What happened Thursday

Business / news

A review of things you need to know before you go home on Thursday; silence from banks after OCR hike, Fonterra earnings slip, retirees hold the KiwiSaver balances, swaps inch up, NZD inches lower, & more

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

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

MORTGAGE RATE CHANGES
Despite yesterday's OCR hike, there are no mortgage rate changes to report yet. See this.

TERM DEPOSIT RATE CHANGES
There are no term deposit rate changes either yet.

INFLATION BITES
The Xero Small Business Index for April 2022, is reporting that small business wages and jobs climbed despite a decline in sales. Wages rose +4.8% year-on-year (y/y) in April, after a 4.4% rise in March. The wages growth has clearly stepped up in the past three months - averaging 4.4% compared to 3.9% in the previous three-month period. The same report showed that SME revenue growth slowed sharply to +2.9% on the same basis in April, coming down from +7% in March 2022.

FEWER PEOPLE BORROWING LARGER MORTGAGES
The latest Reserve Bank figures show the average-sized new mortgage hit a new record high of over $400,000 in April - while far fewer people were scrambling to borrow.

SECOND HIGHEST
Fonterra is reporting lower earnings for the first nine months of the financial year in the face of margin pressures due to the high current milk price. It also released its first estimate for the 2022/23 season, with a mid-point of $9/kgMS, slightly lower than the record high indicated for the current season.

HIGHER DEMAND, LOWER YIELDS
The cheque-books were open at today's Government bond tender with $950 mln bid for just $200 mln on offer. The April 2025 $100 mln went for an average yield of 3.34% which as lower than the 3.42% at the equivalent tender two weeks ago. Only 5 of 34 bidders won any share of this tranche. The May 2032 $100 mln went for an average yield of 3.54%, down from 3.71% two weeks ago. 12 of 45 bidders won share in this tranche. Yields for NZGBs seem to have peaked in April.

LEFT ALONE
Over two thirds of kiwis aren’t touching their KiwiSaver accounts when they become eligible at 65 years old, according to data from ANZ Investments. Of the members of ANZ’s KiwiSaver schemes who became eligible to make a withdrawal in the 12 months to April 2022; 71% made no withdrawal, 17% made a partial withdrawal and 12% withdrew all their savings. This covered a period when banks offered very low term deposit rates and KiwiSaver funds offered much better returns, albeit with risk to the capital sum.

SURPRISE FALL IN INVESTMENT
In Australia, investment in new private capital fell unexpectedly in Q1-2022, when a solid +1.5% rise was anticipated. This was because investment in buildings and structures fell -1.7% while investment in plant and machinery rose by +1.2%.

VOTE FIRST, THEN WE SLUG YOU
In Australia, power prices are regulated. Now just days after the election their regulator has announced new higher "default" power prices, up by between +1.7% and +8.2% above inflation in NSW, south-east Queensland and South Australia from July 1. Soaring coal and gas prices are inflating wholesale prices, mostly war-driven.

SOUTH KOREA RAISES RATES TOO
South Korea raised its OCR by +25 bps to 1.75% in a move that was no surprise in response to rising inflation.

SWAP RATES SETTLE, BUT FIRM
We don't have today's closing swap rates yet but they have probably firmed, at the short end at least. The 90 day bank bill rate is up +7 bps today at 2.40%. The last time it was at this level was in July 2016. The Australian 10 year bond yield is now at 3.25% and up +1 bp from this time yesterday. The China 10 year bond rate is now at 2.78% and down another -2 bps as concerns about the Chinese economy grow. The NZ Government 10 year bond rate is now at 3.53%, down -2 bps and now below the earlier RBNZ fix for this bond which was up +9 bps, now at 3.56%, post the OCR release. The UST 10 year is now at 2.77% and unchanged from this time yesterday.

EQUITIES MIXED YET AGAIN
The S&P500 ended its Wednesday session up almost +1% on Wall Street with an afternoon recovery. Tokyo has opened today little-changed. Hong Kong has opened down -1.1%. Shanghai has opened flat. The ASX200 is down -0.5 in early afternoon trade today, while the NZX50 is up +0.1% but fading well into the afternoon trade.

GOLD SOFT
In early Asian trade, gold has fallen -US$10 to US$1852/oz.

NZD SETTLES A LITTLE LOWER
After the OCR announcement the Kiwi dollar rose, and then settled back to 64.8 USc. Against the AUD we are little-changed at 91.4 AUc. Against the euro we are a little softer at 60.5 euro cents. That all means our TWI-5 moved down -30 bps to 71.6.

BITCOIN LITTLE-CHANGED
Bitcoin is now at US$29,838 and up +0.9% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.5%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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29 Comments

by Justa comment | 26th May 22, 4:00pm 1653537631

And now for the NZ Bank OCR Forecasting Awards. 1st place and Gold Award to Zollner/ANZ for the gutsy and accurate forecast of 2 x 0.5s. Most Improved Category goes to Westpac, have really turned it round in the last 6 months now with new economists it seems. And in last place the Wooden Spoon goes to the oddly dovish and consistently behind the curve ASB for 2 x 0.25, whose forecast of 1.5% at present would be 25% behind the curve. Special mention to our local Kiwibank, who came in 2nd this time with some great commentary in the last few weeks. Have a great day at your interest rate reset meetings, and remember, don't consume too much afternoon tea, we have to watch our inflation!!

by Foxglove. | 26th May 22, 4:27pm 1653539247

So a good number of seniors had sufficient faith in troubled times to retain their Kiwisaver rather than withdraw. Personally I have not a lot of regard for the late Dr Cullen but credit where credit is due. He did introduce here a solid and viable scheme that has now well proven its worth. Put that alongside the Cullen super fund and you cannot deny that he alone achieved more than any other, the big talkers and do nothings that is.

by vman | 26th May 22, 5:03pm 1653541432

It's a shame in1997 we had a referendum for compulsory super,imagine how well of NZ would be now.Rejected by 92% of voters...so those who always say it's my money and I know what's best for it shot themselves and the nation in the foot by rejecting it.

It's fair to say,a lot of the real meaningful changes have come under labour Governments,in spite of what folk say.

Excerpt from NZ Herald 2000;

The revival of the NZ First scheme follows the resounding public rejection of compulsory super in a 1997 refer-endum.

The referendum, which centred on a different scheme to the NZ First proposal, was promoted by Mr Peters, the then Prime Minister, Jim Bolger, and others including Act, after NZ First secured it as part of the party's coalition deal with National.

The present Prime Minister, Jenny Shipley, led the opposition to the scheme, which was rejected in the final count by 92 per cent of voters.

But Mr Peters, whose party's success has previously been drawn substantially from the superannuitant vote, said yesterday that the referendum had not voted the problem of super away.

by Foxglove. | 26th May 22, 5:20pm 1653542453

Aye and even earlier the Kirk government introduced compulsory super. That much maligned government was undone by the oil shock and the vicious vehemency of Muldoon. Once Kirk had died nobody in government could withstand Muldoon. Apart from the super that government introduced ACC, a Property Speculation Tax, sent a Frigate to protest the French nuke tests and Kirk had the backbone to cancel a Springbok tour. Different times for sure but they were voted out and I admit I was party to that too.

by Jonny.Foe | 26th May 22, 6:04pm 1653545075

I've been pretty impressed with Jarod Kerr's (kiwibank) contributions this week to be fair. He has called out clearly and in plain English that the aggressive RBNZ posturing and hikes are bad news for workers, and risky for the economy.

by Independent_Observer | 26th May 22, 6:14pm 1653545691

What we've done 2008 - now has been risky for the economy.

What we're doing now might be the first step towards something that is actually going to be sustainable over the longer term.

We've become conditioned to believe abnormal monetary conditions are normal....and now returning to normal, abnormal.

by northman46 | 26th May 22, 4:08pm 1653538116

NZD still struggling to keep hard.

by Foxglove. | 26th May 22, 4:31pm 1653539491

Sometimes it’s good to be hard, other times, hard to be good!

by Hastings | 26th May 22, 4:15pm 1653538519

In dark times we need hope, how about a new party Chloe plus Winston. Sounds nuts but I'd go for it in a blink.

by Pragmatist | 26th May 22, 4:55pm 1653540905

Star wars: a new hope, starring Chloe as Leia and Winnie as ... Anakin Skywalker?

by kiwikidsnz | 26th May 22, 5:25pm 1653542756

Winston is more Darth Vader

by JimboJones | 26th May 22, 6:54pm 1653548069

I’d vote for Chloe and Shaw but unfortunately the greens have rules against picking the best people for the job, that would be racist and sexist. But choosing people based on their race and sex is somehow fine.

by Room319 | 26th May 22, 7:00pm 1653548447

Way too many simps on this site for her.

by Independent_Observer | 26th May 22, 4:34pm 1653539650

Wage growth data from Xero is interesting....if the RBNZ data is seeing the same, its more evidence for them to keep hiking.

by Pragmatist | 26th May 22, 4:55pm 1653540948

To quash wage growth? You don't want people earning enough to live?

by Independent_Observer | 26th May 22, 4:59pm 1653541182

I didn't set the inflation mandate so you're barking up the wrong tree :-)

by Pragmatist | 26th May 22, 5:03pm 1653541431

CPI doesn't measure wage inflation, and you're the one calling for "them to keep hiking." So no, i'm not barking up the wrong tree.

by Independent_Observer | 26th May 22, 6:04pm 1653545047

Ok, you know best then.

(btw - central banks don't want wage inflation as it will feed into a CPI inflationary feedback loop).

by Pragmatist | 26th May 22, 9:30pm 1653557408

That's a laugh, given that's its CPI inflation that's triggered the wage inflation.

by vman | 26th May 22, 5:08pm 1653541695

We only want the bottom feeders not earning enough to live...cancel the minimum wage increase and give them a $2 a week tax break.

by Rex Pat | 26th May 22, 6:20pm 1653546046

Yawn. It is the labour Government that oversaw the largest wealth transfer in NZ history, has increased core government spending by over 10% every year and is now going to preside over the disembowelling of the mortgage belt. You would have to be a special type to support them.

by vman | 26th May 22, 6:53pm 1653547994

Yawn...takes a special type to want stop folk at the bottom earning a decent living,whilst rewarding those at the other end with even more.

by JimboJones | 26th May 22, 7:00pm 1653548441

I’d say the National party saw a lot of wealth transfer too. Let’s face it, the RBNZ was actually the culprit, there is no debating that.

As for government spending, not surprising really considering English closed his wallet so tight that the whole place was falling to bits.

by vman | 26th May 22, 7:28pm 1653550088

Yea,funnily enough,hospitals etc cost a lot to build...

by GV 27 | 27th May 22, 6:18am 1653589092

The place is still falling to bits, you're just paying through the nose for endless case studies and evaluations instead of stuff actually being built. Look beyond the announcements. North west Light rail? How about the North West bus way? OK, what about the buslanes on the shoulders and stations at off-ramps... you can see where this is going.

Lots of announcements though.

by Squishy | 26th May 22, 7:26pm 1653549977

Over two thirds of kiwis aren’t touching their KiwiSaver accounts when they become eligible at 65 years old, according to data from ANZ Investments. Of the members of ANZ’s KiwiSaver schemes who became eligible to make a withdrawal in the 12 months to April 2022; 71% made no withdrawal...

I wonder how many people just...forget they have it?

by JimboJones | 26th May 22, 7:37pm 1653550657

A couple hundred k in KiwiSaver is nothing compared to a couple of mil of untaxed “hard earned” capital gains

by HouseMouse | 26th May 22, 8:48pm 1653554881

Superb article by Brian Fallow for those who have Premium at the NZ Herald:

https://www.nzherald.co.nz/business/brian-fallow-the-message-adrian-orr…

by nktokyo | 27th May 22, 7:24am 1653593084

Somehow I don't think the lefties are going to get as much support for their cost inflating ideas like compulsory unemployment insurance