Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report today.
TERM DEPOSIT RATE CHANGES
None here either.
FOOD PRICES CONTRIBUTE TO HIGHER CPI
Food prices are rising faster than the last CPI indicated. The overall September CPI was up 4.9% pa with the food component up +3.1%. Food prices were up +3.7% in October and this latest November data pegs them up +4.0% in a year. Imported food tied up in the supply-chain crunch is putting pressure on prices and requiring substitution for higher-cost local alternatives. The Countdown industrial action isn't helping either. Apart from the hard lockdown in June/July/August 2020, you have to go back ten years to find three consecutive months where the annual food price increases were as high as they have been recently. For reference, our grocery monitoring confirms these increases are extending into December.
SERVICES DRAG
The services sector is struggling and the moves toward more movement and economic 'freedoms' have barely moved the needle in the services sector. New orders improved but supply-side issues are constraining activity a lot. With Auckland's border restrictions still in place when this BNZ-BusinessNZ survey was done, it actually was the Otago/Southland region recording the toughest situations. BNZ is noting that Q4 is now unlikely to get much of a bounce in economic activity, even if the about-to-be reported Q3 data won't be as bad as it could have been.
PASSED IN AT TWICE THE RATE
The sales rate at Barfoot & Thompson's auctions halves over the last two months as a surge of new listings gives buyers more choice.
UP TO $2 BLN MORE
Air New Zealand has reworked the terms of its financial support package from the Government, including a reduction in the amount of borrowing by $500 mln, but a new issue of redeemable shares of up to $1 bln.
SOLAR MAKEOVER
NZ Green Investment Finance (NZGIF) has established an $8 million finance facility to fund the operation of solar panels on schools across New Zealand. solarZero Schools provides solar energy services to schools for no upfront cost and with long-term fixed costs at a price below the current cost of retail electricity, making it an attractive option for schools. It will do this by setting up a facility to provide financing for the installation of solar arrays (including operating costs) using power purchase agreements (PPAs). NZGIF is also holding $10 million in reserve for future extensions to the finance facility as demand grows. solarZero estimates the potential generation capacity of the sector to be up to 200 MW of solar over time. This is equivalent to more than all of New Zealand’s currently installed photovoltaic solar power generation.
CONDITIONS STABILISE AS REOPENING PROGRESSES
The widely-watched NAB business confidence survey in Australia fell away in November - and the October data was revised lower. But it remains above its long-run average. At least part of that is because businesses report some success in being able to pass on higher costs, and those include faster rising labour costs.
LOCAL PANDEMIC UPDATE
In Australia, pandemic cases in Victoria were 1189 reported today. There are now 11,051 active cases in the state - and there were another 6 deaths today. In NSW there were 804 new community cases reported today, another jump, with 5,079 active locally acquired cases, and one death. Queensland is reporting no new cases. The ACT has 4 new cases. Overall in Australia, just under 89.3% of eligible Aussies are fully vaccinated, plus 4% have now had one shot so far. In contrast, there were two cases in New Zealand at the border, and 80 new community cases today. Now 89% are double vaxxed, 93.9% of Kiwis nationally aged 12+ have had at least one vaccination, and the equivalent Australian rate is now at 93.3% of all aged 16+ (92.4% ages 12+).
GOLD FIRM
In early Asian trading, gold is at US$1789/oz and +US$2 higher than this time yesterday, and +US$2 above the closing New York and London prices.
EQUITIES WEAK EVERYWHERE
Wall Street closed lower with the S&P500 down -0.9% and the NASDAQ down -1.4% in their Monday trade. Tokyo is down -0.4% in opening trade. Hong Kong is down -0.9%. Shanghai is down -0.5% in their opening trades. The ASX200 is down -0.2% in early afternoon trade. And the NZX50 is down -0.6% in late trade today.
SWAP & BONDS RATES SHARPLY LOWER & FLATTER
We don't have today's closing swap rates yet. They are likely to be sharply lower today. The 90 day bank bill rate is down -2 bps at 0.87%. The Australian Govt ten year benchmark rate is now at 1.55% and -9 bps lower. The China Govt 10yr is at 2.87% and unchanged. The New Zealand Govt 10 year rate is now at 2.34% and down -8 bps and still well below the earlier RBNZ fix for that 10yr rate at 2.39% (-8 bps). The US Govt ten year is now at 1.42% and also -8 bps lower.
NZ DOLLAR WEAKER
The Kiwi dollar is now at 67.4 USc and more than -½c below this time yesterday. Against the Aussie we are little-changed at 94.9 AUc. Against the euro we are lower at 59.8 euro cents. The TWI-5 is down -40 bps at 72.2.
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BITCOIN SLIPS YET AGAIN
The bitcoin price has slipped to US$46,873 and -4.3% below the level this time yesterday. Volatility over that period has been high at just on +/- 3.9%.
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86 Comments
Bitcoin is tanking again. Its going to be a real problem if it doesn't recover and go to new highs each time it bounces. Crypto is the biggest confidence game there is and it is 100% running on faith. The minute the perception is you cannot make money with it, then its toast.
My one hope with crypto tanking is that the YouTuber 'Bizonacci' is awakened from his (or her?) slumber.
You have to have an understanding of Internet meme culture as it relates to cryptocurrency to "get" their short, animated videos depicting the plight of the average crypo investor, but boy oh boy were they good.
Look, I'm not the one contrasting two securities in a comments section without the slightest understanding of what they are and why they might differ in price. No one is going to repo RBNZ bills, they have a unique quality which you will learn if you do some reading - or you could even ask me and I will tell you.
They (RB Bank Bills) can be pledged and re-pledged in RP collateral chains to create liquidity, just the same as government TBills.
Current government collateral demand via the RBNZ's bond lending facility is unending at the moment.
I'm not sure what an RP collateral chain is. RB Bill's are a settlement tool and only held by RBNZ settlement account holders - banks. They are primary liquidity in that the holder can sell them in the morning to settle their RBNZ account for the previous day if the system is short. They are more expensive than a comparable T Bill which means only a settlement bank would ever own them. T Bills are held by a broad variety of investors and are issued by DMO.
They are RP eligible collateral, why sell them? - the RBNZ says they are - And why buy them if you are about to sell them next day to meet liquidity calls? - most CB liquidity operations are undertaken by O/N RP (drain) and RRP (add) actions. Only banks or their subs engage in government RP collateral related activity - hence they generally are system central bank affiliates as part of the clearing function. I worked for a Fed affiliated primary dealer bank in London.
Never seen NZD being this weak before, last time it happened was when lockdown happened last year, but it quickly recovered. Why we are still having such weak NZD even after we came out of lockdown? RBNZ has to urgently raise OCR at larger margin now, otherwise inflation next year will go through the roof. Food price itself hiked 4% in a year.
Probably me. It seems to be a pretty strong correlation. There are forex traders around the world who trade the NZD/USD and AUD/USD crosses purely based on US market sentiment rather than any real economy factor here in NZ. It would take a serious intervention (like a surprise OCR hike of decent proportions) to arrest the slide in the NZD. Just wait; if the market bounces and Americans are piling into growth shares and ARKK nonsense again, the NZD will bounce in synchronicity.
Quite, her investment strategy is proudly and obviously stupid.
"Amazon was unprofitable for years... now it's one of the biggest companies in the world. Therefore we should put all our money into unprofitable companies because those are the ones that will be like Amazon."
People will look back in wonder at the crimes against logic enabled by this bull market.
The SolarZero option for schools sounds good. Batteries included. At least there's a chance to smooth consumption and flatten the dreaded Duck Curve. But I would be a little skeptical about two aspects:
- A 20 year guarantee on pricing?
- Battery replacement and recycling. The batteries certainly won't last the 20 years (panels will) and Li recycling is not commercially viable.
They do not mention batteries at all. And you are correct that battery systems would not be economical.
Pure grid-tie systems are the most cost effective solar supported system to have as long as they are scaled per property to meet just the 80% of peak daily load level, too big and they will feed back to the grid but that usually is not worth the additional cost involved.
No problem giving a cost per kWh guaranteed rate, it is just a finance deal on a fixed period, making electricity is a secondary concern and the solar system is a means to an end, making money is the only goal, with the greenwashing overlay providing everyone involved with a chance to look good.
Saving the schools possibly a few cents per kWh along the way but committing them absolutely to the finance deal on day one.
The question is, if the govt is really worried about climate change, why not use the COVID-19 war chest to buy a set of solar panels for every school and gift them to them. It gives schools more slack in their budget and generates clean green energy for the planet. Win win.
Also, because solar doesn't make that much sense in NZ. Solar peak generation during the day, during the summer. NZ peak demand: morning and evening, in the winter.
Now if you've got a place with big AC demand (think Brisbane), that generation has matching demand, and makes a lot of sense. Not so much here.
Mind I'm talking big picture. Yes, your personal solar may pay for itself. But if we're talking about the whole grid...
Neither are the people (christmas trees sold out). Solar is more consumption and guess what, it takes fossil fuels to produce and maintain. Zero emissions are an excuse for the 1% to pollute and restrict everybody else's consumption. Vaccine passport's are the tool for government control of the people, to stop your consumption. The US people enjoy their liberty too much to fall into such a trap. Try and tell a redneck he needs solar panels or a 1% er to get rid of his Lear jet. Ya's dreaming.
Hi housemouse, I'm a long time reader but first time poster. I have followed all of the commenters on here for a while but wanted to ask you specifically your thoughts on these (crystal ball time..)
1) where do you see interest rates in NZ heading over the next 1,2,3 years.
2) where do you see the NZ property market heading in the next 1,2,3 years
If you can flesh out the answers with reasons that would be great as you come across as a fairly level headed commenter and I'd appreciate your thoughts and rationale. I've seen some of your answers before but want to get some clarity on your position.
(FWIW - I'm an early 30s kiwi who left NZ in 2017 to work overseas due to being completely riddled with anxiety over the housing market, worked basically every day now have 2 properties and aiming to pay one off in full by 2024 after purchasing both in 2020)
Cheers
Oh gosh, I am a bit humbled by that. I am just a pretty average punter really.
But given the complement, I should honour your request!
First the caveats - we are living in a world more volatile than ever, random things can and will happen more regularly. So let's assume there isn't a major global or local event in the next few years.
1) I have been much more bearish on interest rates here than most. While most people have been saying the OCR will be significantly higher than 2% come this time next year, I have said it will be no more than 1.5-1.75% maximum.
My reasoning - given high levels of debt, our economy will be much more sensitive to small- moderate increases in interest rates than in the past. This goes especially for the property market, and on a related note the residential construction sector, a major part of the NZ economy.
By the time the OCR reaches 1.25- 1.5%, the construction sector will be in some trouble, and this will limit further OCR rises.
If the fallout becomes severe, I even see an outside chance of the OCR being cut by the end of 2022.
I think by mid 2023 the OCR will be somewhere in the range of 0.75-1.25.
2) I think the most likely scenario for the property market in 2022 is small to moderate drops in prices, a result of a number of factors - cost of finance increasing, more strict lending practices, high prices, lots of new supply coming on line, low immigration, more kiwis leaving.
The fall in prices might be a bit greater if the unemployment fallout from a construction sector recession is at the higher end of the spectrum.
I think prices will then stabilise somewhat as interest rates come down again.
So a fall of 5-10% in 2022, maybe 15% if the problems in the construction sector are more serious.
And then roughly flat in 2023, with a steadying of the ship as interest rates come down.
HouseMouse im with you on being a bear on interest rate rises.
I think once the supply chain clears out we will see CPI fall quite quickly especially if inflation drives a demand slow down.
The US Yield curve is flattening out already and the bond market is normally correct.
I think we will have a taper tantrum before march 2022 and yields may invert once more.
Interesting times!
We have already seen things that most of us thought were impossible or would never happen yet last year RBNZ started QE in our little country.
What will happen next in these crazy times.
I think more QE and lots of it.
Yes. With bitcoin the more hashes you generate the more chances you have to win the reward for mining a block.
Yep, its like flipping 10 coins and the first person to get 10 heads wins the prize! Which in this case is the honor of minting the next block (and choosing what transactions to put in it) and reaping the reward (currently 6.25 new Bitcoin). We have also just hit 90% of all Bitcoins that will ever exist have been mined. So for the next 120 years of mining they will only find another 2.1m.
The genius is, with any other resource/commodity, the more the price goes up, the more energy and resources people can dedicate to finding the resource, and hence the supply rate increases.
With Bitcoin, there is a breakthrough piece of engineering called the difficulty adjustment. So now when more and more people go "digging" for Bitcoin, it automatically adjusts so there is less and less in the "ground" so it still only gets found every 10 min on average. Or in the above example, it adds more coins the the number required.
Currently, with the network being at all time high for hashrate (most computing power ever) it is equivalent to flipping 70 coins and having them all land on heads. And this is happening on a pc somewhere in the world every 10 min :)
Prob a bit more elaborate than requested but hope it was interesting . (on the flip side to your example, it also means you could have one pc mining and hit the jackpot and win the whole reward yourself in 1 min, but chances are astronomically low)
Costs going thru the roof in the services sector as employees put the gun to their employer heads, give me a big increase or I'm gone. Services companies that rely on staff have no choice or they are a dead duck. Technology, Medical, Construction...you are simply facing choosing to remain in business...or not. So your have to hike your market pricing, or die.The reality check - your lucky if you just don't get a resignation letter. For those that have not done a reality check there is no one else - look at the unemployment rate. Those that are unemployed are unemployable for a good reason. Businesses closing left and right. Who can afford housing as the banks pull the rug.Housing, rent, building materials, food, wages, everything is surging. All to protect debt leverage speculation.
The Stagflation dragon is waking up and lifting it ugly head. Its going to get a lot worse without a massive lift in interest rates. Be prepared for a doubling in cost in nursing and surgical staff, to wipe boomers arse's and remove cancer.
Orrrful legacy...
You can kind of short stocks through CMC markets using a contract for difference. Not all NZ stocks are available but Fletcher are which might be a proxy for the residential market although they operate in other areas too. A stock like CDL would be a better target but aren't available in CMC, and as a shareholder I'm obliged to point out they continue to trade on ridiculously cheap metrics. The REITs and retirement operators probably have some correlation too if they're available.
Not recommending this - there are holding costs involved as well as spread costs, and the potential to lose an essentially unlimited amount of money. If you run out of margin funding they will close your position for you. nevertheless, I do have a position open on AIR.
Way too late (but I guess 'watch' can mean several things?)
Aucklanders invaded the provinces last year, and the years before that. If anything, they'll be looking to enlist the services of a good property salesman whilst they are on their freedom holiday. And if the mythical, cashed-up 'Auckland buyer' isn't the next intended owner, who is?
Then what?
The Provinces, Napier especially, are a long way from 'civilisation' - friends and job (if that's still important). "No. It's just an investment". But chances are, you've bought it from someone who thought that X number of years ago. Why are they selling to you now, if there's more value in it?
We are at that wonderful pivot point from which we can advance in either direction!
Remember though that many kiwis who live in Auckland were not born here. Many will have sentimental ties to regional cities and / or family.
Especially if you are in your late 50s or early 60s, have paid off your mortgage or most of it and have other income generating investment, why not cash up?
You will have 600-800k left over, plus income from another investment, and only 3-8 years away from NZ super. Depending on your work you might be able to do bits of contracting here and there.
You could be right.
But as someone who travelled the length and breath of this country , at leisure, looking for that perfect place to settle, I wish any re-locatee luck.
My parents in law 'escaped' Auckland after 40 years, for their roots in Waipu (south of Whangarei) and whilst it was good at first, it became apparent that with age, it was less than ideal. But by then, they were trapped in situ. The farm that looked so good at 55 became an isolated noose at 65.
As I suggested, it will be interesting to see what the Auckland crowd do when they escape. More of what worked for 40 years, or recognition of what the future might hold>
(PS: If I had it all to do again? I'd stay put; where I first put down family roots and where almost everyone else is still, today. But it's all easy looking back)
Valid points.
I guess some will be put off by isolation and limited healthcare services, others will be unconcerned by it.
So I guess we'll keep seeing the trend to some extent, how significant it will be is an entirely different question.
Right now though, I wouldn't underestimate the desire to escape Auckland, NZ's 'Lockdown Capital'.
Perhaps this is where the apartment market will fill a gap for older people looking to keep a foot in Auckland, free up some capital and explore greener pastures. Being from Hamilton, this isn't really something I need to think too hard about :) I'm even going to stay in Auckland over summer (as an aside - Auckland in summer is great. Kind of feels like you own the place).
Yep maybe apartments to some extent, but I notice many people seem to still want a decent sized house and section.
Yes Auckland is great over summer. Awesome weather, and fewer people around to enjoy it!
I have never really understood the desire to escape the city at it's best, joining the hordes on the roads and at crowded summer locations.
I live near one of those old folks storage facilities, maybe a Ryman one. Seems plenty are pretty happy with apartment/townhouse with shared facilities and a bit of community...but that last is probably the big difference between a purpose built place and a normal apartment block.
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