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A review of things you need to know before you go home on Friday; finally one bank responds to the OCR hike, consumer sentiment remains poor, jobs recover by earnings don't; swaps stable, NZD firms, & more

Business / news
A review of things you need to know before you go home on Friday; finally one bank responds to the OCR hike, consumer sentiment remains poor, jobs recover by earnings don't; swaps stable, NZD firms, & more
[updated]

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

MORTGAGE RATE CHANGES
Despite the Wednesday +50 bps OCR hike, so far Kiwibank is the only bank to have changed its floating rate, raising it the same amount. Late in the day, WBS (Wairarapa) raised both its fixed and floating home loan rates by +50 bps for all terms.

TERM DEPOSIT RATE CHANGES
Kiwibank raised its key savings rates by between +30 bps and +40 bps. And Rabobank raised almost all its rates. It now has a 3.50% one year TD rate, and a 4.15% 3-yr TD rate.

DOWN IN THE DUMPS
The ANZ-Roy Morgan consumer sentiment survey for May remains weak. Consumer confidence fell -2 points in May to 82.3, above its record low of 77.9 in March, but still dire. The proportion of people who believe it is a good time to buy a major household item, the best indicator for spending, fell -7 points to -30. But in welcome news for the RBNZ, inflation expectations fell from 5.6% to 5.1%. Consumer intolerance of inflation is the one certain thing that will get the RBNZ to change tack.

MORE JOBS
Westpac analysts are pointing out that the number of filled jobs rose +0.6% in April, according to Stats NZ’s monthly employment indicator. That reversed most of the drop seen in February and March, when the Omicron wave was at its peak. Looking beyond that interruption, they say the pace of employment growth has slowed in recent months. And the pace of earnings growth fell as well.

MORE JABS
The Government is funding a second booster jab for at-risk people. Final decisions on the make-up of this group will be made within the next two weeks and will be several hundreds of thousands. This follows a recommendation from the COVID-19 Vaccine Technical Advisory Group that a second booster dose may be beneficial for high-risk people.

TAPPING BOND INVESTORS
A note on the NZX website today revealed that BNZ is about to launch an offer for a five year unsecured unsubordinated fixed rate bond to retail investors and to certain institutional investors. More details when we know them.

GOING BACKWARDS I
Equity market woes on top of rising interest rates which depresses bond prices has meat that KiwiSaver balances fell in March from December. They fell by -$2.4 bln. It is not the first time overall balances have fallen. They fell by -$2.0 bln in the mark quarter on 2020 and by -$1.1 bln in the December quarter of 2018. So it is the largest fall ever recorded. And remember, the investment fall will have been much larger, hidden by the relentless inflow of payroll deductions. It is easy to accept that the value of overseas investments might be more volatile and include fewer conservative or defensive elements. But for the first time in the history of KiwiSaver, the value of New Zealand investments fell too, and by more than -$1 bln and this is where those conservative and defensive assets are held. KiwiSaver funds weren't the only managed funds to retreat. More here.

GOING BACKWARDS II
China reported that its industrial companies saw profits grew +3.5% in the four months January to April. In the three months January to March they grew +8.5%. That means the April-alone result was very tough for their industrial companies. Profits at industrial companies fell -8.5% year-on-year in April alone. High raw material prices and supply chain disruptions have significantly squeezed margins.

AS EXPECTED
Australia reported that retail sales were up +0.9% month-on-month in April, and up +9.6% year-on-year. These are gains financial markets were expecting and reflect a slowing in retail demand. But this data is not inflation-adjusted, so that colours the results.

SWAP RATES HOLD
We don't have today's closing swap rates yet but they have probably held. (Update: in fact, they firmed at the end of trading.) The 90 day bank bill rate is up another +2 bps today at 2.42% and adding to a string of quite big moves up. The last time it was at this level was in March 2016. The Australian 10 year bond yield is now at 3.25% and unchanged from this time yesterday. The China 10 year bond rate is now at 2.76% and down another -2 bps and has fallen sharply this week as concerns about the Chinese economy grow. The NZ Government 10 year bond rate is now at 3.48%, down -5 bps and now similar to the earlier RBNZ fix for this bond which was down -7 bps, now at 3.49%, post the OCR release. The UST 10 year is now at 2.75% and down -2 bps from this time yesterday. There is certainly a rate inversion potential in bond yields. In fact its is here for swap rates already.

EQUITIES STILL MIXED
The S&P500 ended its Thursday session up +2% on Wall Street and holding the gain all day. So far this week it is up +4.0%. Tokyo has opened today up +0.8% and if that holds it will be down -0.7% for the week. Hong Kong has opened up a very strong +3.0% which, if it holds, means it books a +0.5% weekly rise. Shanghai has opened up +0.8% and if that holds it weekly loss will be reduced to -0.1%. The ASX200 is up +0.8 in early afternoon trade today and heading for a weekly gain of +0.3%, while the NZX50 is up +0.2% in afternoon trade, but that would lock in a -1.3% weekly loss.

GOLD HOLDS
In early Asian trade, gold has risen +US$2 from this time yesterday to US$1854/oz.

NZD SETTLES A LITTLE HIGHER
The Kiwi dollar is moving up marginally, now at 65 USc. Against the AUD we are little-changed at 91.2 AUc. Against the euro we are unchanged at 60.5 euro cents. That all means our TWI-5 moved up +10 bps to 71.7. A week ago it was at 71.

BITCOIN LOWER & VOLATILE
Bitcoin is now at US$28,861 and down -3.3% from this time yesterday. Volatility over the past 24 hours has been high at +/- 3.3%.

Daily exchange rates

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Daily swap rates

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46 Comments

recommendation from the COVID-19 Vaccine Technical Advisory Group that a second booster dose may be beneficial for high-risk people. MAYBE. Of course this amount of jabs has been widely tested and proven to benefits outweighing the (long term) risks. Luckily if you look at the sports world the sky seems to be clear as can be.

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We are just crossing into population wide negative efficacy against hospitalization (the efficacy is not strong enough to counter age demographics). Fully vaxed is well negative and boosted is getting there. The new shot will look really good in the stats for most of the winter so it looks like they have done something plus they have extra stock from the first booster.

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Is that guy who got 10 in one day still alive?

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Robbo decided to shuffle the NZ Super Fund over to the asset column in order to bolster the Government balance sheets, but it's not just cash under the mattress. What happens when the value of this Fund falls along with everyone's KiwiSavers?

I hope this little accounting trick isn't just being used to justify increased deficits and spending leading up to an election...

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Lolly Scramble Budget

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Its a double edge sword. If shares tank massively, so does the govts books. And who would advocate pouring more money into the Cullen fund right now? Not me!

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"a second booster dose may be beneficial for high-risk people."

If I roll I dice, it may be the number I want, or may be not.

Any mandates coming with this ?

 

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I've long been told that advocating for public health strategies which focus efforts on society's most vulnerable is dangerous misinformation, peddled by the likes of those far-right conspiracy theorists who signed the Great Barrington Declaration.

I'm sure it's different now, though. I probably just lack the degree of cognitive dissonance required to understand it properly.

It's a bit like how Sinovac is a terrible vaccine which doesn't work and should be avoided at all costs, yet the reason China's current zero-COVID policy is pure insanity whereas ours was pure genius, is that everyone's vaccinated now and therefore we can all just let it rip.

Difficult to reconcile that logic. The mind boggles.

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Shurely a boggle or three of the old Mind is a classic sign of Long Covid?

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I’m not sure what is hard to reconcile? We avoided Covid until we had a pretty good vaccine, all sounds pretty sensible. China did the same, but now instead of taking the good vaccine they are taking the bad one and then still avoiding Covid because their vaccine doesn’t work. 

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The part you're missing is the criticism of their harsh lockdowns. How effective their vaccine is or isn't is a different topic for discussion (however, besides being officially recommended by the WHO, it is the most widely used COVID-19 vaccine in the world, so we have plenty of data on its efficacy; I'll leave it as an exercise for the reader to look up the stats), but if we accept the narrative that it doesn't work, then their zero-COVID approach must surely be just as valid as ours was when we were all unvaccinated and vulnerable.

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If you accept the narrative that it doesn't work then all it was, was a placebo.

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I've seen data that suggests the Chinese vaccine is less effective than alternatives for the 1st dose but becomes more effective with the 2nd dose and ends up as effective as any with 3 doses.  I do not know if that is proven. But I do worry that we condemn the Chinese vaccine simply because it is Chinese.

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The Kiwi dollar is moving up marginally...

At least it's moving in the right direction for RBNZ now, raises are having some impact on stemming the importation of inflation.

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Has OneRoof seen the light in terms of balanced reporting?

an article challenging the Ashley Church universal truth that prices must double every 7-10 years:

https://www.oneroof.co.nz/news/41495#

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Wow I made it through the whole thing! 

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blasphemy

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I did the calculations a few years back and found that if it doubled every 10 years, in 100 years the average house price would be about $1 billion while the average wage would be about $1 million. So it would take 100 years to save a 10% deposit, and 1000 years of 100% wages to pay it off. Surely even the Church would admit that isn’t feasible. 
The next 10 decades, starting at $1 mil, would go $2 mil, $4, $8, $16, $32, $64, $128, $256, $512, $1024 million. 

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Nice!

 

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... if the entire population , all 7 billion of us  , was shifted to Texas , USA ... each person would have  a 10 by 10 meter plot to live in   .. ... the rest of the worlds landmass would be completely vacant of humans  ...

The point ? ... there is no shortage of land ... house prices are astronomical because of human mismanagement  ... not because of land scarcity ...

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Not human mismanagement, herd mentality. There's heaps of land but everyone's intent on living in a handful of locations.

Just find somewhere super inconvenient to live miles away from a supermarket. Should be pretty affordable.

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I realise that's kind of just a thought exercise, but there's no way Texas could sustain 7 billion people, even if they all happened to fit there with enough room each to swing a cat.

Physical space is not the same thing as carrying capacity. There's a reason why the population density map of Australia looks the way it does, and it's not because people happen to like ocean views.

Elon Musk appears to be a victim of this misconception, as do those who claim that NZ could host a population 10 times its current size just because Great Britain can.

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Tom Luongo characterizes Davos as an "Octagenarian Oligarch Cage Match".  RTWT. Enjoy.

"Soros is just your typical narcissistic bully, ready to tell you why you need to do his bidding to make him powerful. This will be the last time he makes a speech anyone listens to and the last time anyone will give a sh#t about who wins the fight between two old cripples at a globalist chug and tug."

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I see another large Queensland house builder has just gone under today, citing an unfeasible construction environment over there.

This all seems at odds with what I keep getting told on here. Something's awry, or I'm thinking in the wrong dimension or something.

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What do you keep getting told on here?

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That NZ is broken and it's housing industry is overpriced and disorganised, and Queensland is where it's at.

I'm starting to think there's nothing overly unique or exceptional about NZs current housing/economic situation, compared to everywhere else. Actually, most places seem worse.

Maybe we need to build an orbiting space station to move to.

 

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Went to bunnings yesterday, still no plasterboard. Keep in mind this is an Australian company, I can only assume we aren’t the only country with shortages otherwise why not import it from aus? 

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"Gib" board has a level of monopoly in NZ, and there's such a shortage some smaller players probably won't get any this year. Bunnings import a competing product, but because of the lack of official gib, every last sheet of the parallel product sells before it hits the shelf.

Fletcher's are apparently producing enough Gib each week to line 1000 homes.

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But what we are saying is that Bunnings NZ could sell plenty of Aussie plasterboard at a big profit, yet they are not. The only possible explanation is that they can’t buy it there either. 

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They can't buy more than they usually would go through. So there's no excess stock available in Aussie, yeah.

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Shusssssh, don’t tell Brock that…

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Presumably Brock, and the others leaving (including myself), consider more than just the stability of construction companies when embarking on a new life outside of NZ.

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Interesting that things aren’t quite as bad in NZ, yet…

Any thoughts why?

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Probably just that we have fewer large players in residential construction, and the risk is spread.

It's really the same story everywhere, no house builders have been making money for the last 24 months.

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The trouble will come here, it’s just a bit delayed

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Mmmm, in the short term, people going under are going to be marginal businesses that just can't cope with how much longer anything's taken to be completed. I think the whole industry has been so over-subscribed, half of the activity could die and it would still be a bit too much to handle. 

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Is buying off the plans more common here, has that kept our industry going just that bit longer???

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Always good to get an external, objective view of where things are headed in NZ. Macrobusiness in Aus:

https://www.macrobusiness.com.au/2022/05/fearful-buyers-flee-plummeting…

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Really weird that you call it objective, when 3 of the 8 words in the article title are emotive.

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Kiwibank and Rabobank increased savings rates today following OCR rise. Well done them. The big four still have disgraceful savings rates !! Heartland sure to raise monday to match Kb and Rabo. Meanwhile ASB serious saver still 0.3%.................My elderly relative relies on TD income to pay her now $3400 body corp at her unit, she went to Kiwibank 3 years ago and todays increase will help.

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A new name, second booster. Why not call it what it is....a 4th jab or 4th time lucky lets see if this one works?, what will be the new slogan to get people line to line up?

" 4 shots for winter ". 

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I listened to a podcast a night or two and got the unpleasant surprise of a government sponsored ‘ad’ with a woman talking about how she regretted not getting a booster. As if we can ever know if she would have avoided getting Covid if she had had the booster.

I thought it was a disgrace.

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... having recently contracted Covid ... I'm glad  I was prepared by being vaxxed & boostered  ...even so ,  it sucked ... Covid's a nasty little brute ...

Being unprepared would've been even suckerest  ... anti-vaxxers are rolling the dice  ... 

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Perhaps you imbibed too many of the Green Gummy Bears, and went light on the purple-and-brown snot-flavoured ones?

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Company ownership in NZ property is the future, as seen here: https://i.stuff.co.nz/life-style/homed/300599420/soon-you-can-live-at-t…

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You'll own nothing...but you'll be happy!

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