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 today either.
SWINGING NEGATIVE FAST
New Zealand's trade balance is worsening fast. In November 2021 it was a deficit of -$864 mln, far worse than the November 2020 surplus of +$75 mln and the November 2019 surplus of +$380 mln. For the year to November, that adds up to a deficit of more than -$6.0 bln, an uncomfortable level of about -1.7% of GDP. However it is far from a record which was set in February 2006 at -4.3% of GDP when the trade deficit reached -$7.3 bln in a year. Remember this was a trade surplus of +$3.3 bln in the year to November 2020, so the change from then has been sharp and negative, almost -$10 bln in twelve months. It is getting zero coverage; no-one seems to care.
RECORD SPENDING
Worldline (Paymark) is reporting that with just five days left till Christmas, spending at retail stores is trending at record levels. While the easing of Auckland’s Covid-19-induced boundary restrictions last week allowed for more movement of people across the country resulting in higher spending on accommodation in the Bay of Plenty, Waikato and Auckland/Northland regions, the dominant pattern across the nation was the ongoing surge in spending ahead of Christmas Day.
'HOLIDAY BLUES'
However, Westpac is reporting its consumer sentiment survey shows confidence has continued to fall, and there are now more New Zealanders who are pessimistic about the economic environment than there are those who are optimistic.
'OUR FREINDLY BANKERS'
According to a Federated Farmers survey of members, farmers like their bankers a bit more. This survey reports farmers are feeling slightly more satisfied with relationships with their banks but interest rates are starting to rise and some are reporting a tougher attitude from lenders. Results from the November Federated Farmers Banking Survey show 67% of the more than 900 respondents are satisfied with their bank relationship, up 5.5 points on the May survey and a break in what had been a steady erosion in satisfaction since 2017 (when it was over 80%).
A TEN YEAR LOW
Wholesale electricity demand is sinking fast, down -5.9% from two weeks ago. And with it, wholesale electricity prices have dived to very low levels. Your power bills are about to fall (/sarc, of course they aren't). Hydro lake inflows are above average (there is plenty of fresh water), and hydro lake levels are also above their long term averages. Prices over the past few days sank to their lowest since September 2010. Also recall, record high prices occurred (unnecessarily) on August 9, 2021.
REFRESH GATHERS PACE
Westpac NZ names new Chief Financial Officer & new Chief Technology Officer. It is continuing its board and executive refresh through the appointment of Tania O'Brien as CFO and Martin Gaskell as CTO.
FREIGHT CARTEL ALLEGED
The Commerce Commission has filed civil proceedings in the High Court against two international freight forwarding companies, Mondiale Freight Services and Oceanbridge Shipping, and four individuals associated with the companies, alleging each company entered into and gave effect to cartel agreements.
FAKE NEWS RUMOUR SPOILING CHRISTMAS
The RBNZ says an urban myth picking up speed in Christchurch has genuine banknotes being refused and damaged, and honest Cantabs accused of passing counterfeits. “People are being told that you can tell a fake banknote by scraping it with a coin, and if the printing comes off revealing the plastic then it’s a fake. This is completely false, not one of our recommended ways to check a banknote, and actually illegal defacement”, says Peter Northcote from the Bank’s Money and Cash Department.
WEIGHING AGAINST SLOWDOWN
China cut -5 bps from its 1 year prime loan rate today, but left its 5 year rate unchanged. That is expected to save companies about NZ$20 bln in interest cost over a year, and is part of Beijing's promise to help its struggling SMEs. (See chart at the bottom of this page.)
SUPPLY OVERWHELMS
In Australia, auction clearance rates slumped over the past week after a rush of properties for sale. But at least there, more are still selling than not - unlike in Auckland.
LOCAL PANDEMIC UPDATE
In Australia, pandemic cases in Victoria were 1302 reported today. There are now 123,175 active cases in the state - but there were no deaths today. In NSW there were 2501 new community cases reported today, and another big jump, with 16,225 active locally acquired cases, but also no deaths. Queensland is reporting 49 new cases. The ACT has 13 new cases. Overall in Australia, 89.4% of eligible Aussies are fully vaccinated, plus 3.5% have now had one shot so far. In contrast, there were three cases in New Zealand at the border, and 69 new community cases today. Now 90.2% are double vaxxed, 94.5% of Kiwis nationally aged 12+ have had at least one vaccination, and the equivalent Australian rate is now at 92.9% of all aged 12+.
GOLD FIRMER
In early Asian trading, gold is at US$1802/oz and firmer than where it closed in New York on Saturday by +US$3.
EQUITIES MOSTLY NEGATIVE
The NZX50 has started the week up +0.2%, in contrast to the ASX200 which is down -0.2 in early afternoon trade today. Tokyo has opened down a very sharp -1.8% in early trade. Hong Kong is down -0.7% and Shanghai is down -0.5% in their early trade openings. The S&P500 futures signal a -0.8% fall is in store for Wall Street tomorrow.
SWAPS SOFT & FLATTER
We don't have today's closing swap rates yet. They are likely to be soft. The 90 day bank bill rate is up however +1 bp at 0.94%. The Australian Govt ten year benchmark bond rate is down to at 1.57%. The China Govt 10yr is little-changed at 2.87%. The New Zealand Govt 10 year bond rate is now at 2.24% and down -3 bps and still below the earlier RBNZ fix for that 10yr rate at 2.29% (-2 bps). The US Govt ten year is now at 1.38% and -5 bps softer.
NZ DOLLAR STAYS LOW
The Kiwi dollar is now at 67.4 USc and marginally firmer from where we opened this morning. Against the Aussie we are also marginally firmer at 94.7 AUc. Against the euro we are still at 60 euro cents. That means the TWI-5 is now just under 72.2 and touching its four month low again.
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BITCOIN SLIPS AGAIN
The bitcoin price has fallen by -1.2% to US$46,607 from the level it opened at this morning. Volatility over the past 24 hours has been moderate at just over +/- 2.2%.
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15 Comments
Trade deficit. Worsening savagely too. Last line this para, reminded of the Monkees (only one left now) Pleasant Valley Sunday. “Rows of houses that are all the same, and no-one seems to care.” Guess government(s) policy, have houses, will prosper nothing else to worry about then?
Lack of tourism must be a massive factor in the deteriorating trade balance?
And no one cares? Probably not. Why worry about old fashioned things such as your country earning a living when you've got a housing ponzi going gang busters and making everyone (feel) wealthy.
I think tourism (both inward and also outward tourism by Kiwis) shows up in the current account balance but not in the trade balance.
But the current account is also running highly negative.
The current deficits both for trade and in the current account may help explain why the NZD has been dropping and may have further to drop.
By definition, a deficit in the current account has to be balanced by a surplus in the capital account; i.e. an inward flow of capital.
KeithW
Roelof,
The figures David was reporting were for merchandise trade and the term 'trade balance' is the term that the Stats Dept uses.
The combined goods and services deficit for the September quarter was 6.1 billion, up from 2.1 billion for the same quarter last year.
The current account deficit in the September quarter was 8.3 billion, up from 3.8 billion in the corresponding quarter last year.
All of those sets of figures say that it is time to hold on tight.
These figures are driven by big increases in imports and this is not sustainable.
As David says, no-one seems to care but they should.
The first place it is likely to show up is in the exchange rate. That will increase tradables inflation. If that happens, the 'flow-ons' from that will not be nice
KeithW
The US Govt ten year is now at 1.38% and -5 bps softer.
A classic oil supply shock case, one consistent with several periods in modern history.
Are we now seeing something similar?
Questionable more likely deflationary money to go along with that clear oil price shock, neither of those would be conducive to the economic climate by which consumer prices outside or inside of gasoline continue as they are now. Curves and markets are increasingly saying something is going wrong, and with the dates coincident to that 5-year TIPS auction it’s hard to avoid making these specific retro comparisons.
Did oil go too far?
It is at least possible – to the point the possibility needs to be serious considered – these growing deflationary fears are about just this kind of 1990 “inflation” only applied globally which then doesn’t actually lead to inflation (and therefore the rest of the TIPS market being upside-down). Link
David: Like most people in NZ I don't think that you understand the electricity market. Retail prices are aligned to the long term supply of generation provided by the generator/ retailer. They are reasonable well matched for generator /retailers. If they are renewable generators they have swap contracts with thermal generators with the ability to generate surplus electricity to other parties. For when the wind doesn't blow, its not raining and its cold and the load is high.
The wholesale prices are for the overs or unders. Nothing to do with the internal price of electricity within the generator retailers. There are pure retailers with no generation. That business model has been disastrous. (bleating when prices are high, quiet when the prices are low). The other option is where the customer is deliberately on a wholesale rate contract via a generator retailer. (Which is a real gamble).
Anyway if a retailer can't supply all the power that they have contracts for with their retail customers then they have to buy a bit. And I mean a bit of electricity from the wholesale market. Sure the price can go really high for this extra generation if there are things such as transmission constraints but it will normally be for a fixed time period.
There could be major issues if say Transpower balls up and the HVDC is unexpectedly out of service. And it could go out of service for a year if the ballsup was big enough. That would get govt intervention.
I could go on for ages on all the potential possibilities. But the main point I want to make with this post is that the wholesale market determines the price for a relatively small proportion of load.
Your power bills are about to fall (/sarc, of course they aren't).
No, of course not! Ours just went up 5% again despite the charges from the local geothermal generator remaining static for the last two years. Electricity is one of the biggest rorts in the country (along with everything else that NZ is famous for being amongst the most expensive in the world, like Internet and pay TV).
Not to worry! Having an electronics background I installed a DIY off-grid solar system 5 years ago at a cost of about 3 years worth of power bills but kept 'the mains' as a back up system during extended bad weather. So our power bill will go from about $15 per month (including the fixed 'low user' line charge of about $10/mo) up to $15.25 a month (the 5% increase is on the electricity portion only) ... I think we can manage that.
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