Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
ASB is the latest to raise fixed home loan rates. More here.
TERM DEPOSIT RATE CHANGES
BNZ and ASB raised term deposit rates today. We assess their 'fairness' here. Nelson Building Society also raised their TD rates.
RISING INFLATION EXPECTATIONS
The RBNZ has revised its household expectations survey (M13) to bring it up to 'best practice' and match how other central banks are surveying this same data. It means most of the changes reported today have a different base to prior reports, although they advise the 1 year expectation is still comparable. Those surveyed say that current inflation is running at 3.7% (actually its 5.9%, so financial understanding is not flash). These same people say in one year it will rise to 4.5% and in five years it will rise to 5.6%. Expectations - even from this surveyed cohort of unknowledgeable people - is that we face rising inflation.
KEEPING SUPPLY CHAIN OPERATORS HONEST
An international task force ("working group") has been established to identify potential cartel conduct in global supply chains. This group includes our Commerce Commission, the Australian Competition and Consumer Commission, the Canadian Competition Bureau, the United Kingdom Competition and Markets Authority and the United States Department of Justice Antitrust Division. The group will share intelligence and use existing international cooperation tools to help detect and investigate potential cartel conduct arising from disruption in global supply chains, they say.
EXTRA MONEY ON THE MORTGAGE?
Westpac claims its data shows that a majority of Kiwi households with mortgages are financially better positioned than a year ago to cope with the twin strains of Omicron and rising interest rates. 68.1% of Westpac’s home loan customers were ahead on mortgage repayments by at least 3 months, at the end of 2021, a jump from 65.9% at the end of 2020. Those customers were ahead of their scheduled mortgage payments by a median amount of $11,022 or 10.5 months – up from $9,657 and 9.0 months at the same time in 2020.
COSTS RISE AT THEIR FASTEST RATE IN 20 YEARS
Producer prices moved up sharply in December, according to the data released today. Input costs were up more than +8% on a yea-on-year basis. Output prices were up +7.2% on the same basis, so firms aren't able to pass on all they are being hit with. But so far, there in no suggestion this is an intractable problem. However, the cost of new capital goods are rising very much faster, up +9.2% year-on-year and their fastest rise since this series was started in 2002.
BUSINESS OVERHEAD COSTS MIXED
Away from direct costs, business overhead costs are generally rising faster too. Commercial rents are up +6.5% from the same period a year ago. Gas is up an eye-watering +27%, road freight up +7.3%. There were some surprises in this data too - sea freight was up just +1.4% (you wonder what they are counting here), and electricity costs fell sharply after big rises earlier in the year.
FARM COSTS UP SHARPLY TOO
On the farm, input costs are all up, led by fertiliser which was up +47% in a year. All other costs increases averaged +7.2%, with dairy farm costs leading the way with a +7.9% rise, and the smallest was for horticulture but still up +5.8% in a year.
MEMORY PROBLEMS SPREAD
In other media, there has been considerable publicity about the rise of second tier lenders to finance property development. Many are raising funds from the public via special funding vehicles like syndications, capital ventures, and the like. All are targeting "wholesale investors" who are presumed to know what they are doing. Many of those seem to have very short memories, chasing yield, 'buying' the promoters marketing, and ignoring the liquidity risk. Memories are short because it was these same liquidity risks that came home to roost when most of the finance companies went belly-up. Many promoters went to jail. Investors lost most of their capital. That 2006-2012 finance company crisis was mostly about non-bank lenders sourcing public funding for property development. (This is one reason you won't see many ads for modern day capital raising for property development on interest.co.nz.)
CORPORATE BOND PRICED
The Investore (IPL, #37) bond raised the full $125 mln, and will pay an interest rate of 4.00%, the company has advised. It was at the upper end because the 5 year swap are is rising.
LOCAL PANDEMIC UPDATE
In NSW, there has been 9,243 new community cases reported yesterday, now with 109,524 active locally-acquired cases, and another 15 daily deaths. There are now 1,381 in hospital there and continuing to fall away. In Victoria they reported 6,935 more new infections yesterday. There are now 48,852 active cases in that state - but there were 14 deaths there. Queensland is reporting 5,795 new cases and 9 more deaths. In South Australia, new cases have fallen to 1440 yesterday and 3 more deaths. The ACT has 561 new cases and one death, and Tasmania 623 new cases and no deaths. Overall in Australia, more than 24,500 new cases have been reported so far although not all counts are in yet. In New Zealand, there were 18 cases stopped at the border, plus 1929 new cases reported in the community, another new record.
GOLD UP FURTHER
In early Asian trading, gold is now at US$1894 and up +US$24 from this time yesterday.
EQUITIES WEAKER
The S&P500 ended its day on Wall Street sharply lower, down -2.1% after a building selloff all session. Tokyo has opened today down -1.3% and heading for a -1.6% weekly fall after a volatile set of trading days. Hong Kong is down -0.5% at its open; Shanghai is down another -0.4% but at least they are heading for a weekly gain. The ASX200 is down -0.8% in early afternoon trade and may end their week unchanged. And the NZX50 is down -0.9% in late afternoon trade and almost certainly will end the week little changed by giving up earlier gains.
SWAPS RETREAT
We don't have today's closing swap rates yet. They are likely to have fallen back today as risk is off while the prospect of an invasion of Ukraine is imminent. The 90 day bank bill rate is unchanged at 1.23%. The Australian Govt ten year benchmark bond rate is down -2 bps from yesterday to 2.22%. The China Govt 10yr is little-changed at 2.80%. The New Zealand Govt 10 year bond rate is now at 2.77% (down -3 bps from this time yesterday) and now above the earlier RBNZ fix for that 10yr rate at 2.76% (down -8 bps). The US Govt ten year is now at 1.98%, and down -5 bps from this time yesterday.
NZ DOLLAR FIRMER
The Kiwi dollar is marginally firmer today at 67 USc. Against the Aussie we are up at 93.2 AUc. Against the euro we are higher at 58.9 euro cents. That means the TWI-5 is firmer at 71.4.
Appreciate this coverage? Support us and go ad-free. Find out how.
BITCOIN FALLS
Bitcoin is down sharply today to US$40,789 and -7.4% lower than this time yesterday. Volatility over the past 24 hours has been extreme at just on +/- 5.0%.
This soil moisture chart is animated here.
Keep ahead of upcoming events by following our Economic Calendar here ».
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.