Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
ASB has raised all its fixed home loan rates, and to levels above its main rivals. More here.
TERM DEPOSIT RATE CHANGES
BNZ raised some of its term deposit rates today. Of the largest banks, it is now with a 2.00% one year rate, although Westpac was already at that level.
EXPECTING HIGHER INFLATION
Future inflation expectations continue to rise but are now lagging actual current price growth. Households on average expect one-year ahead inflation to be 4.5% (previously 3.8%). But in fact these levels are lower than the actual CPI rise in September of +4.9%. In any event, this survey suggests high inflation wont be transient. It is not often 'household inflation expectations' lag current experience. Households on average expect house price inflation to be 5.3% in 12 months time (previously 5.5%). This same survey tracks rising worry about making mortgage and rent payments.
INFLATION MAY WRECK SOME PLANS
Future inflation may make today's release redundant. The Massey University review of the savings required in retirement already is pretty tough. A two-person household in the main cities in 2021 would need to have saved $809,000 to fund a ‘choices’ lifestyle, while a couple living in the provinces would need to have saved $511,000. The lump sums required for a ‘choices’ lifestyle for a one-person household are $600,000 and $688,000 for metropolitan and provincial areas respectively. A ‘choices’ lifestyle is more fulfilling and includes some luxuries. A 'no frills' lifestyle is very basic. Only two-person provincial households living a ‘no frills’ lifestyle come close to being funded by NZ Super, though they would still need savings of $75,000. A metropolitan two-person household with a ‘no frills’ lifestyle would require $195,000 savings at retirement in addition to NZ Super.
GETTING OLDER FASTER
As at September 30, 2021 more than one in six New Zealanders were aged 65 or older, 16.1% of the 5,126,300 population and its highest level ever but growing at a very slow pace (its slowest since 1999 when we briefly had significant emigration). With the borders shut and little immigration, the median age of our population rose quicker to 37.8 years, 36.8 yrs for men, 38.8 yrs for women. The working aged population (15-65) has fallen to 65.0%, its lowest since this Stats NZ series began in 1991. Our birth rate is very low, but there is some evidence that births are rising during the pandemic 'working from home' lockdowns.
HOLDING HIGH
We have updated our extensive charts tracking average rents today. Most areas we track reported slipping rents off a high base. See here for Auckland and its seven districts, here for the 14 other town in the rest of the North Island, and here for rents in nine South Island towns. But one area stands out - there was a +40/week jump in rents in the Waimakariri District just north of Christchurch.
LOCAL PANDEMIC UPDATE
In Australia Delta cases in Victoria have slipped to 797 cases reported there today, and a noticeable easing. There are now 14,131 active cases in the state (a big decrease) and there were another 8 deaths yesterday. In NSW there were another 212 new community cases reported today, another drop, with 2,864 active locally acquired cases (an increases), and they had another 2 deaths yesterday. Queensland is reporting zero new cases again. The ACT has 12 new cases. Overall in Australia, just over 82% of eligible Aussies are fully vaccinated, plus 8% have now had one shot so far. In contrast, there was one new case in New Zealand at the border, and 222 new community cases and more than for NSW again today with one death. Now 90.4% of Kiwis nationally aged 12+ have had at least one vaccination, and the Australian rate is now also at 89.5% of all also aged 12+.
GOLD RECOVERS
In early Asian trading, gold is at US$1865/oz and recovering yesterday's US$6 drop. This is higher than both the New York close and the earlier afternoon London fix.
EQUITIES MARGINALLY SOFTER
The S&P500 ended unchanged on Wall Street in its Monday session. Tokyo has opened flat too. Hong Kong has opened up +0.2% while Shanghai has opened its session up +0.1%. In early afternoon trade, the ASX200 is down -0.5% while the NZX50 is down -0.2% in late trade.
SWAP & BONDS RATES RISE
We don't have today's closing swap rates yet. They are probably rose. The 90 day bank bill rate is up another +1 bp to 0.86%.The Australian Govt ten year benchmark rate is now at 1.84% and up +7 bps. The China Govt 10yr is still at 2.95% and unchanged. The New Zealand Govt 10 year rate is now at 2.63% and up +3 bps but still well below the earlier RBNZ fix for that 10yr rate at 2.67% (+1 bp). The US Govt ten year is now at 1.61% and up +6 bps.
NZ DOLLAR UNCHANGED AGAIN
The Kiwi dollar is now at 70.5 USc and unchanged from this time yesterday. Against the Aussie we are little-changed at 95.9 AUc. Against the euro we are up at 62 euro cents. The TWI-5 is now at 74.8 and the same as where we started this morning.
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BITCOIN SLIDES IN PULLBACK
The bitcoin price is now at US$61,880 and down a sharp -6.1% from this time yesterday. Volatility in the past 24 hours has been very high at just over +/- 4.3%.
This soil moisture chart is animated here.
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37 Comments
Got my first invite to a dinner party where the host wants all of the guests to show their vaccine status before attending.
This is one of my wife's more unusual friends, who is about as gracious a host as Attila the Hun, so I am greatly tempted to light my vaccine card on fire and stay in with a takeaway pizza and beer instead.
Every cloud has a silver lining, right?
If the in-laws pull this stroke for Christmas, I will be on the phone to MoH begging them to delete my vaccine record ... then I can lounge about in peace.
.Then take a leaf out of President Coolidge’s decorum book. When Dorothy Parker was seated beside him at a formal dinner she said “my friends have bet me I won’t get more than three words out of you.” Whereupon he retorted “ you lose.” Suggest play it like that as defence against further invitations, alternatively play a chainsaw.
I'm in Spain at the moment and everything is open, people are going about their daily lives, I've been out every night and not once asked about my vaccination status.
New Zealand is living within a narrative of it's own creation that's creating excessive fear. This suffering is not only unnecessary but unhelpful in a time when we need a focus on happiness and positivity [link].
Apparently Kiwibank has announced that they are withdrawing low-deposit home loan pre-approvals today. As per the article:
“Kiwibank is withdrawing preapprovals – that’s unprecedented. It hasn’t been seen since ASB back during the GFC cancelled about $1 billion of preapprovals,” said Loan Market mortgage adviser Bruce Patten.
One unfortunate soul on a FHB Facebook page received a revised conditional pre-approval at 90% LVR, satisfied that they had met the conditions decided to go unconditional on the sale, only to find Kiwibank has pulled the pin later that day.
Suspect a lawyer was not involved in the process, as a pre-approval does not = offer of finance does not = unconditional offer of finance.
Discussions of the Massey Retirement Expenditure guidelines usually miss something important, reflected in this quote from the guidelines: "It is important to note that the guidelines do not represent suggested or recommended levels of expenditure – they reflect actual levels of expenditure in retired households, as defined above, as determined from the HES."
So they don't tell us what you need. Rather, they tell us about what current retired households - likely to be the wealthiest group of retirees in history - actually spend. If you look at the numbers, even the 'no frills' spending looks luxurious to me. To give an example of one, I have never had more than the 'no frills' budget to spend. When I was renting in a metro area and saving for a house, I lived on less than the 'no frills' metro budget - including rent. Now I pay a mortgage in a provincial area, and if you don't include my mortgage (which I aim to pay off by retirement) I live on less than the provincial no frills budget.
In early Asian trading, gold is at US$1865/oz and recovering yesterday's US$6 drop. This is higher than both the New York close and the earlier afternoon London fix.
It's fascinating to watch Gold, in particular, rise in price while the tentacles of financial repression embrace lower negative real yields.
This is the phenomenon we study. Financial repression (FR) is defined in Box 1, while Table 1 describes a selection of policies that defined the FR era in the United States but are representative for other countries, advanced and emerging alike. There is considerable cross country variation in the extent of financial repression and the magnitude of the financial repression tax. When controlled nominal interest rates coupled with inflation produce negative real interest rates, it liquidates (reduces) the stock of outstanding debt; we refer to this as the liquidation effect. However, even in years when real interest rates are positive, to the extent that these are kept lower than they otherwise would be via interest rate ceilings, large scale official intervention, or other regulations and policies, there is a saving in interest expense to the government. These savings are sometimes referred to as the financial repression tax. Link
RBA Gov Lowe in Aussie says they will not hike rates to control house prices
A translation of these points is that the RBA will do nothing to slow surging house prices. But, on the other hand, if wages growth does rise fast they'll slam the brakes on. If you are a potential house buyer in a low wage bracket you're on a hiding to nothing.
The RBA is selling the transitory story too.
https://www.forexlive.com/centralbank/!/rba-gov-lowe-qa-now-says-will-n…
One of Queensland's largest residential construction companies goes bust. WIth hundreds of unfinished projects on the books, the CEO warns of wave of building company collapses on the way.
https://theglobalherald.com/news/privium-homes-stops-work-on-their-cons…
Future inflation expectations continue to rise but are now lagging actual current price growth. Households on average expect one-year ahead inflation to be 4.5%
RBNZ claims five year inflation expectations are 5.6%. It also claims the 20/09/25 inflation linked bond trades at - 0.33%. By implication no future, ~four years, inflation is expected at all.
More DGM from across the ditch. Scomo is promising low interest rates and cost of interest. What a plonker and an insult to the avge intelligence of Australian people.
And the reality:
A survey by research firm McCrindle on behalf of the Finance Brokers Association of Australia, released on Monday found half of people quizzed said they would struggle to deal with a $300 a month increase in the average $572,000 mortgage.
The people are living paycheck to paycheck with an extra $300 a month causes "struggle."
https://www.smh.com.au/politics/federal/morrison-says-he-can-keep-inter…
EXPECTING HIGHER INFLATION.
Not to worry as inflation is transitory..........(Remember : Transitory now stands for anywhere between few years to a decade)
INFLATION MAY WRECK SOME PLANS
Why........Mr Orr said everything is under control and not to worry about inflation (Remember : Prediction of money required is estimate as of now, which like other prediction could be wrong and also the way inflation is, will soon need to update every quarter)
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