Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Non-bank lender Resimac have raised their fixed rates by between +23 bps and +43 bps and well above the main banks. They have also raised their floating rate by +20 bps to 4.09%, which is lower than the main banks.
TERM DEPOSIT RATE CHANGES
None to report today.
THE DAIRY AUCTION
After having rise at the prior four bi-weekly auction events to be +19% higher than at the beginning of 2022, today's dairy auction saw WMP prices fall -2.1% and after other lines rose, an overall slip of -0.9%. But with the local dairy season winding down now (and it will until May), today's dip won't have much impact on the farmgate payout forecasts.
THE CARBON AUCTION
There was a carbon market auction as well today. Each quarter the Government releases New Zealand Units (NZUs),also known as carbon credits, via an auction, quarterly. Demand was sufficient to trigger release of extra units from the cost containment reserve, resulting in new 10,518,300 units in total being released to the market. This was as expected. 30 of 32 bidders won something at this auction. Prior to today's auction the price of a NZU was $72/NZU having fallen from $86.25/NZU at its peak over the past month. Post auction the price rose marginally and is now at $74/NZU.
THE HOUSING AUCTIONS
Just over a third of auctioned properties are selling under the hammer in Auckland, two thirds in Canterbury.
LARGER CURRENT ACCOUNT DEFICIT ...
Our actual current account deficit in the year to December was -$20.8 bln, or 5.8% of GDP, pushed up by a rising deficit during the year. In 2020 it was just -0.8% of GDP, in 2019 -3.3% of GDP. All these are manageable levels, mainly because our overall liabilities are not rising (see next item). (The highest current account deficit for any year was -7.8% in 2008.) None of this is market-moving. New Zealand's Q4-2021 GDP result will be released tomorrow. An average +3.3% expansion is expected, but Westpac expects +3.8%, ANZ expects +3.6%.
... BUT WE OWE THE WORLD LESS
New Zealand’s net international liability position was -NZ$161 bln (-46.1% GDP) at 31 December 2021, $19.1 less than at December 2020. In Q4-2020 this was -55.7%. In Q4-2019 it was 53.7%. The narrowing of the net liability position was due to rising offshore financial asset values outpacing the rise in the value of our financial liabilities. The net international investment position represents the difference between New Zealand’s financial assets and liabilities with the rest of the world. New Zealand has a net liability position as we have more liabilities with the rest of the world than we do assets.
FMA TO CONSULT ON FINANCIAL SERVICES CONDUCT GUIDE
Financial Markets Authority CEO Samantha Barrass says the regulator will soon publish a draft conduct guide for consultation as it moves to overseeing the conduct of banks and insurers under the Financial Markets Conduct Act. This will refresh and keep up-to-date the FMA's expectations of what good conduct looks like, will apply to the whole financial sector, and won't be a prescriptive checklist, Barrass says.
RBNZ MULLS CAPITAL INSTRUMENTS FOR MUTUAL BANKS
With its new bank regulatory capital requirements being phased in by July 2028, the Reserve Bank has issued a consultation paper on developing a bespoke capital instrument that could qualify as Common Equity Tier 1 capital for mutual banks SBS Bank and The Co-operative Bank. The Reserve Bank offers two options; a Mutual Equity Instrument (MEI) and a Mutual Equity Tier 1 (MET1) capital instrument. The Reserve Bank says it favours the MET1, considering it closer to having the same loss absorbing qualities as ordinary shares. Submissions are sought by June 10.
MORE CONSULTATION ON CLIMATE-RELATED DISCLOSURE REPORTING
The External Reporting Board has released the second part of the climate-related disclosure standards for public consultation. This focuses on strategy, metrics and targets which combined, outline how entities need to assess current and future climate risks and opportunities and report on corresponding financial implications. Development of the climate reporting standards follows the announcement in 2020 to introduce a mandatory reporting regime for key New Zealand companies including large, listed issuers and financial sector entities.
FEWER NEW TRACTORS
The number of new tractors registered in February was on the low side, in fact the lowest February level in five years.
UNHAPPY IN WORK
In Australia, jobs growth is high and their jobless rate is at decade lows, but consumers are unhappy. ANZ suggests this can perhaps be explained by falling real wages. But even that is balanced by a much larger pool of household savings built up during the pandemic lockdowns so you might have thought this would back up consumption in Australia. In any event unhappy consumers present a downside risk to Aussie consumption.
CHINA HOUSE PRICES UNDER MORE PRESSURE
The latest data on house prices in the major cities in China shows that 40 or their 70 largest cities in their reporting sample declined in February from January. (They say on a population weighted basis they rose. But that 'rise' is a 6 year low.) But second- and third-tier cities remained flat or decreased month-on-month. On a year-on-year basis that is only 24 of 70 major cities that rose. The declines are building.
WHAT WILL JAY DO?
All eyes are shifting to the US Federal Reserve tomorrow morning for their inflation-fighting policy stance. Markets are nervous.
GOLD FALLS FURTHER
In early Asian trading, gold is lower today from this time yesterday, now at US$1922 and down another -US$27. It is a price that got down to US$1918/oz in New York earlier, having closed even earlier in London at US$1914/oz,
EQUITY UPDATES
The S&P500 ended its Tuesday session up +2.1%, rising steadily during the day. The Dow was up less, the Nasdaq up +2.9%. Tokyo has opened up +0.9% in early trade. After two days of steep declines, Hong Kong has opened today up +2.8%, making back a part of the overall retreat. Shanghai has opened up +0.8%. The ASX200 is up +1.1% in afternoon trade. The NZX50 is up +0.7% in late trade today.
SWAPS PUSH UP AGAIN
We don't have today's closing swap rates yet. They are likely to have risen again today, but with smaller gains than recently. The 90 day bank bill rate is up a sharp +7 bps at 1.56%. The Australian Govt ten year benchmark bond rate is down -3 bps at 2.49%. The China Govt 10yr is up +4 bps at 2.85%. The New Zealand Govt 10 year bond rate is now at 3.16% (up another +5 bps) and still higher than the earlier RBNZ fix for that 10yr rate at 3.14% (up another +5 bps). The US Govt ten year is now at 2.15% and down -1 bp from this time yesterday.
NZ DOLLAR SLIPS
The Kiwi dollar is now at 67.4 USc and little-changed from this time yesterday although it has moved around in between. Against the Aussie we are also unchanged at 93.9 AUc although it got over 94c earlier. Against the euro we are softer at 61.5 euro cents. That means the TWI-5 is now just over 73 and net lower.
BITCOIN FIRMER
Bitcoin has firmed again today, now at US$39,258 and up +0.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.2%.
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39 Comments
The external current account deficit of $20.8 billion has had to be balanced by net capital inflows from overseas of the same amount. This has included purchase by overseas investors of over $6 billion in Government securities in the last quarter of 2021. This is not sustainable.
In contrast, the increase in value of NZ assets held overseas, as referred to in the article, is highly dependent on international share values which right now are dropping (since the end of the 2021 calendar year reported above). But in any case, the linkage of these overseas share values on the one hand, and the required balancing between the current account deficit and necessary balancing capital inflows on the other hand, is not direct. It does not solve the issue that we are buying a lot more from the rest of the world than what we are selling.
KeithW
$6 billion per year profit for the banks vs the $4.8 billion Road Improvement funding requirement for 20/21. https://www.nzta.govt.nz/assets/userfiles/transport-data/FundRoadImprov…
People are outraged at fuel prices, asking why we pay so much in excise and rolling out the old "GST tax on a tax" chestnut.
$3200 excise per year per household if they consume 50 litres of petrol per week for 52 weeks. Meanwhile the banks make a profit of $3300 per household and nobody batts an eyelid.
Our actual current account deficit in the year to December was -$20.8 bln, or 5.8% of GDP
All those articles in our MSM brushing this off as a temporary spike - until export education and tourism are up and running again this winter - shows you how we got into this miserable situation in the first place.
In the medium-to-long run, having more tourists and low-skilled/untargeted migrants adds to consumption, not production and exports within our economy; much of this consumer demand has to be met with imports.
Have been awaiting the FED announcement for a few weeks now. Locked away a TD for 12 months at the best rate possible for now but interested in the shift in the market. Fully expecting rates to be higher by Feb 2023 when it matures. I have a feeling its going to be a reluctant slow crawl upwards.
Cannot escape a sense that our government, for four and a half years now, has never really had much of grip on anything substantial. Yes there has been touchy feely things, gas oil exploration went kaput, a climate emergency was declared, UTEs got taxed, there was pathos for White Island and the terrorist tragedies and then along came covid, which seemed to provide one great big long smokescreen. Now a year and a half from the next election this government is, I suggest, revealing that same lack of actual substance and this is being evidenced by knee jerk reactions fast coming to the fore as an opposition of some merit at long last, confronts them in parliament. Richard Prebble today labelled it as sheer panic in fact. For example qualifying NZrs returning, suddenly no self isolation. Denial of any actual crisis but then acceptance that in fact there was one, followed immediately by hastily decided reduction in fuel excise. And now suddenly, the international border to virtually fully open four months early. Recall the highly experienced Mr Peters, even while serving in their cabinet, considered them as a bunch of incompetents. Personally I tend to agree with him by the very large part. Still that raises the question what the hell did he think he was doing when he chose to inflict them on us!?
After the Nats got the most votes in the election, Bill and Winston got together. Winston demanded a whole lot of stuff. Bill stuck to his principles and told him to shove off and come back when he had something sensible to offer the Nats in government. Winston took the same demands to Cindy, and she said,"Where do I sign?" That is how she got in. I thought everyone knew that.
The standards of NZ governance have plummeted to an all time low over the last 4.5 years. It has been simply embarrassing. The only thing worse has been the collapse of the media in following suit. Add that to the poor education system we currently run (down) & you have all the reasons you need to know why we are struggling to pay our bills. We're f.........
As neither a blue blood or a boomer. I have to agree with the post.
Our education is shot, we are sliding down the rankings. Our health system was collapsing long before covid. Successive governments appear to be causing more issues than they are solving. The media are filled with the undereducated who just repeat whatever pre written Media release they are given (Backed up by some tweets or reddit commentary from user847474 or whoever looks the least crazy).
I used to just think risk/negativity came with age. But a global pandemic, hammering home of the climate emergency, the very real threat of nuclear war, and the apparent imminent collapse of the financial system seem to be justifying the increasing anxiety many are facing right now.
The post would have merit, but it was all lost when he specifically said the last 4.5 years. It's no different when people mention 9 years of housing failure, we can all guess what Government that relates to, but it's incredibly counter-productive to slap partisan colours on problems that as you say span successive Governments.
I think we're going through the height of the 4th Turning Wrong John....which is meant to be chaotic and not make much sense. Big demographic changes taking place (or at least the roles that each demographic is playing in society) and it also aligns with the end of the long debt cycle (75 years since 1946 Bretton Woods) - so that if history is correct means the US as the reserve currency holder being challenged by other countries and looking for weaknesses. China/Russia etc are testing the US and the west and their resolve - at the same time they also have record amount of debt. This also puts pressure on internal political systems as at the end of the long debt cycle there are big gaps in wealth between the 'haves' and the 'have nots' which can create big gaps in political views which can make it hard to justify defending your global dominance (which is possibly where the US are...the have war time debt levels already and there hasn't been a war).
If the 4th turning theory is correct (and Ray Dalio with his long debt cycle theory) this should all be resolved in the coming years (perhaps within the decade)...but the world that we have known the last 40 years (or more) might be very different when compared to the coming 40 years. That will bring about financial and political stability and much better leadership - a return of a civil society as opposed to the self comes first over society mindset we currently have.
I'd be careful what you mean by richest. Perhaps you mean the most powerful?
The US is essentially bankrupt and if history is correct, will default in debt at some point in the future as it tries to preserve its status as the world reserve currency holder/world power. Its looking very fragile right now, which is why I think it is now that Putin has pulled the trigger on Ukraine. If the US has to print even more money to fund a war it might be enough to completely topple the countries finances - and internally it will make the wealth gap even worse (money printing does that)...so politically they could turn on themselves and have no hope of putting forward a united front to a global crisis like WW3 with Russia/China etc.
I thought they were pretty much the richest in terms of GDP per capita but just did a search now and they are only 13th (although the list looks very distorted by oil countries and tax havens). Still I don’t think they needed all that debt (or any debt probably), they just needed to live within their means. Yes now they may be bankrupt, but they really shouldn’t be, idiots.
A Bustard of a landlord just got Busted.
https://www.nzherald.co.nz/nz/a-penalty-reserved-for-incorrigible-landl…
I'm an ex-landlord. Renting property can be profitable but always involves risk and sometimes plenty of inconvenience. So I ought to be biased pro-landlord but reading this report surprises me yet again how feeble and slow NZ's legal system is. Slapping with a wet bus ticket understates it.
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