Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
China Construction Bank increased mortgage rates for six-month to five-year terms by between 20 and 50 basis points. Its six-month rate is now 4.35%, and its five-year rate is 6.35%.
TERM DEPOSIT RATE CHANGES
Westpac increased its three-month to five-year term deposit rates by 10 basis points, The three-month rate now pays 1.20%, and the five-year 3.80%.
FMA MAKES STOP ORDER RELATED TO HOUSING DEVELOPMENT
The Financial Markets Authority (FMA) says it has made a stop order against The One Management GP Limited regarding an offer in relation to The One Property LP, which is only available to wholesale investors, including eligible investors.
ANZ REDUCES ITS FONTERRA MILK PRICE FORECASTS
ANZ's economists have revised their farmgate milk price forecast for the 2021-22 season down 40 cents to $9.30/kg milksolids (MS), the bottom end of Fonterra’s current forecast range of $9.30-$9.90/kg MS. ANZ has also cut its forecast for the 2022-23 season by 80c to $8.50/kg MS. The reason for the reductions is the expectation commodity prices will keep falling over coming months. ANZ is NZ's biggest rural lender.
RBNZ TO RETAIN FLOOR SYSTEM FOR MONETARY POLICY IMPLEMENTATION FRAMEWORK
Following an internal review of its monetary policy implementation framework, the Reserve Bank says it will retain a floor system for monetary policy implementation, and doesn't intend to reintroduce credit tiers. It says a floor system is where all Exchange Settlement Account System (ESAS) accounts are remunerated at the Official Cash Rate (OCR). This framework was implemented in March 2020 following the removal of credit tiers on ESAS accounts. The Reserve Bank says the current settlement cash level (SCL) is more than sufficient to keep short-term interest rates anchored at or near the OCR and for payment and settlement needs. However, it expects the SCL to decline in coming years.
Separately, the Reserve Bank is advertising for a Director of Risk, Resilience and Compliance.
BEEF CATTLE NUMBERS RISE
Statistics NZ says the number of beef cattle in NZ rose 82,000, or 2%, to 4 million at June 30, 2021. Just over two-thirds of all NZ beef cattle are farmed in the North Island. Total beef exports were $3.6 billion for the June 2021 year.
SHEEP NUMBERS DIP
Statistics NZ also says the number of sheep fell 296,000, or 1%, to 25.7 million in the June 2021 year. A total of 22.9 million lambs were tailed, down 265,000, or 1% from the previous year. There are 13 million sheep in the South Island, and 12.7 million in the North Island.
DAIRY CATTLE NUMBERS SLIGHTLY LOWER
And finally Statistics NZ says the total number of dairy cows and heifers in milk or calf fell 32,000, or 1%, to 4.8 million. There was little change in the total number of dairy replacements, being the remaining dairy cattle to restock herds, with 1.2 million in total. That's down 1%, or 9,000, year-on-year. There are 3.7 million dairy cattle in the North Island, and 2.5 million in the South Island.
COAL BOILERS GOING FROM SCHOOLS
Climate Change Minister James Shaw says a $10 million investment from the Government’s $220 million State Sector Decarbonisation Fund will see all remaining coal boilers in New Zealand schools replaced with renewable woody biomass or electric heating sources by 2025. This will reduce carbon emissions by around 35,400 tonnes over 10 years, Shaw says.
SHARE MARKETS WEAKER
At the time of writing the NZX50 is down 137.68 points, or 1.17%. In Australia the ASX200 is down 169.80 points, or 2.31%.
NZ DOLLAR A LITTLE HIGHER V GREENBACK & AUSSIE
The Kiwi dollar is a bit higher on the day against both the US dollar and the Aussie dollar. At the time of writing it's at US64.28 cents, up about 20 basis points on the day, and it's up about five basis points against the Aussie at 90.38c. Against the euro it's at 61.01 euro cents.
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29 Comments
Incredible fall off on the national sheep flock. Virtually 66% reduction from the numbers of the halcyon mid 80s. Except then of course the product itself was vastly inferior to that of today. Presumably beef tonnage growth on the other hand, is largely courtesy of dairying which as such produces beef virtually as a by product, that is manufacturing grinding meat, a 100% commodity trade. There is there, some irony then. That was the nature of the majority of sheep meat in mid 80s.
We'd had this demographic bulge making labour was really cheap, an extraordinary period where international trade was growing rapidly which drove down commodity prices and really subdued demand due to monetary conditions after the financial crisis. Now those trends are normalising gradually.
Bringing the population of China (20% of the worlds population) into the global workforce was always going to have a big impact. Demographic shifts (low birth rate, and slowing rate of urbanization) were always going to reduce China's deflationary impact on global labor/manufacturing costs - but Covid and now Ukraine situations have highlighted the risks to companies of outsourcing so much production to the lower costs countries and the question is how much of a retreat we see in globalization as a result.
Developed countries could run ultra loose monetary policy while the inflationary impacts were masked by imported deflation. Will be interesting to see how things unfold over the next decade.
Valid point JJ.
Paradoxically in my industry it was felt that technology would ultimately bring jobs back to the higher wage western countries. Almost depressingly we see that in fact the mega Chinese businesses have used the massive gains from outsourcing to invest in technology and obtain volume based discounts on the multiple componentry required by these machines to manufacture dentures, crowns, etc. Sadly the small scale NZ manufacturing company in this space pays a premium for the technology and consumerables. Supply chain issues are giving us a point of difference spasmodically but as for the future???
Laws of unintended consequences????
Economic sabotage???
Who knows ...
Companies are always trying to save a buck, but perhaps the real cost of the massive amounts of outsourcing is only just being felt, so perhaps the pundits' prediction about manufacturing coming back may bear fruit.
I guess the added issue for dentistry is the high value of the produced item relative to size, if the labour is 1/20th the price then you can afford to spend more on priority international freight.
Is 3D printing of teeth a thing yet?
The prosperity of that are largely dependent on international fortunes. Which are potentially not looking great, although fortunately we peddle in basic commodities which will have a lot of demand pressure in the next 12-24 months. There's going to be a shortage of calories out there.
Couldn't care less about housing, it's the real productive economy that should keep people awake at night.
Housing and the NZ economy are not mutually exclusive for a number of reasons. Considering the wealth effect, the SME capital base, services.
If housing goes, the neg imacts will be immense. Can I prove and quantify it? No I cannot.
It's circular.
You can't have a booming housing market with a dead economy.
A flat housing market stifles internal economic activity.
Housing gets a way, way disproportionate level of news and mental energy, because I guess most people's experience with the economy involves going to their job, and going home.
There's not a massive amount of profit building homes, so a fallback in values will mean less houses being built. So the building sector takes a hit, as well as ancillary industries like architecture, trade supplies, whiteware retailers.
I predict more $2 shops and cash converters opening.
On Wednesday, a federal appeals court in New York upheld the dismissal of lawsuits against the securities regulator brought by Madoff investors. The court said the SEC’s actions and “regrettable inaction” were protected by a law that shields federal agencies from liability.
The lack of acccountability is dreadful.
https://www.reuters.com/article/us-madoff-sec-idUSBRE9390X420130410
It says a floor system is where all Exchange Settlement Account System (ESAS) accounts are remunerated at the Official Cash Rate (OCR)
So, commercial banks currently have about $46 billion of deposits in their RBNZ deposit (settlement) accounts. These balances are earning interest at OCR levels. That's nearly $2 million a day of Govt cash being paid to the banks. Why exactly?
Are you kidding or just missing the point that the Crown in respect of the RBNZ has a liability to authorised QE bank agents which entails a cost of funding?
Banks don't take deposits and they never lend money. They are in the business of purchasing securities. The RBNZ purchases government securities from bank sellers. Now the RBNZ owes those banks money and it creates a record of the money it owes, which we call deposits - source.
Re the MFB controversy this week, ignoring the inappropriate personal comment, Henry was correct about the float being overpriced. But you cant stop people from buying into a float that was clearly at least 40% overpriced its a free market. Seasoned market watchers could see what it was and did not subscribe.
... as the father of a Euro-Asia lady , I get the offensiveness of Henry's comments ...
Nevertheless , Nadia sold out ... when MFB listed , 88 % of the IPO money went to insiders , for them to bail out ... just 12 % went to the actual company , for growth & debt ... all except one of the insiders took the money bag & ran ... absolutely disgraceful that the NZX still permits this sort of BS to occur , to mislead investors ...
It’s good to get out of the tiny echo chamber that is economic commentary in little ole NZ.
over at the excellent Macrobusiness in Aus, they reckon the market’s expectations of how high the OCR will peak are ‘delusional’:
https://www.macrobusiness.com.au/2022/05/markets-forecast-interest-rate…
Countdown are gonna freeze the prices on 500 lines , throughout winter ...
.... forgive me if this point has been raised already , but does that mean none of those 500 will be " specialled " too , as supermarkets do , rotating weekly specials around the aisles ? ..
.. if so , the cost to CD of the " freeze " may be negligible ... price dont go up , nor down ... A great bit of superb self promotion , & Mr Gumby ( Luxon ) fell for it ...
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