What happened Tuesday

Business / news

A review of things you need to know before you go home on Tuesday; many minor rate changes, mortgage managers gloomy, auction activity slow, credit card use stable, PPH 'undervalued', swaps soft, NZD soft, & more

[updated]

26th Apr 22, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
Unity Credit Union has raised all its fixed home loan rates. Heretaunga Building Society has raised all its mortgage rates too. Update: Westpac has raised all its fixed rates late today.

TERM DEPOSIT RATE CHANGES
ICBC has raised most of its term deposit rates. And both Unity Credit Union, and Heretaunga Building Society have come through with TD rate rises too. Update: Westpac has raised all its term deposit rates by between +10 bps and +20 bps.

MORTGAGE MANAGERS GLOOMY
Banks expect demand for mortgages to weaken further more over the next six months, according to an RBNZ survey of bank officers. These same people see potential falls in house prices and inflationary pressures as factors that will continue to dampen demand for mortgages. Tighter lending standards will remain, they expect.

GOING COLD
It's not just Auckland. A chill wind blew through the the nation's auction rooms last week, with the overall sales rate dropping to just 29%. More properties were passed in at Canterbury auctions, suggesting the cooling housing market is now nationwide.

CORE USERS PAYING MORE INTEREST
Credit card balances continue to fall, at a $5.7 bln as at the end of March are at their lowest in six months, and down -7.2% in a year. Although the trend is still down, we should note that the proportion of credit card debt that incurs interest has been inching over the past three months. In fact, the effective overall interest rate applying to all cards is now 18.4% on average, which is the highest such rate since March 2009.

CARD USAGE HOLDING
Credit cards are still being used however with a very similar amount being charged to these cards as a year ago. Local billings on overseas-issued cards were down (as you might expect), but billings on locally-issued with overseas merchants were up to their highest level since the start of the pandemic.

HIGHER PAY FOR ON-FARM WORKERS
The 2022 Federated Farmers-Rabobank Farm Salaries Remuneration Summary Report has found salaries for farm employees across the dairy, sheep/beef and arable sectors have grown strongly over the past two years as employers faced challenges from a continued shortage of on-farm workers. The report found salaries across on-farm positions were up by a weighted average of +14% since 2020, with the average salary rising to $64,000. Dairy sector salaries increased by an average of +15% with salaries for sheep/beef positions up by an average of +14% and arable salaries up by an average of +8%.

ANOTHER CORPORATE LOOKS TO LOCK IN CHEAP FUNDS
Mercury says it is about to launch a $250 mln bond issue of unsecured, subordinated paper. No details are available yet but they will come soon. Their lead managers have strong retail bases.

HARD COMMODITY PRICES SAG
The iron ore price dropped sharpish today on perceptions the Chinese economy is going off the boil. The copper price was down similarly. And the top has come off the aluminium price as well. But these may all turn around after a statement released a few minutes ago from the Chinese central bank that it "will increase support for the real economy".

GOLD DROPS
In early Asian trading, gold is down -US$51 from this time yesterday at just under US$1900/oz.

SWAPS HIGHER
We don't have today's closing swap rates yet. They are likely to be lower today and possibly reversing some of last week's rises. The 90 day bank bill rate is up a further +1 bp at 1.97%. The Australian Govt ten year benchmark bond rate is down -9 bps from this time Friday, now at 3.05%. The China Govt 10yr is down -2 bps at 2.85%. And the New Zealand Govt 10 year bond rate is down -3 bps at 3.56% but still above the earlier RBNZ fix for that 10yr rate at 3.54% (up +1 bp). The US Govt ten year is now at 2.81% and down -16 bps from where we were at this time on Friday.

MIXED
After having been down -1.7% at one stage, the S&P500 recovered to be up +0.6% at the end on Monday trading on Wall Street. Tokyo has opened up +0.4% in early Tuesday trading. Hong Kong is up +0.5% after yesterday's very sharp dump. Shanghai has opened down -0.5% today, on top of yesterday's steep -5.1% drop. The ASX200 has opened down -1.8% in reaction to the Chinese retreat. The NZX50 is down -0.7% near the end of Tuesday trade on similar sentiment, with Air NZ (AIR, #39) down -2.2% and A2 Milk (ATM, #11) down -2.6%. Auckland Airport (AIA, #2) is down -2.2%, and Fisher & Paykel Healthcare (FPH, #1) is down -2.0%. Going the other way, Pushpay Holdings (PPH, #29) has jumped +20% today after it announced that it has appointed Goldman Sachs to handle "multiple" takeover approaches.

NZ DOLLAR DOWN
The Kiwi dollar is now at 66.2 USc and more than -1c lower than this time on Friday. But against the Aussie we are almost +1c firmer at 92.2 AUc on the same basis. Against the euro we are spoft at 61.7 euro cents. That means the TWI-5 is now at 72.9, and down a net -50 bps from this time Friday.

BITCOIN UNCHANGED
Bitcoin is unchanged from Friday, still at US$40,502 but it is up slightly from this morning. Volatility in the past 24 hours has been high at just under +/-3.3%.

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44 Comments

by kiwikidsnz | 26th Apr 22, 9:18pm 1650964684

Revenue minister has 'virtually no idea what rate of tax is paid by the very wealthy' | Stuff.co.nz

"Revenue Minister David Parker will introduce a bill which would set out principles of fairness in the tax system."

To deliver on a principle of "equality" the only fair income tax is a flat % rate for everyone at all income levels. Progressive taxes are simply socialist envy.

Equality of opportunity is fair. Equality/equity of outcome is unfair because it ignores individual effort & making smart life choices - resulting in those who make the effort & good choices subsidising those who won't.

by ex agent | 26th Apr 22, 4:20pm 1650946806

Not everyone is born with the same amount of grey matter. Those who are born with a lot of it have a duty to care for those less fortunate.

by chebbo | 26th Apr 22, 4:42pm 1650948169

Don't make the mistake of equating wealth with intelligence (or, for that matter, the ability to care for others).

by mfd | 26th Apr 22, 4:44pm 1650948288

I largely agree. The massive role that luck plays in the lives of successful people is usually ignored by those who want to believe they did everything on their own. I am doing just fine, but that is primarily because I was born to a loving family in a stable country, my Mother didn't abuse any substances while pregnant with me, I suffered no major trauma in childhood, and was sent to a good school. None of that was in my control. Perhaps I was born with a decent brain too - this wasn't in my control either.

I may have grabbed the opportunities but I was supremely lucky to be offered them, and a little empathy for those without such luck does not go amiss. I am very happy to pay more tax as a proportion of my income than those who would really need those extra dollars to pay for basics.

by kiwikidsnz | 26th Apr 22, 5:05pm 1650949531

Over the last 65+ years I noticed that the harder & smarter I worked the luckier I got.

by mfd | 26th Apr 22, 5:07pm 1650949624

You are lucky to begin with if you are born in a stable situation with the genetics and upbringing that drive you to succeed. Sure, you had to complete the jigsaw puzzle but plenty of others are given boxes with pieces missing.

by Waikatohome | 26th Apr 22, 5:46pm 1650951976

The best way to predict a persons future wealth is to look at the wealth of their parents. Most people rise to the level they came from. Social mobility is largely a myth. Richer kids go to better schools, get a better education, have greater access to sporting opportunities, have pushier parents who clear the way for them, connections to get a job, give them money for University and a house deposit. There are exceptions but they are the minority.

by singautim | 26th Apr 22, 6:28pm 1650954486

Some truth in what you say but I only have to look at the relative success of myself and my three siblings to see divergence and even more among my six children. A healthy society needs plenty of social movement to get people into jobs that match their talents. We have too many builders who would make great teachers or academics and bank managers who would be happier and more productive with a spade in their hands.

by chebbo | 26th Apr 22, 7:22pm 1650957731

Yep. Everyone loves themselves a rags to riches story, but it's not as common as Hollywood would have you believe.

We talk about "pipe dreams", but upward social mobility is perhaps better described by the American term "hoop dream"; the aspiration of just about every young black male in the country to become an NBA all-star, something which only a small handful will ever achieve, and not for lack of trying.

The phrase "temporarily inconvenienced millionaire" also springs to mind, as does "glass ceiling". Perhaps we're not so far off a caste system here after all.

by malamah | 26th Apr 22, 4:24pm 1650947054

I believe the word of the day is "equity", which is by definition fair.

by Baywatch | 26th Apr 22, 4:26pm 1650947207

The wealthiest New Zealanders pay just 12 per cent of their total income in tax on average, according to research from Inland Revenue and Treasury, Stuff can reveal.

The same research found 42 per cent of the wealthiest New Zealanders were paying lower tax rates than the lowest tax rate paid by people who earn their money from an ordinary job or a benefit.

Great 12% it is then..

by Beanie | 26th Apr 22, 7:18pm 1650957481

They must be including capital gains in income to arrive at 12%.

by KH | 26th Apr 22, 10:10pm 1650967853

And a great portion of the lower paid pay no tax net at all. Given the government kicks back things like working for families.

by lowercase capitalist | 26th Apr 22, 4:36pm 1650947819

To deliver on a principle of "equality" the only fair income tax is a flat % rate for everyone at all income levels. Progressive taxes are simply socialist envy.

Do you think that tax should be paid on other forms of income like capital gains?

Seems like if we're trying to deliver a principal of equality then all forms of income should be treated the same.

by kiwikidsnz | 26th Apr 22, 5:15pm 1650950145

There's no justification for CGT on the family home, originally purchased with after tax income. Its still the same asset, relative to other homes; inflation = devalued money which is just the medium of exchange.

Levying a CGT on a business sale (including residential property investment, farms etc) is likely appropriate. The increase in "goodwill" value of a business is the result of the economic activity.

by JimboJones | 26th Apr 22, 7:08pm 1650956880

I’m happy for CGT to be applied only on the amount over inflation. But no CGT at all is hardly fair.

by Palmtree08 | 26th Apr 22, 7:19pm 1650957547

Cool. Hope you would be happy with tax credits when those asset values go backwards then?

by powerdownkiwi | 26th Apr 22, 4:39pm 1650947941

kknz - and if the rich are rentiering on the poor (as in landlording, which is 100% parasiting, given that capital gains are a planetary ponzi, leaving tenant income as tthe only source...)?

Seems to me we should be asking what wealth is (it is access to resources and energy, both of which are in global decline and increasingly demanded). The rich don't 'create'it, they commandeer more tickets for those two items. Mostly, they do this by rentiering.

In an energy/resource-depleting world, 3 things increasingly won't fit - all things created to fit the growth phase, now behind us. One was rentiering, two was interest-charging, three was profit. We are about to enter some very interesting times.

by Officebound | 26th Apr 22, 4:46pm 1650948388

A truly flat tax system across all types of income, would be great for the middle class, and cost the wealthy a lot.

by redcows1 | 26th Apr 22, 5:52pm 1650952335

And that's really what parker and IRD are hopefully looking at. Certainly the dogged determination with which those in power have resisted the idea of a tax free income threshold would indicate the numbers are not as many would say.

I've thought for a long time that a flat rate on all income with no deductions would be simple and effective at catching those individuals and companies who pay very little.

by JimboJones | 26th Apr 22, 7:11pm 1650957105

I wonder if a comprehensive GST system for everyone would work? You pay GST on everything you buy (no exceptions, includes assets), and you can claim GST on everything you sell.

by Beanie | 26th Apr 22, 8:23pm 1650961391

"..you claim GST on everything you sell" ??

You might need to give an example for me to understand.

by Fairlyfrank | 26th Apr 22, 9:48pm 1650966532

Dead right red redcows I wonder also why the desperate avoidance of a tax free threshold like Australia has at $18000.00 , it can only be because people in this bracket are paying a disproportionate amount of tax . Pity because it would provide an incentive to work for people on welfare.

by GV 27 | 27th Apr 22, 7:19am 1651000762

I hate to break it to you, but once you adjust for transfers, those people tend to pay next to no net tax at all.

In fact, a huge, huge amount of our tax revenue comes from a very small portion of taxpayers - and it's not the ones at the bottom.

The reason that you don't see a tax free threshold in Australia is that every man, woman and child would be eligible for it, which makes it enormously costly. Similar to the tax bracket at $180K which brings in relatively little as there's bugger all people actually earning that in terms of PAYE income when compared to the number of people in the lowest bracket, which is pretty much everyone.

by agnostium | 26th Apr 22, 8:08pm 1650960484

On this basis I assume you would support 100% taxation on all assets when someone dies. And probably prohibit parents spending money on their children to give them an unfair advantage over others. Maybe kids should be sent away from their parents and raised as equals like the Spartans did. You're obviously into each person should make their own wealth on their own merits.

by kiwikidsnz | 26th Apr 22, 9:11pm 1650964296

It must be reassuring to be surrounded by so many straw men

by agnostium | 27th Apr 22, 4:35pm 1651034104

You were the one that raised "equality of opportunity"

by Jonny.Foe | 26th Apr 22, 4:24pm 1650947041

Outstanding credit card balances are now down to levels last seen in 2012! Savings deposits have increased from $80bn in early 2020 to nearly $120bn. Current account balances are also up massively. People are paying off their mortgages like they have gone out of fashion - around $13bn per quarter of closing payments over the last year or so - compared to around $9bn per quarter previously.

What we are basically seeing is all that extra Govt spending washing through into the bank accounts of people who benefit most when Govt spends more than it taxes - landlords, shareholders, etc. With rising interest rates on the horizon, these 'real beneficiaries' are paying down their debts quickly and making sure they have a decent buffer.

Meanwhile, the $0.8bn of interest paid monthly on mortgages is about to start its relentless rise towards $1.5bn per month as the average interest paid on $330bn of mortgages increases from 3% to more than 5%. That's a $700m per month reduction in disposable income. Low to middle income mortgagees are going to get their feet held to the flames for sure.

As savers save, and middle income earners hand more and more of their money over to banks, high oil prices etc will continue to pull money out of our economy. Thus demand in the economy will plummet and those in the most precarious work will soon be joining the dole queue in record numbers. RBNZ are only targeting an increase in unemployment from 3 per cent to just over 4 per cent. I am guessing the overshoot on this target is already baked in.

by Averageman | 26th Apr 22, 4:39pm 1650947957

Some groups are paying down their mortgagees. The "interest only, debt to the moon" clearly by design are not. As for major shareholders paying it down and building buffers, they need to. They have just suffered very difficult trading conditions in the last two years, and a paid productivity hit in the form of extra sick leave, and and extra public holiday. With the head winds that have been building over printed debt in the last ten years, and central bank can kicking, you would be irresponsible for mortgagee holders and business owners to do otherwise.

by J.C. | 26th Apr 22, 4:44pm 1650948255

Some groups are paying down their mortgagees

I'm sure they are. That's how mortgage payments are supposed to work. You pay it back....regularly. But what's happening to the share of wallet allocated to non-mortgage spend?

The "interest only, debt to the moon"

Risky game

by Jonny.Foe | 26th Apr 22, 4:58pm 1650949112

That's not what I meant. When I say paying down their mortgages - I mean paying them off in full, early and in unprecedented amounts. It looks from the data like people are pulling money out of low paying term deposits to pay off mortgages. People are also paying way over their scheduled repayments.

by J.C. | 26th Apr 22, 4:39pm 1650947995

Is this MMT working its magic Jfoe? All that hhold savings and debt repayment must be good, right?

by Jonny.Foe | 26th Apr 22, 4:56pm 1650949003

I guess one thing that the MMT economists have spot on is that when Govt spends more than it taxes, the net amount becomes an asset of the private sector. The challenge we have is that in our economy, this 'extra money' is routed with ruthless efficiency to people who already have money - the rentier class who exist off the back of others. Thus we see the K-shaped recovery - with the wealthy half of society paying down debts, insuring themselves against stock market losses, etc, whilst those at the bottom of society prepare for job losses, poverty, and reliance on increased Govt handouts.

by J.C. | 26th Apr 22, 6:39pm 1650955164

I think that pretty much sums it up

by Jvdl | 26th Apr 22, 4:43pm 1650948214

Bingo! these last two years of historically low mortgage rates have allowed me to pay down more debt than I would have ever dreamed. Yes my interest rates will go up now but Im still well ahead and have kept my payments the same through out. I'll pay more interest now (and tax via limited deductibilty) but the buffer I have built in should see me through.

by Jonny.Foe | 26th Apr 22, 5:00pm 1650949206

If only everyone did that, we would all be rich!

by profile | 26th Apr 22, 4:29pm 1650947379

That time we mandated a experimental gene therapy on a population with no clear benefit from the randomised control trials. Turns out Ardern's claim "you won't get sick, and you won't die." was bang on from a mortality point of view.

"“The two major RCT of mRNA vaccines, produced by Pfizer and Moderna, included 74,193 adults among whom there were 61 deaths (31 vaccine-recipients, 30 placebo recipients). These vaccines were not associated with lower overall mortality, the overall RR being 1.03."

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4072489

by JimboJones | 26th Apr 22, 7:38pm 1650958709

Well unless our ministry is lying about hospitalisations, then there is a very clear link even from just NZ data, that the vaccinations work very very well.

by profile | 26th Apr 22, 8:31pm 1650961919

That 'very, very well" just couldn't be replicated in randomised control trials. Disturbing that people lost their livelihoods, marriages etc. for a gene therapy that hadn't shown to have any benefit in the RCT's. Why weren't the adenovirus-vector vaccines promoted by the podium of truth? At least they had statistically significant RCT evidence that they actually reduced mortality. Why, why, why is there no Royal Commission or even a RCT in NZ? We have them for Auckland governance and mine accidents but not forced mandates based on zero RCT evidence. She'll be right mate.

by Carlos67 | 26th Apr 22, 10:02pm 1650967363

We all had the choice to take the vax or not. For those that took their advice from the podium of truth you lack critical thinking skills.

by agnostium | 26th Apr 22, 8:15pm 1650960956

From the site you just linked to:

Preprints available here are not Lancet publications or necessarily under review with a Lancet journal. These preprints are early stage research papers that have not been peer-reviewed. The findings should not be used for clinical or public health decision making and should not be presented to a lay audience without highlighting that they are preliminary and have not been peer-reviewed.

by profile | 26th Apr 22, 8:52pm 1650963135

Is the University of Southern Denmark, Danish Council for Development Research, Novo Nordisk Foundation, European Union FP7and the Danish National Research Foundation dodgy? Thanks for the heads up.

by agnostium | 27th Apr 22, 4:39pm 1651034398

Not saying that at all. Just pointing out that you don't understand how science works.

by agnostium | 26th Apr 22, 8:16pm 1650960991

You are either very thick or a fraud.