Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report so far.
TERM DEPOSIT RATE CHANGES
Kiwibank has advised that they will be raising TD rates on Monday. They are adding +25 bps to their 3, 4 and 5 month rates, the highest of these to become 1.25% for five months. (Their 6 month rate is unchanged at 1.50%.)
WINNERS
There was an important release of data today relating to the "Consolidated Accounts of the Nation" - as at March 2021. First, they show that 'compensation of employees' is now 44.0% of GDP, and that is the highest in this series since at least 2003. This data undermines the barbeque conversations that wages as a share of national income are declining; it is not, rather it is rising and has been for nearly 20 years.
STABLE
The "Consolidated Accounts of the Nation" also shows that household consumption is at 56.7% and steady for most of the period.
BIGGER WINNERS
The "Consolidated Accounts of the Nation" also shows that Central Government now takes 18.4% of GDP, its highest since 2003. It rose steadily from 2003 at 14.8% to 2009 at 17.5%, and then fell steadily until 15.8% in 2018. Since it has risen quickly to the present 18.4%. Local Government's take of GDP is rising too but only from 1.9% to 2.3%.
LOSERS
With wages and Government taking a larger share, something has been reducing and it is our international trade. Exports as a share of GDP are falling. They were 32.8% in 2003 and fell to 27.3% in 2020. Then it sank sharply to just 21.9% in 2021 as tourism and the education sector closed down. Imports on the other hand were 29.8% of GDP in 2003, and fell steadily to 27.0% in 2020, then sank to 22.3% as the economy's borders closed.
HEARTENING AUCKLAND REBOUND
BNZ is reporting a +27% jump in retail activity as measured by the spending on their electronic cards as Auckland gets released slightly from lockdown. They say: "It is heartening to see the extent of the bounce back in spending and provides us with further hope that, as the economy opens up more generally, we will get the solid recovery in activity in the first quarter of 2022 that we are anticipating."
A SUNSET SECTOR
Credit cards balances sank -8.7% from October 2020 resuming a trend of shrinkage. But a larger proportion is incurring interest. After dipping to an all-time low of 54.8% in July this metric rose to 57.4% in September.
FALLING ACTIVITY
But transactions being run through credit cards are falling too, and were down -7.0% in October from a year ago. From October 2019 they are down a similar amount. And don't forget, this is a value observation. Rising prices mask a larger activity fall. (Of course, from 2019, some of that is due to closed borders and the tourist and education trade.)
HISTORY NOTE
Just an historical observation: rising interest rates and inflation together with low growth led to string of big company collapses in the late 1970s and the 1980s. These culminated in the locally-owned BNZ sinking in 1990. Just saying ... given that most managers weren't around during this period.
DEFLATION THREATENS
Japan still has virtually no inflation. But at least it hasn't sunk back into deflation - yet - although that is knocking on its door again.
LOCAL PANDEMIC UPDATE
In Australia Delta cases in Victoria have risen to 1273 cases reported there today. There are now 13,813 active cases in the state and there were another 8 deaths yesterday. In NSW there were another 216 new community cases reported today, another drop, with 2,840 active locally acquired cases, and they had no deaths yesterday. Queensland is reporting zero new cases again. The ACT has 17 new cases. Overall in Australia, just under 84% of eligible Aussies are fully vaccinated, plus 7% have now had one shot so far. In contrast, there was one new case in New Zealand at the border, and 198 new community cases today with no deaths another two deaths (with Covid, not necessarily of Covid). Now 90.9% of Kiwis nationally aged 12+ have had at least one vaccination, and the Australian rate is now also at 91.0% of all also aged 12+.
GOLD LOWER
In early Asian trading, gold is at US$1861 and down -US$8 from this time yesterday. This is higher than both the New York close and the earlier afternoon London fix.
EQUITIES MOSTLY LOWER
The S&P500 ended up +0.3% on Wall Street in its Thursday session. Tokyo has opened +0.2% firmer. Hong Kong has opened lower but more so, down another -1.4% and is down -1.9% so far this week. Shanghai has opened its session +0.3% firmer. In early afternoon trade, the ASX200 is flat by down -0.9% so far this week. The NZX50 is down another -0.2% in late trade heading for a -1.1% weekly fall.
SWAP & BONDS RATES FLAT
We don't have today's closing swap rates yet. They are probably little-changed or marginally lower. The 90 day bank bill rate is unchanged at 0.87%.The Australian Govt ten year benchmark rate is now at 1.82% and up +1 bp. The China Govt 10yr is still at 2.93% and down -1 bp. The New Zealand Govt 10 year rate is now at 2.58% and up +2 bps but still well below the earlier RBNZ fix for that 10yr rate at 2.62% (-3 bps). The US Govt ten year is now at 1.59% and unchanged.
NZ DOLLAR FIRM
The Kiwi dollar is now at 70.3 USc and a little firmer than this time yesterday. Against the Aussie we are noticeably firmer at 96.7 AUc. Against the euro we are little-changed at 61.9 euro cents. The TWI-5 is now up at just under 74.8.
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BITCOIN SINKS
The bitcoin price is now at US$56,812 and down -6.2% from this time yesterday. Volatility in the past 24 hours has been high at just over +/- 3.7%.
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37 Comments
Japan still has virtually no inflation. But at least it hasn't sunk back into deflation - yet
After 25 years of flogging the QE horse for all it's worth, it looks like Japan is about to lead the way again.... for all of us. ie:
Just an historical observation: rising interest rates and inflation together with low growth led to string of big company collapses ....
Japanese h'holds and firms continue to pay down debt. They do not borrow and spend like drunken sailors. That is one of the reasons why inflation is so low and QE has not worked. Also, Japanese corporates are sitting on huge cash reserves. Warren Buffet invested in the trading house behemoths last year and owns 5% of the big guns.
https://asia.nikkei.com/Business/Business-Spotlight/Warren-Buffett-s-Ja…
Take comfort professional traders are pricing deflation down the road.
RBNZ claims the 20/09/2025 inflation linked bond is trading at -0.52%.
US Treasury real yields are negative.
Thus, if the real rate is close to zero, it must be that, under this hypothesis, expected inflation is close to zero as well. The solution to low inflation in this context is to increase the nominal interest rate. - Link
Jeff Snider is another - https://podcasts.apple.com/nz/podcast/macro-voices/id1079172742?i=10005…
The BNZ wasn’t alone. The problem was when Rogernomics let loose the existing RBNZ tight restrictions on all lending the trading banks went nuts on it. Collateral went out the window. New trading banks, United, Countrywide sprung up and floundered. Still if the government then had stepped in as it did later for AirNZ the BNZ would be returning its profits here rather than Australia. However a lot leading up to that collapse has never been disclosed. Winston Peters left the National government on that issue and thus precipitated the eventual demise of the Bolger government.
I witnessed some of the BNZ’s absurd lending to the equally absurd corporates at the time – you’d have been lucky to even find any actual collateral to go out the window - I’d suggest it was ultimately doomed no matter what the economic climate at the time.
I’m sure after the BNZ’s collapse there was some ill-fated TV ad with I think 2 women over coffee talking about the injustice of the banks demise and a line something like “you expect people to pay back what they borrowed don’t you” – suggesting the failure wasn’t the banks fault at all – the blame all lay at the feet of the now tarnished and scoundrel borrowers.
I’ve searched around google and youtube land but can’t find it – do you recall?
Vaguely yes. The write off’s eventually were beyond reason, beyond description. Just goes to show how far back government propaganda reached into the media, very unsophisticated in those days. Can recall the big wig at the BNZ, Pyne?, disappeared in a huge hurry, ended up in Tasmania?
Exports as a share of GDP are falling. They were 32.8% in 2003 and fell to 27.3% in 2020. Then it sank sharply to just 21.9% in 2021 as tourism and the education sector closed down.
Very interesting. Thanks for posting this and fits in with my confirmation bias. There have been a few bright lights such as Kiwifruit exports to Japan.
On a Linkedin post from a successful NZ businessman based in Canada and looking to set up in NZ,
I am in XX right now and then back to Canada next month. I reached out to the NZ Trade Commissioner and rather than talk to me, he got a lacky to give me a call and basically tell me that I had to make a case so that MIQ could potentially, maybe consider something one day. The Trade Commissioner is obviously too important a person to talk to business leaders directly. In comparison I have the cell number of the Canadian Trade Commissioner in XX and I can call her any time. What the hell does the NZ Trade Comm do if he can't do that one thing?
What Happened Today :
Fed Governor Powell has been caught in his own manipulation as in his speech in August, he laid down five parameters that if happens will be cause for concern ( As is the habit of kicking the tin down the road to avoid being question and to justify their biased action) and those ALL five parameters are starring at him now :
https://www.bloomberg.com/news/articles/2021-11-17/powell-s-five-inflat…
Now what, how much lie and manipulation and for how long....
Nice little history note!
There was also a little housing crash in the late 70s that gets glossed over a bit. It was a crash in real terms rather than nominal.
I remember a quarter built house on our neighbour's property in Wellington was a great play space for my brother and I, pretending we were in a bombed out WW2 setting
It sat around not much further built than foundations for several years until the economy recovered a bit
Must have been about 1975-76 because thats when we bought our first house in NZ. Pretty sure the builder went bust and we bought the place and had to finish it. The garden was pure clay and the layout was terrible but all I remember really is the good times there.
Yeah my parents built their house and moved in about '75/76, the crash hit and the neighbouring house construction ceased. It was like a bomb site until about '81 when the property was purchased and completed.
Many people are unaware of the carnage in the NZ economy around those times. House prices fell about 30-40% in real terms.
This data undermines the barbeque conversations that wages as a share of national income are declining; it is not, rather it is rising and has been for nearly 20 years.
How much of the benefit has gone to shiny-pants bureaucrats rather than productive workers, I wonder. To say nothing of the explosion in paid consultants over the last twenty years.
Who can afford to accept NZD wages as a form of payment for work rendered, when it is so debased the unit cost of shelter is ~$1,000,000 and it takes a few $millions or more to save $10,000 p.a. at current deposit interest rates? Oh, I nearly forgot, financial repression is rabid with inflation last reported at 4.9%.
I think I understand, but can you explain it in simpler terms?
Are you saying that the house prices are ridiculous to the wages?
Or that CPI inflation is devaluing the debt?
But with my understanding of monetary inflation (vs CPI inflation) do we have actual accelerated bank credit growth YoY?
Please help me understand this.
Audaxes is only comparing the value with the cost of shelter though. It's patently nonsense as wages can buy lots of nice stuff like cars, electronics, food and even rent a house. Shockingly people are even still able to borrow and buy shelter on the value of wages.
Anyone holding Bitcoin or other Crypto really, really, really doesn't want an RBNZ Digital Currency. What happens to your Bitcoin if it loses the link to a Fiat "Value" ? Who is to say what Bitcoin would be "Worth" relative to a new Digital Currency if they cut all links and it had to stand on its own two feet as "Money" ? What if it was suddenly Turkish Lira ?
Anyone holding Bitcoin or other Crypto really, really, really doesn't want an RBNZ Digital Currency. What happens to your Bitcoin if it loses the link to a Fiat "Value" ?
Sorry but I really have no idea what you mean here. Why would RBNZ Coin have more value than BTC?
Not mentioned...
Co-op had their 4 year TD rate at 4.00% through to about 2pm when it dropped to 3.00%
https://imgaa.com/image/61973b718c7b5553016677
Typo?
Filling Capital requirement?
Error in advance of projected change?
Yes, it might be an "error". We updated our service to 4% based on an official rate update email we received from them. But their website says 3.00%. for 4 years. We asked for clarification yesterday but not received yet. (BTW, they have never offered a five year rate.)
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