What happened Tuesday

Business / news

A review of things you need to know before you go home on Tuesday; some key rate hikes; auctions signal housing market slowdown; huge new windfarm; demographic changes; swaps hold, NZD falls; & more

29th Mar 22, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
ANZ has raised their fixed rate card across the board. More here. HSBC has raised its floating rate by +40 bps and its revolving credit rate by +30 bps. Update: NBS have increased their fixed rates by +25 bps.

TERM DEPOSIT RATE CHANGES
ANZ has raised term deposit rates by between +10 bps and +30 bps in a steepening trend. More here. TSB raised many rates. HSBC raised some savings account rates by between +5 bps and +15 bps. Heartland Bank increased its nine month offer to 2.50% (+25 bps).

THE AUCTION 'COAL MINE CANARY'
Slowdown in auction sales first evident in Auckland is now spreading to the rest of the country with the retreat most notable in the Bay of Plenty.

MASSIVE OFFSHORE WIND FARM
The NZ Super Fund says it plans a development that would power over 650,000 homes and be much the biggest of its type in the country.

UPSWING
After having declined for generations, there are growing demographic positives coming for Māori in coming decades. In 2018, the Māori population was 17% of our total population, ranging from 54% of Gisborne’s population down to nine percent in Tasman and Otago. That share is projected to rise to 21% nationally by 2043, ranging from almost 70% in Gisborne and ranging down to 12% in Tasman and Otago. Everywhere will grow, although the growth will be least in Auckland going from 12% now to 13% in twenty years. In 2043 17% of the country's population is expected to identify as Māori compared to just over 15% now. 9% will identify as Pasifika (up from 8% now), 53% will identify as European, down from 61% now. The big mover will be those identifying as Asian, rising from under 16% now to over 21% in twenty years. In twenty years, the standard population projection is 7.4 mln, an increase of +2.2 mln from the 5.16 mln now.

REVIEW GIVES ANZ NZ DIRECTOR ATTESTATION PROCESS TICK OF APPROVAL
The Reserve Bank says ANZ NZ has taken appropriate steps to remedy concerns raised about its director attestation framework in 2019. ANZ NZ has invested heavily in its director attestation and remediation programme, according to a Deloitte review. Christian Hawkesby, Reserve Bank Deputy Governor and General Manager of Financial Stability, says the review notes a level of complacency in relation to the execution of some aspects of the directors attestation framework in 2019 is no more. There has been a marked emphasis on adopting a "show me, don't tell me" governance approach at ANZ that aligns with the Reserve Bank's strengthened supervisory policy, Hawkesby says.

A SPENDING SLURGE UNDERWAY
Australia delivered another impressive retail sales result, beating forecasts that assumed storm and the pandemic would hold them back. They didn't and spending surged to its second-best month - ever. These sales were up +1.8% from the prior month, and an impressive +9.1% higher than a year ago. Because the January activity was strong as well, it is likely that Q1-2022 will end very well.

CHINA INCHES CLOSER
The Solomon Island prime minister has told his parliament that the country is ready to sign a development deal with China - one that gives the Chinese the right to step in and protect their investments.

GOLD DOWN AGAIN
In early Asian trading, gold is down -US$29 from this morning at just under US$1924/oz.

EQUITIES HIGHER EVERYWHERE
On Wall Street, the S&P500 ended its Monday session up +0.7% in a building gain. Tokyo has opened up +0.8% in Tuesday morning trade. Hing Kong is up 1.0% in early trade. Shanghai is up +0.3% in their opening trade. The ASX200 is up +0.8% in early Tuesday afternoon trade. The NZX50 is up +0.2% in late trade.

SWAPS HOLD
We don't have today's closing swap rates yet. They are likely to be little-changed. The 90 day bank bill rate is up +1 bp at 1.61%. The Australian Govt ten year benchmark bond rate is back up +5 bps from this time yesterday at 2.89%. The China Govt 10yr is back up +1 bp at 2.83%. However, the New Zealand Govt 10 year bond rate is now lower at 3.37% (down -2 bps) but still higher than the earlier RBNZ fix for that 10yr rate at 3.32% (down -6 bps). The US Govt ten year is now at 2.48% and a +1 bp rise since this time yesterday.

NZ DOLLAR SOFT
The Kiwi dollar is now at 68.9 USc and down more than -½c that this time yesterday. Against the Aussie we are down less than -½c at under 92.2 AUc. Against the euro we are -½c lower at 62.8 euro cents. That means the TWI-5 is now down to 74.4 and a -50 bps retreat.

BITCOIN UP AGAIN
Bitcoin has risen +1.1% today to US$47,433. Volatility in the past 24 hours has been modest at +/- 1.6%.

This soil moisture chart is animated here.

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44 Comments

by realterms | 29th Mar 22, 4:14pm 1648523660

Rates keep going higher. Risk assets keep going higher. Maybe the new normal is just completely insane.

I suspect the reckoning is going to be unpleasant.

by Justa comment | 29th Mar 22, 4:18pm 1648523898

With the real estate volume now falling away with vendors still hoping for dec 2021 highs, this is where someone like Peter Thompson will come out and say the venders need to be 'realistic with their asking price now' to get the market volume going again. Seen it all before. Meanwhile the buyers are all waiting for the 10% (or more) fall.

by sparrow | 29th Mar 22, 4:14pm 1648523696

A population prediction of an increase of 2.2 million in 20 years!! That's more than 100,000 each year. Where do we get to vote for or against that.

by realterms | 29th Mar 22, 4:19pm 1648523976

1.8% pa, for context

by morepork | 29th Mar 22, 4:23pm 1648524225

Labour did say they'd reduce immigration to 20-30k/year, which with a current natural increase of 30k/year, but until covid hit it's not something that happened. I don't hold out much hope for National turning down the taps, so maybe NZ First?

by nigelh | 29th Mar 22, 4:39pm 1648525188

Based on previous NZ first history not going to happen. Pick a number. Labour 40-50k a year. National 50-60k a year and Act 60-80k a year.

by singautim | 29th Mar 22, 5:55pm 1648529707

It ought to be NZ First but they have a proven record of not to be trusted about immigration.

by Beanie | 29th Mar 22, 9:57pm 1648544248

And that is why they will never again be in parliament. I doubt they will even contest the next election.

by Palmtree08 | 29th Mar 22, 4:43pm 1648525398

Perhaps NZ First will come back into the picture? Not that they did anything to curtail rampant population growth when they could have. More of a button pushing issue among Winstons target demographic, than a sincere immigration policy. Needless to say, I won't be voting for any party that proposes population growth, so I probably won't be voting. I am done giving a mandate to parties on a least bad basis.

by singautim | 29th Mar 22, 6:00pm 1648530031

Maybe TOP? It is hard to choose a party by a single policy. Even the Greens promised a reduction in the rate of immigration but instantly reneged on it but it was on their policy webpage for months. Immigration rates are rather like road speed limits with different countries choosing different maximum speeds. If a typical OECD country has a limit of 100km/h then NZ is 300km/h.

by Nzdan | 29th Mar 22, 6:52pm 1648533158

How does a political party actually legislate a reduction in Immigration numbers? I would have thought the numbers are based solely on the number of visas that are processed by Immigration NZ/MBIE.

If a political party seeking campaigning on a reduction is elected, why does Immigration NZ just carry on doing their own thing? "Reduce immigration numbers by 20k to 30k per year" it's quite simple really. They have people employed specifically to interpret the data and execute policies.

by printer8 | 29th Mar 22, 8:40pm 1648539643

Immigration visas (such as work or skilled immigrant visas) are based on a points system for a variety of factors (age, family connections, skills, etc).

Currently one needs to have 100 points to lodge an expression of interest but I think the current threshold for a work visa is 160 points.

It is my understanding that Government can direct Immigration by determining the number of immigrants by altering the threshold.

I stand to be corrected.

by singautim | 30th Mar 22, 12:21am 1648552860

The minister can do it without any public consultation or even informing parliament. Middle of 2016 (if I remember right) one day they said no more residency visas for parents - this was relaxed fairly recently but with a quota of 1000 (not 999 or 1001 or any other publicly discussed number)

by imhenry | 30th Mar 22, 7:57am 1648580234

I think there is a growing number of people won't be voting on a least bad basis

by Justa comment | 29th Mar 22, 4:19pm 1648523942

by morepork | 29th Mar 22, 4:18pm 1648523912

Is population growth of around 2%/year really what we want? Isn't that what has got us into much of the issues we have now around housing and infrastructure?

We have an immigration lever to pull, and I think most would prefer 1%/year, which would still lead to just over 1 million people in the next 20 years.

by singautim | 29th Mar 22, 6:02pm 1648530159

NZ's problem with housing and infrastructure is mainly sheer incompetence but immigration doesn't help.

by imhenry | 30th Mar 22, 8:01am 1648580508

We will have to take a drastic cut in our life style with less immigration. We are not paying our way in the World

by thewanderer | 29th Mar 22, 4:22pm 1648524150

I don't understand, 17% Māori in 2018 and increasing, but supposedly 15% now? Then back to 17% in 2043?

by Foxglove. | 29th Mar 22, 4:49pm 1648525772

Perhaps the word identifying is the crux of that. In psychology an identity crisis is a well documented condition. Simply, individuals get to questioning their own physiology. If that might transition into individuals entering in and out of their racial heritage, you could then argue statistically speaking, identifying as to one part or another of that, will inevitably cause fluctuations amongst the various categories?

by ACB | 29th Mar 22, 4:57pm 1648526271

Maybe to do with people being of mixed race deciding that they identify as Maori, and then the next time deciding not to?

by Hamish | 29th Mar 22, 7:45pm 1648536354

Legacy issue from the last (debacle) census?

by Ahuhyeah | 29th Mar 22, 7:41pm 1648536084

Landscape is a changing. 2043 half of Auckland population will be Asian. Be interesting to see how that shapes the city

by northman46 | 29th Mar 22, 8:11pm 1648537867

For the better, if Australia is anything to go by.

by rastus1 | 29th Mar 22, 4:46pm 1648525561

For a real laugh have a look at NBR (paywalled) and have a chuckle at the comments on the article Correction on the cards for fragile housing market.

Talk about a bunch of denialists. Here's an example -

This article is misleading, there will be no correction. Property as an investment class, with a natural monopoly on supply and a decade of equity building, will continue its compound growth. The NZ property casino will continue as the bulk of boomer landlords have plenty of equity and will increase rents with cost.

by nigelh | 29th Mar 22, 4:53pm 1648525982

MASSIVE OFFSHORE WIND FARM

"The NZ Super Fund says it plans a development that would power over 650,000 homes and be much the biggest of its type in the country."

I find it quite incredulous that that the NZ Super Fund is getting involved with this. There has to be massive arm twisting by the govt. to have the Super Fund to embark on this venture with absolutely no experience in electricity generation and to top it in bed bed with an overseas company whose sole aim is to sell wind turbines.

If this is anything like some other venture that the Super Fund was going to get involved with they'll want cast iron guarantees on returns. Nothing wrong with that but guess whose going to pay for these guarantees. The electricity consumers. Add another 5% to whatever increase usually occurs in electrical energy costs. Where did I get this figure. A thumbsuck.

This is the only instance I hope Maori find a taniwha or something equivalent swimming around the site of the windfarm and scupper it completely.

by ACB | 29th Mar 22, 4:59pm 1648526397

Yes, good point, you have to question why Meridian or Mercury would not want to be part of the JV.

by solardb | 29th Mar 22, 5:11pm 1648527111

And your alternative ??? More fossil fuels , with carbon units going to double in the next few years? Wind is already cheaper.

by nigelh | 29th Mar 22, 5:46pm 1648529172

I doubt if wind is cheaper without subsidies. In addition its unreliable. Having worked in the electrictuy industry there was an occasion when there was no wind in PN on one of the coldest nights of the year so all of PNs energy had to be imported elsewhere on existing transmission line. It needs to be backed up by other forms. Texas have or will introduce a law making wind farms responsible for backup generation in event of no gen if no wind. Don't have the exact details but have probably gone too far with requiring too much backup in event of no generation with no wind

by Hardly | 29th Mar 22, 6:00pm 1648530052

Wind is incredibly cheap in the US, way cheaper than fossil fuels on a cost per KWh basis.

by nigelh | 29th Mar 22, 7:39pm 1648535993

I doubt it. Huge subsidies as well.

by mfd | 29th Mar 22, 9:18pm 1648541908

Wind is not subsidized in New Zealand and yet most generation going in at the moment, and most of the pipeline, is wind. This is because it is cheaper than fossil fuel generation here.

There is also geothermal and solar investment going on.

by Hardly | 29th Mar 22, 9:29pm 1648542545

Nah. Fossil fuels were doing so bad versus renewables in the US they tried to subsidise coal. They tried to pass a law saying only energy sources where you stored fuel onsite qualified for a subsidy - only covered coal and nuclear. But it shows how desperate it is for coal right now.

by JimboJones | 29th Mar 22, 7:38pm 1648535922

What’s wrong with using a nice renewable free energy when you can, and only turning on the horrible polluting expensive option when you have to?

by Pragmatist | 29th Mar 22, 7:56pm 1648536976

Because someone still has to pay to maintain the not running plant, and depending what sort of plant that is, you might need several days to start a thermal plant from dead cold. Dunno about you, but my ability to predict how windy or sunny it's going to be in three days is decidedly sub-par.

by singautim | 29th Mar 22, 6:05pm 1648530338

Is off-shore wind cheaper. Does it depend on the ocean and storms?

by nigelh | 29th Mar 22, 7:38pm 1648535928

In general capital cost no compared with on shore. There again if your wind farm on shore is in the wop wops you are likely to have some high infrastructure cost to get it to a transmission point (>=110kV, ie predominantly Transpower). I'd generalise and say yes. Off shore is more expensive. Aggressive environment as well.

by Hamish | 29th Mar 22, 7:49pm 1648536565

The servicing and renewal costs for a forest of offshore wind turbines sure would add up quickly.

by Wrong John | 29th Mar 22, 5:30pm 1648528237

And we have a lot of wind here in NZ. All sorts of winds in fact.

by nz-it-worker | 29th Mar 22, 5:41pm 1648528860

There's often quite a bit of wind in the Interest comments section. Maybe the super fund could investigate the electricity generation potential of that.

by Pragmatist | 29th Mar 22, 6:05pm 1648530319

So much rising hot air...

by morepork | 29th Mar 22, 6:01pm 1648530112

Need a turbine or two in front of the beehive

by Uninterested | 29th Mar 22, 6:19pm 1648531195

From running the wholesale market program I know that if you plonk a big generator somewhere you reduce the price that you get for generating power in that area. So its not as rosy as just looking at the prices beforehand. And if there is a transmission constraint, then you cannot generate any more than that.

So in some remote locations the generator company will have to fork out huge amounts for a long new transmission line. Although I think the govt in its wisdom is considering changing the transmission pricing methodology so that load customers (rather than the generators) pay the lions share of transmission charges. ie You and I. I must admit that I have not bothered keeping up with these proposed changes in detail because its political and I don't like the politics of this govt.

by Jonny.Foe | 29th Mar 22, 8:10pm 1648537817

"The Solomon Island prime minister has told his parliament that the country is ready to sign a development deal with China - one that gives the Chinese the right to step in and protect their investments."

China using its huge foreign currency reserves to invest in the hard and soft infrastructure it needs to secure access to the raw materials it knows it will need in the future. Solomon Islands exports a decent amount of rough wood and aluminium to China. Those exports sound familiar don't they?

Meanwhile in NZ, we build up a huge portfolio of financial assets and commit to spending a few years thinking about building a wind farm whilst we studiously avoid interfering in the 'market'.