Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Bluestone raised most rates.
TERM DEPOSIT RATE CHANGES
None here today.
HIGHER & ENDING STRONG
The 2021 housing boom continued right into December, bringing the total new dwellings consented to nearly 49,000 in the year, worth more than $30 bln at consenting values at least. There is an expectation that 2022 consenting activity for dwellings will remain around current levels. As Westpac notes: "While interest rates are on the rise and the housing market is starting to cool, strong house price gains in recent years are still providing a powerful incentive for developers." And Infometrics says: "Translating record build intentions into actual completions is becoming an increasingly difficult task, with the tightest labour market on record, and surging input costs." But with borders shut, this activity will be catching up the housing shortfall much quicker than otherwise. If borders reopen, that catchup pace may slow.
HIGHER (BUT ARTIFICIAL?)
Building consents for all non-housing construction had a strong year too, with December also ending on a strong note. More than $8.2 bln was consented in 2021, +16% more than the prior year and just below the 2019 peak. But this sector's activity is driven by the taxpayer 'investing' in its building and non-building needs. Boondoggle projects like 19th century rail upgrades and the dubiously-sited Transmission Gully project can easily make these numbers look big. Missing from 2021 numbers were tourism projects, so they may return 'soon'.
CLOSED BORDERS, FIERCE DEMAND
Job ads jumped 8.5% in January from December to a new record high. That makes them more than a third higher than the peak before the pandemic started. The tight candidate availability is consistent with the very low 3.2% jobless rate. And demand is across all regions even if not across all industries. Eyes are now on the relaxation of border controls in the coming year to see what impacts that will have.
HOT DEMAND FOR GREEN ELECTRICITY
The Overseas Investment Office has approved the sale of land just north of Invercargill for "a hyperscale data centre". The lure is cheap 'green' electricity. The overall project claims it will bring over $1 bln in investment here. Multinational data center businesses will use the capacity to lower there average global 'carbon footprint' claim. But then, it is likely that Rio will want to continue to refine bauxite into aluminium there for much longer too - for exactly the same reason, and because the Chinese are taking out capacity for environmental reasons just as worldwide demand for aluminium is rising because it will be an essential metal for new 'green' environmentally friendly consumer goods (like Teslas).
THE NEW GREENER ECONOMY NEEDS MUCH MORE MINING
Global aluminium prices are now touching their record highs (first hit in 2008). So is tin, copper, and lithium.
LOCAL PANDEMIC UPDATE
In NSW, there has been a drop to 10,698 new community cases reported yesterday, now with 102,847 active locally-acquired cases, and another 31 daily deaths. There are now 2,494 in hospital there, off their high. In Victoria they reported 11,240 more new infections yesterday. There are now 65,968 active cases in that state - and there were 36 more deaths there. Queensland is reporting 6,857 new cases and 13 more deaths. In South Australia, new cases have slipped to 1583 yesterday and one death. The ACT has 449 new cases and one death, and Tasmania 570 new cases and no deaths. Overall in Australia, about 31,000 new cases have been reported so far although not all counts are in yet. In New Zealand, there were 64 cases stopped at the border, plus 209 new cases reported in the community.
GOLD STABLE
In early Asian trading, gold is at US$1807/oz and up just +US$1 from this time yesterday.
EQUITIES SOFT AT END
In New York, the S&P500 closed down a sharp -2.4% awaiting tomorrows NFP result, and digesting the Facebook disaster. For the week so far the S&P500 is up +1.0%. Tokyo has opened today down -0.2% but is heading for a weekly gain of +1.8%. Both Hong Kong and Shanghai have missed that because both are closed for Chinese New Year holidays. The ASX200 is down -0.3% in early afternoon trade but heading for a +1.0% weekly gain. The NZX50 is down -0.7% in late trade but is heading for a banner +3.4% weekly rise.
SWAPS FIRM
We don't have today's closing swap rates yet. They are likely higher. The 90 day bank bill rate rose +2 bps to 1.16% and ending it week at its highest since before the start of the pandemic. The Australian Govt ten year benchmark bond rate is up +8 bps to 1.94%. The China Govt 10yr is still at 2.72%. The New Zealand Govt 10 year bond rate is now at 2.58% (up +7 bps from this time yesterday) and now above the earlier RBNZ fix for that 10yr rate at 2.57% (up +2 bps). The US Govt ten year is now at 1.84% and up +7 bps from this time yesterday.
NZ DOLLAR LITTLE-CHANGED
The Kiwi dollar is little-changed from this time yesterday to 66.3 USc. Against the Aussie we are still at 93 AUc. Against the euro we are also unchanged at 58.7 euro cents. That means the TWI-5 is holding at just under 70.9.
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BITCOIN HOLDS
Bitcoin has marked time today and is now at US$37,084 which is up a miniscule +0.3% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.5%.
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69 Comments
From Chris Joye across the ditch on "near term" housing bubble forecasts:
To be clear, our October 2021 property price forecasts remain unchanged.
Cheap money gave us capital gains worth 26 per cent since their September 2020 nadir, which is in line with the 20-30 per cent we had been looking for. Reduced purchasing power will take some of this away.
Mitigants include robust household income growth and a slow RBA hiking trajectory, both of which are likely. We have replicated and refined the RBA’s complex internal housing model, which accounts for both the demand- and supply-sides of the market, and it points to a much steeper 33 per cent fall in prices after a permanent 100 basis point increase in mortgage rates.
Let’s be real – God help Aussie house prices if the RBA is compelled to lift its cash rate to 4 per cent, which would mean mortgage rates above 6 per cent.
https://www.afr.com/wealth/personal-finance/the-future-of-house-prices-…
Australia is in a far better place than where New Zealand is in the moment. Their inflation only just reached 3.5%, unemployment rate is sitting at 4.2%, where as in New Zealand, inflation has reached 6% (I know it's 5.9 but pretty much 6 to me), unemployment got to a unsustainable level. So if they slowly start rising their interest rate by.25 from time to time. They might be able to dodge this inflation bullet while keep their housing market in a stable condition. In addition, housing market in Australia is in a much healthier position judging by their economy, housing supply compacity, income ratio, population.
Why no one has raised the issue of exhobirant charge that is charged in NZ for pre covid test. It is more than three times in Australia, UK and many other countries. Compare to developed countries is 5 times to 7 times.
Why NZ is charging $250 Compare to $80 at Sydney Airport, £45 in UK.....
A family of four travelling to Australia / overseas will first have to pay $250 x 4 = $1000 before leaving NZ.
Wow. Government gets away and opposistion, media and experts accept it as faith instead of raising the issue.
National leader should pick it up and continue with his NOW approach. Reduce it Now.
Private providers. But as usual, people are quick to blame the Government for everything wrong in the world.
However, I was shocked to see one North Shore clinic charging $285-plus per test. For a family of four visiting Australia, that's over $1100 in testing fees.
https://www.stuff.co.nz/business/money/126343583/claim-that-kiwis-payin…
Unlike other countries, where their are multiple operator, here in NZ is done by only one company - monopoly so people have no choice but to pay what is asked.
Government can and should set the price and / or allow other private companies to remove monoply.
An expert on interest.co.nz can easily check where NZ stand in terms of cost compare to other countries in the world. Also in other countries, one is able to get the covid result within 6 to 8 hours to plan with one's trip or max 24 hours and also as is requirement of many countries but in NZ their standard response is that will get the report within 72 hours, which does not matches the requirement though give in 48 hours but keep passenger on edge. Should not be more than 24 hours wait.
It’s a classic NZ problem.
• Is this a priority for the govt relative long term issues with monopolies/duopolies/oligopolies in NZ?
• Is it a reasonable capacity issue given we will be stretching testing over the coming months.
Ultimately we are a free market economy and people being able to take affordable international holidays seems like a first world problem.
This data centre project won't use much power compared to an Al smelter.
Personally I don't think this hydrogen proposal will go anywhere. Its too lossy across the supply chain.
So I think there will be plenty of electricity for Tiwai for a good number of pot lines if they want to stay.
The hydrogen proposal is a joke and the government should ban it. Or at least require the generators to sell power to the project at the prevailing wholesale rate.
The purpose of the Tiwai Point/Hydrogen deals seems to be to remove 15% of NZs power supply from the market and to push up the cost of other businesses.
https://www.youtube.com/watch?v=rRG-jHK0FT0
Its funny seeing a video from 2014 when Chris Joye was saying property is in a bubble. Prices in Australia have about doubled since then.
Are you referring to this christopher joyce?
https://www.afr.com/wealth/personal-finance/is-the-house-price-boom-bac…
Sounds like a DGM /s
This is total fabrication. Christopher Joye is one of the most respected macro commentators in Australia and the active fund management company he runs (Coolabah Investments) has made exceptionally prescient, often contrarian, bets on the Australian economy. I would listen carefully to what the man has to say.
S&P was down, the DOW was down (-1.45) and the NASDAQ was down (-3.74%).
Today Facebook -25% (almost -30% YTD), Netflix -5% (-32% YTD) and Zoom -6% ( -25% YTD) - this reminds me of the dot com bubble - perhaps Web 2.0 is no different from Web 1.0 - all hype but when reality hits perhaps the valuations don't look so good.
These companies make huge amounts of money so it is different from 2000 when the earning power of the web wasn’t proven.
I’d argue Facebook has two problems:
• It’s notionally a growth stock but has no room to grow.
• It doesn’t have a moat. Lots of tech companies are vulnerable. In browsers - Netscape => Internet Explorer => Google Chrome. There is no reason why Facebook or Google Seacrest couldn’t be toppled. And if browsers are anything to go by they would go from hero to zero very fast.
You're right on the growth stock part. It's going to be very hard to add more users at a high rate now. Those days are done (In the western world anyway).
On the second I'd argue it does have a moat though, critical mass and huge resistance to change. Look at the hype around Google spaces etc. Dead on arrival. People can't and won't be bothered with the effort of moving to a new social media (Not one that is so total life focused like FB).
I personally think FB is the end of the line for this sort of thing. I won't ever be 'moving'. Not because I like FB or even use it much, but it's where everyone is on. I don't think we'll ever see the necessary critical mass of people all move to a similar platform ever again. (Myspace etc to FB is not comparable.) Especially now we all know how poisonous social media can be. We have our current vice, but won't take up a new one etc. Younger generations of course will continue to quickly move from one superficial platform to another, Vine, Instagram, Tik Tok etc, but we won't see another massive dominance like Facebook happen. Now I've made a prediction of the future, I'm sure it will be totally wrong ha.
While Facebook is making money - some but not all are making money - and that is the issue. If they have stupid valuations, are not making money (or even if they are making some money) and don't have a moat fundamentals at some point start to be come important.
I still believe the lessons of Web 1.0 have not been learnt and history is repeating with Web 2.0. This does not mean that I am bear on tech stocks just their valuations.
This has all the signs of a stock bubble popping. A few high growth (in this case tech) stocks will get start to get hammered, due to a perceived weakness. Then people look to the next stock that might "underperform" and it ripples out.
This has less to do with Facebook, or Netflex etc. It has everything to do with the QE/Low interest rate punch bowl being threated to be taken away. If I had to guess i'd say this is the beginning, as its being caused just by the thought of monetary stimulus being taken away.
Hold on tight.
Also today the RBNZ says that lowering interest rates has no effect on inequality, actually it makes it better!
*please don't point out the RBNZ purposefully excluded asset valuations in it's analysis
Thanks god for the comments.
Come on Hardly, why would they include the thing that they know isn't going to give them the results they want? They have obviously started with the conclusion, then worked backwards, eliminating the things in the analysis until they get the result. Apparently, that's how you do "research" at the RBNZ.
Such analysis has isn't even worth the toilet paper it's written on.
Also today the RBNZ says that lowering interest rates has no effect on inequality, actually it makes it better!
NZ is in deep trouble if this is what they believe.
It shows the mentality of reserve bank and if this is their mindset what else can one expect from them
https://i.stuff.co.nz/business/127687433/reserve-bank-says-lower-intere…
Real Shame
I’m not sure if I’d put more faith in a used car salesman or a central bank(er). Both want to sell you the features and hide the defects.
Central bankers appear to favour financial repression for non asset owners in order to protect asset prices - emergency rate cuts if there’s a small possibility of deflation, but then watch, wait and live in denial when actually reported inflation runs 3x target.
Must protect those holding debt and destroy those holding cash.
Hey, Someone's gotta pay for the Au,Sn,Pb,Fe,Al,Cu,Li,Co,Ni etc Mines that need to be commissioned to Go Green. Oh, and pump the diesel and bunker fuel to run the excavators, rock trucks, dozers, loaders, ships etc to heft the stuff around between mine, refinery, manufactory, warehouse, retailer to get that Good Greenness to you....
The wonder is that the spread is currently (sorry) so small.....
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