Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
There have been no mortgage rate changes so far today.
TERM DEPOSIT RATE CHANGES
SBS has tweaked some of its TDs up by 5-10 basis points and ICBC has moved up its term deposits across all maturities by between 10 and 20 bps.
CROWN FINANCES BETTER THAN FORECAST ON STRONG TAX TAKE
The Crown accounts for the nine months to the end of March, show the Operating Balance before Gains and Losses (OBEGAL) deficit was $8.1 billion, which was $4.1 billion below that forecast in December’s Half Year Economic and Fiscal Update. Tax revenue was $2.7 billion above forecast at $78.6 billion, due to better-than-expected corporate profits and a strong jobs market. This was partly offset by lower GST returns. Core Crown expenses were close to forecast at $92.6 billion. Net core Crown debt stood at 36.3% of GDP, $155 million less than forecast. The Budget is on May 19.
ELECTRIC VEHICLES ACCELERATE IN RECORD YEAR FOR VEHICLE IMPORTS
Statistics New Zealand reports that Imports of fully electric vehicles more than tripled in the year ended March 2022, amid a record-breaking year for imports of all vehicle types. The total value of passenger motor vehicles imported in the year to March 2022 was $6.1 billion, an increase of 50% on the previous year. While this is partly due to the year ended March 2021 being heavily affected by COVID-19, this still represents the largest value of vehicles purchased within any year ended March on record.
BNZ TOPS $700 MILLION FOR HALF-YEAR PROFIT
BNZ's half-year profit rose 7.4% as income rose and expenses fell. BNZ's net profit after tax for the six months to March 31 rose $49 million to $709 million from $660 million in the six months to March 2021.
JOB ADS STILL GOING UP
Hard on the heels of Wednesday's reporting of still record unemployment lows at 3.2% comes news that job ads as measured by the BNZ/SEEK Employment Report rose 2.6% in April. "If the 2.4% increase in March’s job advertising was about getting past the worst of Omicron’s spike, the 2.6% gain in April was an indication there is broader-based momentum at play now. And, yes, this marks a novel record high. Then again, this is consistent with employment intentions, from various business surveys, being solid, even with the recent economic challenges and the official news of rising wage inflation," BNZ senior economist Craig Ebert said.
AND THEN THERE WAS ONE...
The Government says four years into a world-first attempt to eradicate Mycoplasma bovis, agreed jointly between the Government and farming sector groups, just one infected property remains in New Zealand. Prime Minister Jacinda Ardern and Agriculture Minister Damien O'Connor marked the milestone at the national bulk milk testing lab MilkTestNZ in Waikato alongside eradication partners DairyNZ and Beef + Lamb NZ. Also announced: The Budget will contain a $111 million boost for biosecurity.
AIR NEW ZEALAND GETS ITS $1.2 BILLION
The refuelling is complete for our national airline. Air NZ reported significant interest in the bookbuild for the 272 million shares not taken up in its capital raise, with a final price achieved of NZ$0.81, which is a premium to the offer price (which was 53c per new share) of NZ$0.28 per share. Shareholders who didn't take up all their entitlements to buy shares in the offer get the extra 28c, with Air NZ getting the 53c. Air NZ chair Therese Walsh said the $1.2 billion raised would allow the airline to repay the government loan and strengthen its balance sheet as part of the broader $2.2 billion recapitalisation of Air NZ.
BRISCOES' $4 MILLION OMICRON SALES HIT
Retailer Briscoe Group is estimating that its financial year first quarter sales for the period to May 1 might have been hit by about $4 million as shoppers kept away through fears of Omicron. Notwithstanding that, the group still made $176.2 million sales, being 1.77% higher than the $173.1 million achieved for the same quarter of last year.
SO THAT'S SUSTAINABLE
We've been wondering what these 'sustainable' house prices are the Reserve Bank has been talking about now for a little while. Well, apparently they are about 5%-20% less than where house prices are at the moment. Thanks to MPs at Thursday's Finance & Expenditure Committee meeting for asking the RBNZ the question.
...AND THEY'RE OFF!
After two years of confinement in good old NZ, the feet of some folk are reaching unscratchable levels of itching. But these folk are going to have a go at scratching the itch anyway. A Horizon Research survey finds 23% of adults planning to holiday overseas. This equates to around 926,500 people. Around 76,900 say they’ll go this month. Don't forget your masks.
GOLD CRACKS US$1900 AGAIN
In early Asian trading, gold is at time of writing just sitting on US$1900, having risen US$18 so far on the day, but it's up more like US$35 since this time on Wednesday.
SWAPS GO INTO REVERSE AFTER THE FED DOES ITS THING
We don't have today's closing swap rates yet, but the Fed rate hike - or more to the point, the Fed ruling out 75 bp hikes in future - has taken the steam out of things and NZ swaps a short time ago had reversed many of yesterday's gains, with falls in the 7-10 bps range. The 90 day bank bill rate is up 1 bp today at 2.15%. However, the Australian Govt 10 year benchmark bond rate is down 12 bps at 3.41%. The China Govt 10yr is at 2.85%. The New Zealand Govt 10 year bond rate is down 6 bps to 3.77%. The US Govt 10 year is up a little (3 bps) today, but down on yesterday at 2.94%.
STOCKS FIND SOME CHEER
Wall Street was really cheered up by the Fed ruling out large (75 bps) rate hikes in future and surged 2.8% to celebrate. Tokyo is still closed but Shanghai has re-opened nearly 1.0% higher and Hong Kong is up 0.8%. The ASX200 is up 0.7% in mid-day trade, while the NZX50 is up for the first time this week, by nearly 0.5%.
NZ DOLLAR MIXED - STILL SLIDING AGAINST AUSSIE
The Kiwi dollar is up against the US dollar at US64.7c from US64.4c this time Wednesday. Against the Aussie though we are still on the slide, falling to A90.1c from A90.7c on Wednesday. Against the euro we are at 61.3 euro cents from 61.2c on Wednesday. The TWI-5 is virtually unchanged at just a touch under 71.8.
BITCOIN PUSHING US$40,000 AGAIN
Things are much perkier in cryptoland on Thursday as well. Bitcoin is pushing the US$40,000 mark again, up 4.65% in the past 24 hours at US$39,720, having been as high as US$39,900 and as low as US$37,970. If your name's Musk you could have a go at buying the whole crypto market on Thursday for US$1.81 trillion, which is an increase in value of 5.23% over the past 24 hours.
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79 Comments
Yes plenty of taxpayer money handed out to Farmers who brought Bovis into the country, paid handsomely for their infected cattle disposal (bitching an moaning of course), and back in business with a new herd, new tractor and off we go to protests with groundswell.. What have I missed??
You need to become more informed! The bulk of dairy farmers wanted to self manage M Bovis, Our fearless leader and cohorts saw this as a great PR opportunity to produce another "world first" - a massive gamble! Despite all her crowing yesterday there is still lakes of water to go under the bridge yet. Wouldn't get to excited yet!!
Am also waiting for KW's admissions of error."It now seems likely that Mycoplasma bovis is in New Zealand to stay. Just like the rest of the world, we must learn how to live with it. We do not yet have to give up totally on hopes of eradication, but eradication is looking more and more unlikely." 17/01/18
Speaking as someone with no expertise in the area, the M. Bovis work looks like a massive success and a great job by those involved. I remember talk a couple of years ago about how terrible and futile the eradication program was, glad to see this was apparently mistaken.
Fed sends swaps into reverse
Now I'm confused. I have learned from experts on here that the market leads central banks by the nose on rates...
On a related note, personal expenditure is dropping fast now in nominal and real terms, with the % of spending on credit cards compared to debit cards going through the roof. Missed mortgage payments are also increasing already. Higher prices and the initial round of mortgage rate increases look like they have already stalled consumption and we know what happens next.
There are a lot of articles like this one around in the US - it really is time to question the established orthodoxy.
Can we just be sensible and agree that the relationship is reciprocal with the influence shifting depending on the context?
For example, central banks using yield curve control (either fully or in part) have almost complete control of swap rates in their currency, whereas central banks that are not intervening assertively in bond markets tend to be reactive to market rates. However, even in this latter case, the market adjusts to what central banks actually do. As shown by the example in the article (and thousands of others).
I think its quite feasible that as central banks raise rates, we actually start seeing even more inflation! So agree this isn't black and white....but I miss you're point somewhat as it appears that you believe the current situation we are in is normal and should be allowed to carry on without consequence into the future.
Is that your point?
Inflation in tradeables requires - demand to exceed supply/willing buyers/availability of cash or credit - a liquidity crisis is impending and evidence already of consumer spending going down so tradeables unlikely to stoke inflation. Non tradeables - Mortgage interest/rates/insurance/energy /taxes all going up so much future inflation will come from non tradeables - RBNZ/Banks/Energy & fuel suppliers etc Im looking at you Orr and Robberson.
What experts Jfoe?
Inflation is going to be bludgened lower by stripping the average person of any ability to discretionary spend. It's a blunt tool and life is about to become incredibly miserable for many. You are not going to find it difficult to buy a second hand Stabicraft in 6 months time.
Life already is miserable for many Te Kooti - its just that those who own assets and have been creaming it while interest rates went to zero....missed out on that suffering and have often been completely out of touch (not an accusation towards you in particular...just a general society wide observation).
Raising rates may not make life any more miserable for those suffering than what it has already been.....it will be like getting blood from a stone.
It will be those with a lot to lose (asset owners) who may now start to whinge how unfair this is as they see their paper wealth disappearing before them. Landlords and businesses will try to push costs onto customers, so they don't lose out, but how far can we go with that...it will be like going back to 2020 where their will be holes in balance sheets across the economy....and the only solution will be even more QE from central banks which will make the situation even worse down track! (this business cycle has lasted about 2 years...will the next one be even less as society realise that this is a fools game?)
I realise that, but it will become more miserable trust me. Unemployment will rise and 99% of us are going to experience a reduced standard of living - regardless of what the starting base was. Incomes are not going to keep up with inflation and the only tool to quell inflation is to force a recession. The already miserable may do comparitively better, but that's it.
I pondered this on a recent early morning drive from a holiday hotspot to catch a flight, I must have passed 50+ late model double cab utes towing late model fishing boats on the way to the several boat ramps near me. Many of these are secured on recent home equity increases.
Financial repression to pay back the loose fiscal/monetary policy of the last two years....reaping that what we sow.
ps...you sound like you might be in the doom goblin (lol) club now.....given how miserable you say the future is going to be.
I'm less doom goblin than you now I think. Times are changing.
Ha, yes I'm actually very bearish on the economy. The light's are on, the dj has stopped and the cheques arrived. Having said that, Central Banks are talking very tough but will be secretly hoping that changes consumer behaviours enough that they do not have to follow through.
I'm still not a DGM though......
Why do people put emotions into it?
It's just physics - with a dash of chemistry, biology, call it ecology.
People get confused when they believe economists; not much further down the track which spawned priests and witch-doctors. Firstly, entrail-reading doesn't work, secondly, emotions are irrelevant. Predicting the end to exponential growth on a finite planet doesn't make you a doom-merchant; it makes you a truth-caller. Messenger-denigration is usually an attempt to shoot the message.
I agree about the Stabis (and the trucks towing them); why would you hitch so much debt to such a depleted resource, so late in the trajectory? Any of either, bought new, won't see their working lives out, for lack of fuel. Which makes them stranded assets.
Have no fear , Super Robbo is here ... It's Budget Time ! ..
.... and , he'll throw another $ 6 Billion into the economy ... which by an economic miracle , will not be inflationary ... whereas , if he gave it to you in tax cuts and you spent your money yourself ... that would be inflationary ... naughty boy , you !
Now I'm confused. I have learned from experts on here that the market leads central banks by the nose on rates
You obviously are confused, because that's not what anyone has been saying.
The market by and large dictates rates to the RBNZ, as evidenced by rates moving down today without Adrian Orr having to lift a finger. Global events, whether they originate from central banks or not, move rates here.
Banks are the market makers. My bank in London had 10 sales people as far back as the late eighties.
The market maker has to have direct access to the Treasury market to hedge the swap commitment.
My department was the primary dealership.
Large investors, read hedge funds etc, use their bank prime brokerage accounts funded by bank credit.
Come on, I know that you understand there is a two way dynamic between market rates and central bank interest rates (and signals). The weighting of that influence each way varies depending on the context, what other central banks are doing, and the willingness of the central bank to step in and exert control.. This is not at all contentious.
The RB Governor tells us he regrets nothing about mon policy, (& the Minister of Finance seems not to care). Between them these two have (a) cost taxpayers $7.2bn in losses on the LSAP programme so far, (b) delivered us core inflation well above target and worst for 30 years, Link
After two years of confinement in good old NZ, the feet of some folk are reaching unscratchable levels of itching. But these folk are going to have a go at scratching the itch anyway.
It seems like every week another family we know decide to make a go of it overseas, usually Australia. I don't know if we are just seeing the resumption of normal trends or if the scenario in New Zealand over the last couple of years has compelled people to seek new opportunities abroad.
We know several people off to Australia or Europe. They all feel they will earn more, save more and get ahead easier. I hop so for their sake. Unfortunately they either have trade or a profession. Not great news for our economy. Mind you the landed gentry in NZ have certainly done their best to make it harder for those wanting a first home.
It's also the scenario over the next couple of years - & beyond depending on the result of next year's election.
Because many more of us now have realised that we can't ever trust again Govts who lie to us (including lies of omission) & a complicit mainstream media. Not that the Australian govt is any better.
Good on you. I would do exactly the same as you and Brock are doing. This country is a basket case. Lovely if you have plenty of money.
I lived in Aus from 2010-2014, and really liked it, although it’s far from perfect. But for the average person it can offer a decidedly better standard of living than NZ.
I only came back because my mum was very sick and my brother couldn’t come back from Europe. I guess I took one for the family.
Hoping the inflows of tourists at least match outflows of those holidaying overseas. Hate to think thats a net loss - a slowdown in domestic spend as money is shuffled overseas on holidays.
If the rest of the world got its post lockdown overseas holiday splurge done while we were still locked down and not an option, we might find a short term net loss.
We can always look through this though. I'm still looking through... (mostly windows that need cleaning)
I bought a hybrid off an Auckland dealer last year in June and it was booming then. I rang him today and he said it was pretty quiet up there. Houses go down in value and sales elsewhere go down. This country is certainly a one trick pony. Housing is huge here and general sentiment follows housings trajectory.
A net loss is a blessing - ex fossil energy we're overstocked in NZ.
And anyone silly enough to want to go to the Northern Hemispnhere - Europe particularly - isn't reading the tea-leaves too well.
I'm more interested to see whether they get 'away' before the global economy tanks - through too little energy being contested by too many.
Countdown to freeze prices on essential items over winter. Might CPI inflation start looking better over the next few months?
https://www.nzherald.co.nz/nz/cost-of-living-crisis-countdown-to-freeze…
In NZ context, the OCR is a domestic policy tool whereas the swap rates are an international finance cost.
If the swap rate exceeds the OCR then interest rates will rise much faster than the OCR for lending. But saving rates are primarily driven by the OCR, not the swap rates. So if you have a low OCR but a high swap rate environment, then you'll have a big gap between the two, while the usefulness of the OCR as a consumer spending tool diminishes if the swap rates get way higher than the OCR.
That's from the demand side of it anyway. The supply side bit I'm not so sure about, in terms of what happens when both the OCR and the swap rates rise - do banks have two different costs to pass on, or is it an excuse to just keep moving rates upwards even though one is largely superseded by the other?
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