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