What happened Thursday

Business / news

A review of things you need to know before you go home on Thursday; inflation jumps to 31 yr high, RBNZ completes is management refresh, Manji at TOP, NZGB bond yields rise, swaps up, NZD down, & more

27th Jan 22, 3:59pm by David Chaston

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
No changes so far today.

31 YEAR HIGH
CPI inflation rose to 5.95% in December from the same period a year ago. For the quarter (September to December) it rose +1.45%, so an annual rate of +5.8% and little different to the full year rate - meaning it is neither accelerating recently, nor falling away. Tradables inflation rose +6.9% for the year, and non-tradables inflation by +5.3%. It is historically unusual for tradables inflation to be the driver and it has been now for two quarters, meaning a not of our recent inflation is imported. A lower exchange rate won't help the situation. More here. (It is also probably worth pointing out that current inflation is now higher than the GST spike we had in 2010. That of course passed within a year.

THE NEW GUARD
After Christian Hawkesby was pulled upstairs into a Deputy Governor role, the RBNZ has replaced him with Karen Silk as the "Assistant Governor / General Manager of Economics, Financial Markets and Banking". She joins from Westpac. That means now all eight Executive Leadership roles at the RBNZ are now filled, five of them are existing senior staff at the central bank. More here.

MIGRANT APPLICATION SURGE
Nearly 30,000 migrant workers applied for residency in December under new government scheme. Under that scheme, up to 165,000 migrant workers could be granted NZ residency. It has caused a mad rush of form-filling for those involved, one that is on-going.

MANJI AT THE TOP
The Opportunities Party has named Raf Manji as its new permanent leader, replacing Geoff Simmons who stood down after the last election. He has a background in finance, governance, strategy, policy and risk. He spent two terms as a Christchurch City Councillor from 2013 - 2019. Long term readers may recall him as a commenter on this news service.

ACCOMODATION SUPPLEMENT INCREASES DOES'T RAISE RENTS
A new study from Motu Research shows the 2018 increases by the New Zealand Government in accommodation welfare support has not led to increases in rents. In 2018, the Government changed its Accommodation Supplement policy. The Government made large increases in the maximum support available in Accommodation Supplement areas. But the rent changes were negligible, this deep-dive study shows.

A THIRD OF ALL PROPERIES THAT SOLD IN 2021 WERE FOR $1 MLN+
Data from REINZ shows that In 2021, the number of properties sold nationwide for $1 million or more increased by 69% compared to 2020. In 2021, 30,873 million-dollar-plus properties were sold, up from 18,260 in 2020. Across New Zealand, properties that sold for over $1 million accounted for 35.2% of sales, up from 21.4% in 2020.

HIGHER YIELDS AT NZ GOVT BOND TENDERS
$586 mln was bid for $200 mln on offer in two separate NZ Govt bond tenders today. Ten bids of 27 won a piece of the May 2031 $100 mln offer, but the median winning yield rose to 2.68% from 2.36% at the prior event six weeks ago. Twelve of the 33 bidders on the $100 mln May 2041 bond won a piece of that at a median winning yield of 2.98%, up from 2.86% seven weeks ago.

EYES SHIFT TO JOBLESS RATE
The next influential data risk for the RBNZ is Tuesday's RBA policy stance. But that will be minor compared to Wednesday's labour market data. ANZ thinks the jobless rate will fall from 3.4% to 3.0% and its lowest since the artificial levels when NZ was a closed shop in the early 1980's. They also see wages up +4.1% in the year to December. Those forecasts are quite different to Westpac's which see the December jobless rate rise to 3.5% and wages up +2.9%. A low jobless rate will give the RBNZ cover to raise the OCR.

SPRING FESTIVAL STRESS
Chinese New Year is starting. In China, authorities are trying hard to prevent people from travelling because of the Covid risks. But the people are apparently more determined than ever to get back to their home villages after being locked away for two years. Could get ugly. The legal holiday is seven days starting February 1, but the migration - one of the world's largest, is now underway even if 'silent' this year.

LOCAL PANDEMIC UPDATE
In NSW, there were 17,316 new community cases reported yesterday, a decrease from the prior day, now with 181,527 active locally-acquired cases, and 29 daily deaths again. There are now 2,722 in hospital there off their high. In Victoria they reported 13,755 more new infections yesterday. There are now 119,153 active cases in that state - and there were 15 more deaths there. Queensland is reporting 11,600 new cases and 15 more deaths. In South Australia, new cases have slipped to 1953 yesterday with no more deaths. The ACT has 884 new cases and no deaths, and Tasmania 726 new cases. Overall in Australia, about 46,234 new cases have been reported so far although not all counts are in yet. In New Zealand, there were 51 cases stopped at the border, plus 45 new cases in the community. There are 507 active cases in isolation, 90 of them with Omicron. For more on the Omicron plan from here, see this.

GOLD SHARPLY LOWER
In early Asian trading, gold is at US$1813 and down -US$35 from this time yesterday.

EQUITIES ALL LOWER
Equities are selling off after the US Fed review. The expectation of higher rates means lower price valuations, generally. Although it was higher for most of its session, the S&P sank at the end, closing down-0.2%. Tokyo is down another -2.4% in morning trade. Hong Kong is down -2.3% in early trade and Shanghai is down -0.9% in their early trade. (They will be closed Monday through Friday next week. Hong Kong will be closed Tuesday through Thursday.) The ASX200 is down more than -2.0% in early afternoon trade today, while the NZX50 is down -1.3% in late afternoon trade.

SWAPS RISING
There has been a loud echo from the Fed in local bond rates. We don't have today's closing swap rates yet. They are likely to be higher. The 90 day bank bill rate is up +2 bps at 1.10%. The Australian Govt ten year benchmark bond rate is up +7 bps at 2.02%. The China Govt 10yr is up +4 bps at 2.73%. The New Zealand Govt 10 year bond rate is now at 2.67% (up +7 bps) and back above the earlier RBNZ fix for that 10yr rate at 2.66% (also up +7 bps). The US Govt ten year is now at 1.86% and up +8 bps.

NZ DOLLAR SOFTER
The Kiwi dollar has fallen -½c to 66.3 USc. Against the Aussie we are firm at 93.6 AUc. Against the euro we are soft at 59 euro cents. That means the TWI-5 is now just under 71.1 and lower. This extended devaluation will be inflationary, boosting tradable inflation.

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BITCOIN DROPS
Bitcoin has fallen today and is now at US$35,855 and is down -2.1% from this time yesterday. Volatility over the past 24 hours has been very high at just over +/- 4.3%.

This soil moisture chart is animated here.

Keep ahead of upcoming events by following our Economic Calendar here ».

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Source: RBNZ

Source: CoinDesk

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37 Comments

by Averageman | 27th Jan 22, 8:38pm 1643269119

Jacinda sound byte is something like "the spending completed was absolutely necessary".

Its what the spending has achieved because it looks like just a larger group of beneficiaries. Not more nurses, police or teachers. Just crushing inflation that will more than eliminate any minimum wage inflation. Let's do it.

Surgery lists are being cancelled due to la k of nursing staff. And Omicron has not really hit yet.

by VanillaChilli | 27th Jan 22, 4:22pm 1643253765

Well yes, totally. Very little of the massive fiscal spending and new debt over last 2 years into into productive investment; the size of the pie is the same, if not smaller, just a lot more money in circulation. Smaller slices of same sized pizza costing more and more..

by RickStrauss | 27th Jan 22, 9:08pm 1643270889

Necessary to keep house prices up (to the moon) and mortgages paid. Good for the banking sector and asset holders. Most people expect the value of their house to keep going up and investments should not be subject to risk apparently.

I would love to know what Treasury's advice was through this too. I'd hazard a guess it was a significant factor.

by Yvil | 27th Jan 22, 4:08pm 1643252908

It will come as a surprise to many on this site that accommodation supplement rises don't equal higher rents

by chebbo | 27th Jan 22, 9:03pm 1643270596

Appreciate the coverage of TOP. They tend to get ignored by legacy media.

I don't know whether I'll vote for them this election cycle or not, we'll have to see what Raf brings to the table. What I do know is that the pigeons down in Wellington badly need a cat thrown amongst them, and TOP seems like they might be just the feline for the job.

by Whatwillhappen | 27th Jan 22, 4:23pm 1643253788

I personally think TOP is a spent force. I'd like to be wrong. Manji was touted as a Labour MP once not so long ago and has intelligent things to say, but so did Simmons (and Morgan for that matter) and it meant nothing. TOP had some great policies and still got nowhere. At best, Manji will split the Labour vote in some Christchurch electorate and National will take it. At worst, more wasted votes (and donations) and the status quo continues. ACT is where it's at for ideas if people want change. Seymour has plenty of ideas (even if some are old ideas with a new shirt), and only by killing off Nationals' stranglehold on the right will there be a real contest of ideas, as National and ACT look to differentiate themselves.

by Plutocracy | 27th Jan 22, 5:21pm 1643257315

Personally I'd rather 'waste' my vote voting for TOP rather than 'waste' it by voting for Labour or National.

by redcows1 | 27th Jan 22, 8:03pm 1643267009

If you want change it's Pretty unlikely to be achieved by voting for the status quo I reckon (deep thinking mode)

by RickStrauss | 27th Jan 22, 9:09pm 1643270969

I would love to see either major party implement the recommendations of the Electoral Commission (lower threshold, STV equiv) to give people more democratic voice. It's shameful that both have ignored it to shore up their own power.

by Ideapenny | 27th Jan 22, 10:37pm 1643276264

All we need is a transferable vote so that all the people who want to vote TOP won't get left feeling like wasted voters. Then we can pick our first and second preference. How democratic we would be!

by blobbles | 27th Jan 22, 11:36pm 1643279806

WTF is this weird thing people have calling a vote "wasted"? Particularly when the two major parties have caused a couple of decades of endless suffering for productive workers to make the paper wealthy even more paper wealthier? You want a wasted vote? Keep voting for the same mugs causing the same issue to become even worse!

"Wasted vote" is simply the propaganda spat out by the major parties to stop you voting for small parties who could shake the major parties up. And you ate it up like a good little tribal voter, well done.

Last time ACT was in power, they had a hand in making all the things that are massive problems now. Giving the baby fox keys to the hen house instead of daddy fox, will not turn out well.

by Ideapenny | 28th Jan 22, 9:50am 1643316627

I agree re: wasted vote propoganda. The trouble is that it works, people want to know that their individual vote shaped the seats in parliament. If i had it my way the phrase "wasted vote" would be outlawed during electioneering. And im glad that "wasted vote" has sparked an impassioned response - this is what we need politically... some well founded discontent so that we can actually see a CHANGE!

by rastus1 | 27th Jan 22, 4:19pm 1643253586

ACCOMODATION SUPPLEMENT INCREASES DOES'T RAISE RENTS

Not so fast.

"We conclude there is little evidence the relative increases in accommodation support led to stronger increases in rents across these contrast-boundaries"

That should not be extrapolated out to conclude asup does not raise rents. ASUP increases the ability to pay and the higher the rent, the more that is received and passed to landlord or bank.

Tax payer funded welfare to the landlords and banks.

A rort that needs exposing.

by DIYman | 27th Jan 22, 4:35pm 1643254558

Agree 100%, but how do you fix the problem, never rented to anyone on an accom supp, but it would appear economics of rentals is skewed. I presume the skew is offset by rent arrears

by Yvil | 27th Jan 22, 5:32pm 1643257921

Talk about lack of open mindedness and bias.

Rastus believes "X", a study shows "X" to be untrue.

- Rastus could realign his view but no, unwilling to learn anything, he rather doubles down on his wrong opinion and throws his toys out of his cot.

by rastus1 | 27th Jan 22, 6:54pm 1643262847

5.32pm is a bit early to start drinking ain’t it.

by Yvil | 27th Jan 22, 11:09pm 1643278179

Really, that's your best reply on the topic?

by RickStrauss | 27th Jan 22, 9:11pm 1643271089

Interesting that Motu found in their search differently to Treasury's advice to Bill English (I think it was?) and different to the effect of student allowances increases soaked up by Wellington landlords. Worth a read to see how they did it.

by blobbles | 27th Jan 22, 11:42pm 1643280141

Wow, guess who sponsored their research? MSD - i.e. the same organisation which administers the funds allocated for accommodation supplement! I treat their conclusions much the same as the oil company sponsored "research" which shows how their business models are causing utopia for all, or Coke sponsored research showing how healthy their products are.

If Accommodation Supplement was removed, MSD would have less funding. So they will produce as much research as they can to show why it should be continued or increased and <sarc> how it's effects are benevolent and cause huge societal benefit </sarc>.

by Squishy | 27th Jan 22, 4:31pm 1643254312

Wouldn't worry about the accomodation supplement, at this point any impact on quality of life has long since been inflated away.

by Nifty1 | 27th Jan 22, 4:36pm 1643254575

All this talk about inflation but New Zealand got me feeling deflated asf...

by Audaxes | 27th Jan 22, 6:50pm 1643262615

The Kiwi dollar has fallen -½c to 66.3 USc.

A general shortage of shadow banking eurodollar credit creation manifests itself in higher USD currency pair values and hence the U.S. Dollar Index Cash (DXY00)

The US$ is strongly correlated with the UST yield curve and eurodollar futures up to its inversion. In fact, the strongest relationship – going all the way back to the start of June, therefore more than half a year already – is between the US$ (DXY or trade-weighted) and the yield curve’s dramatically flatter shape.

Another money correlation

by Foxglove. | 27th Jan 22, 4:44pm 1643255099

Raf Manji earned a fair amount of plaudits during his time at the CCC. A good voice for reason & accountability but there was too much uphill & headwind, afraid to say. Stood against Gerry Brownlee 2017 election as an independent. Personally I believe he would bring calibre & improvement to our parliament. But this unlikely given his choice of vehicles methinks, and that’s a pity.

by taimaiakka0 | 27th Jan 22, 4:58pm 1643255890

https://finance.yahoo.com/news/jeremy-grantham-even-scarier-prediction-…

by J.C. | 27th Jan 22, 5:37pm 1643258263

You could have quoted from the article. I'll do it for you:

Grantham contends that the excesses -- and costs -- of the super bubble are symptomatic of humanity’s tendency to live beyond its means: the demand for easy money that drove up asset prices and, in doing so, exacerbated inequality is now taking its toll in the form of economic stresses and societal fragmentation.

Sounds very apt for NZ.

by J.C. | 27th Jan 22, 5:42pm 1643258538

Interesting tweet from Avid Commentator (Aussie journo) about Japan.

While Japan's 'Lost Decades' sound bad on paper, once you account for a falling population, its actually a pretty reasonable deal. You've got affordable housing, near full employment and a relatively stable cost of living.

GDP per capita has been rising in Japan.

https://twitter.com/AvidCommentator/status/1486180945070030851

by stacking_cheddar | 27th Jan 22, 9:18pm 1643271531

Having lived, worked and studied there, and collected a lot of JP graduates as friends along the way, I 'd have to kind of agree. The workplace culture is abominable, but the simple pleasures of a living wage, fresh and plentiful local food, reasonably priced public transport and a functioning accomodation market seem like a distant dream now I'm back in the anglosphere. A casual hour of work at a crappy student job used to pay about Y1000. Enough for a hot lunch, a cold beer and a return trip across Tokyo. Try that in Wellington!

by JimboJones | 27th Jan 22, 6:20pm 1643260810

You have to feel like a bit of an idiot as the RBNZ governor when inflation is at 30 year highs and double your target maximum don’t you? Especially when you have interest rates at record low levels. He only really has 2.5 jobs to do (inflation, financial security and full employment as a side role). How can he get one so wrong?

by gnx | 27th Jan 22, 6:26pm 1643261190

Double??? ....triple dont you mean?

by JimboJones | 27th Jan 22, 6:53pm 1643262784

I bet if he was 4% under the target he’d be cutting like crazy, but when 4% over we get the occasional 0.25% rise.

by pete johns | 27th Jan 22, 6:26pm 1643261192

Great day in the comment sections , new PB maybe in numbers , a lot of clever commentators , Jacinda could do with reading some of them....we are all just that mouse on the wheel , with Jacinda and her team spinning it faster & faster.....l was lucky and stepped off a long time ago .

by JimboJones | 27th Jan 22, 6:47pm 1643262479

So national want to scrap the light rail and build 2 new motorways in Auckland. And luxon was criticising the harbour cycle bridge again today. They really can’t help but live in the 1960s can they, the party of the old people, we’ll I guess I just have to vote labour again.

https://www.nzherald.co.nz/nz/nationals-new-transport-spokesman-simeon-…

by Carlos67 | 27th Jan 22, 7:24pm 1643264654

Well you have to be honest, a cycle lane over the bridge is a dead duck. We don't need new motorways we just needed more lanes on the existing ones but no room for them now. Just imagine if we had 6 lanes in each direction, traffic problem solved and massive savings in both time and petrol. The only hope long term is much smaller cars and chop the existing lane widths down.

by Brock Landers | 27th Jan 22, 8:47pm 1643269677

What we need is good public transport.

by blobbles | 27th Jan 22, 11:46pm 1643280412

We don't need new motorways we just needed more lanes on the existing ones but no room for them now. Just imagine if we had 6 lanes in each direction, traffic problem solved and massive savings in both time and petrol.

This is ridiculous and proved completely wrong by every country that has tried it. The only way forward is not to build more roads, it's to reduce demand on them. Building more lanes causes induced demand for them and very quickly they simply fill up with more cars. This is EXACTLY what has happened in other places in the world AND IN AUCKLAND for the last 50 years. Doing the same thing and failing again and again is stupid.

by RickStrauss | 27th Jan 22, 9:17pm 1643271475

There's some odd logic in Simeon's statements.

Can't build a light rail down a major artery because not enough people live there to use it. Yet...build public transport and allow intensification around it seems to have worked very well elsewhere in the world. Instead an extra road for an area with not many people in it yet - but not seeing the contradiction in his thinking.

And statements re financial viability of transport options yet failing to address the poor value of Mill Road? $300,000 per metre when it was last estimated, and probably would've inflated more by now (land acquisition).

And saying "Give people options" while continuing to make personal car travel the only viable option....?

The article suggests National only pretend to acknowledge climate change is a real issue, and have little regard for financial viability of projects themselves.

I am personally not in favour of the tunnel option for light rail but there's no question we need greater intensification and investment in public transport, not just planning where we pretend climate change is not a thing and only invest significantly in yet more roads.

by EpsomArtsandCrafts | 27th Jan 22, 8:39pm 1643269141

The NZX 50 now at the same level it was 2 years ago in Feb 2020 at an index of around 12,000. Not sure why it isn't performing. However in the 5 year period before 2020 it doubled so perhaps it will kick on again later in the year?