Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE RATE CHANGES
ANZ raised its floating rate today by +50 bps, as well as its overdraft rates by the same amount.
TERM DEPOSIT RATE CHANGES
No changes to report here for term deposits, but ANZ raised its Serious Saver rate by +50 bps to 2.30% 2.80%. However, it won't be effective until September 1, 2022.
FIFTEEN TIMES WORSE
Our trade balance is deteriorating fast. In the two months June and July 2021, we ran a -$142 mln deficit. But in June and July 2022 that has blown out to a -$2.2 bln deficit. If we go back to 2019 and pre-pandemic, we had a surplus of +$330 mln and in July a deficit of -$732 mln. So we have been going back disarmingly fast.
CUSTOMERS WANDER AWAY
By country, we are going backwards fast as well, especially in our trade with the big four. China is buying a lot less, but that is also true of Australia and the US as well. We are buying a lot more from Japan, mainly cars of course. Our public policy is no longer focused on our international income, now its all about 'spending'. And it shows in our trade performance. Without focus it will only get worse. Our Current account update for June when it is released in about a month will reveal some grim reading.
TACKLING WAGE SUBSIDY FRAUD
The SFO has filed fraud charges over rorting the Covid-19 wage subsidy scheme. It is building on a series of MSD investigations. They have at least ten more cases coming up.
NO CREDIT CARD APPETITE
RBNZ data for July shows there is no end in sight for declining credit card balances. They have atrophied for 30 consecutive months now. And card users are keeping less and less interest-bearing. That proportion is about its lowest ever. Billings run through domestic-issued cards are still pretty flat too. If you factor in inflation, they have to be falling.
MORE 'RELIEF' OFFERS
BNZ has joined ASB and Westpac in offering payment relief and higher overdraft balances for storm-affected customers in the South Island.
JAPAN'S NEW-FOUND INFLATION HANGS AROUND
Japan's inflation rate rose to 2.6% in July from 2.4% in the prior month. This was the 11th straight month of increase in consumer prices and the fastest pace since April 2014, amid surging fuel and food cost following Russia's invasion of Ukraine, as well as a sharply weakening yen.
SPONSORED ARTICLE
Southern Cross Partners explains how to make money in property, without owning property.
SWAP RATES LITTLE CHANGED
Wholesale swap rates are probably little-changed to finish the week. The 90 day bank bill rate was up +2 bps to 3.37% ahead of today's OCR review. The Australian 10 year bond yield is now at 3.38% and up +2 bps since this time yesterday. The China 10 year bond rate is at 2.64% and another -1 bp slip and its lowest since May 2020. The NZ Government 10 year bond rate is now at 3.53%, up another +3 bps from this time yesterday, and now above the earlier RBNZ fix for this bond which slipped -1 bp to 3.51%. The UST 10 year is now at 2.88% and up +10 bps from this time yesterday.
BOND YIELD SIGNAL?
The New Zealand Govt bond yield curve has flattened right out. Here are today's rates: 90 day bill rate 3.37%. 1yr 3.50%, 2yr 3.50%, 5yr 3.45% and 10yr 3.51%. It is hard to get flatter than that. You have to go back to October 2008 for it to be this flat. (In fact from 2004 to 2008 it spent all those four years negative.)
EQUITIES MUDDLED
The S&P500 ended its Thursday Wall Street session up +0.2%. After starting strongly, Tokyo has eased back in its Friday session to be up only +0.1%. Hong Kong has firmed +0.3% but Shanghai is down -0.1% in early trade. The ASX200 is up +0.1% in early afternoon trade and heading for a good weekly gain of +1.2%. The NZX50 is sharply lower today, down -0.9% which has wiped out all the prior weekly gain and more, heading for a weekly -0.2% retreat. Fisher & Paykel Healthcare (FPH, #1) said its golden run is over for now as the pandemic emergency fades.
GOLD SLIPS
In early Asian trade, gold fallen -US$6 to US$1,756/oz.
NZD HOLDS
The Kiwi dollar is lower at 62.4 USc falling almost -½c from this time yesterday. Against the AUD we are softish at 90.4 AUc. Against the euro we are firmish at 61.9 euro cents. That means our TWI-5 is now at 71.3 and little-changed since yesterday.
BITCOIN FALLS AGAIN
Bitcoin is fell -2.8% from this time yesterday to US$22,781. Volatility over the past 24 hours has been modest at just on +/- 1.9%.
Daily exchange rates
Select chart tabs
Daily swap rates
Select chart tabs
This soil moisture chart is animated here.
Keep abreast of upcoming events by following our Economic Calendar here ».
95 Comments
ANZ Serious Saver. 2.8%.That’s not bad if I do say so myself. Considering Term Deposits awhile back, were 1%, more or less flat across the board. Assuming TDs are set to nudge up on the back of the latest OCR increase, what’s the consensus for the optimum term, for best return, say next 12 to 36mths?
FIFTEEN TIMES WORSE
Our trade balance is deteriorating fastCUSTOMERS WANDER AWAY
By country, we are going backwards fast as well
Time to get grown up government with a PM who has some financial nous?
15 billion minus the 10 billion or so that New Zealanders take abroad on holiday minus the extra fossil fuels we need to import to cart the tourists around.
So lack of tourism can't explain the entire trade balance. Increases in the price of imported fuel explains some of it. I wonder if electrifying our transport fleet could improve the balance of trade.
I'm not saying it explains it all, but the article is written like it's a permanent shift south, when some of it can be fairly easily resumed at some point.
If there's a financial case to be made to justify the capital outlay for increased electric transportation, maybe.
NZ only has a few competitive advantages, and most of those are close to tapped out, or becoming verboten, for a variety of reasons.
The government can try and incentivise things, but there's a financial gravity that is hard to escape.
I keep asking but no one can tell me what feasible alternate industry NZ should be investing in (i.e. "productive business") to replace what we currently have. I guess if people knew, they'd already be doing it.
Because they arrive on an airline owned by said origin of tourists, travel in a bus owned by a tour operator from the same and stay and eat in hotels that are ditto and undertake tours and excursions that, if not already under that ownership too, pay quite some handsome fees for their “en masse” patronage.
I guess the point of contention is what a "large proportion" is, and whether there's a significant fiscal velocity to the money that definitely stays in NZ.
Margins in these industries are like 10-20%, so the bulk of the money spent in country should flow through the system at some level.
Oh, of course one size does not fit all. There are the individual tourists, families, friends, small groups doing their own thing. And then there are the bulk jobs, plane loads, bus loads, hotel loads, shuffled and shunted from location to location, venue to venue, without much idea about anything other than what their particular package includes. Not just NZ of course, a few years back saw exactly the same scene on the road between Madrid & Toledo. Ok fair enough have nothing to differentiate the national revenue from that sort of operation compared to the type of custom you enjoy, but would hardly think the former is insignificant, quite the opposite I would suggest.
Sadly, English and Key didn't bring us much of anything better. Short term sugar rushes built on land speculation and debt rather than growing productivity by incentivising business rather than speculation.
They may have had slightly less stardust but unfortunately the substance to bring productivity was absent, seeing our productivity continue to lag and reliance on debt increase.
yep
hey, here's an opportunity. The government could set up some huge CLT plants, support the timber industry, and massively step up housing construction.
Oops, sorry, that's right, the government has no vision, initiative nor ability to actually implement real world projects...
You should check out the US treasury yield curve.
Flat from 1-3 years then inverted out to 10 years.
They've been flat for quite a while if you want to get specific.
New Zealand Government Bonds - Yields Curve (worldgovernmentbonds.com)
But if its new news for you and that floats your boat...then consider yourself informed and floated.
(I wasn't in any disagreement with you on your original post by the way...)
If the 2-10 year is inverted, its been an accurate indicator of recession in the following 12-18 month (approx..) window (going back decades).
The US 2-10 year inverted mid-late 2019....so a few months later I sold a bunch of share holdings. A few months after that we had a market meltdown in early 2020 that was conveniently blamed on COVID...
"Aug 14 2019 - The yield on two-year U.S. Treasury notes was higher than the yield on the 10-year for a while Wednesday, marking the first time since June 2007 this curve has inverted."
But the market had already been predicting recession/sharemarket trouble prior to Covid showing.
The US has been inverted for a while again now, so indicating further pain ahead.
10Y2YS: -0.33 +0.02 (-7.04%) (cnbc.com)
Put this out to max timescale and you should see the pattern.
Have a play around with the time scale on this chart here and observe how the shape changes over time. Look at mid 2019 and compare it with late 2020. In 2019 its predicting trouble. In late 2020 after the fiscal and monetary stimulus, its saying everything is good. Its now saying the future is bad....
Based upon liquidity preference theory (that you should be rewarded more for the risk you take by buying longer duration bond), the yield curve should be positive (upward sloping) over time for an economy that is predicting strength/growth in the future. If it flattens out or goes negative, its the bond market warning everyone that trouble is ahead. There is weakness, or the economy might shrink (recession) ahead.
Unfortunately the average person doesn't know this, so then goes - wow this recession and sharemarket crash is a real surprise. Well no, the market has been predicting it for months..
Nearly anyone with a tertiary finance education would/should be able to tell you about this - and if they don't, they shouldn't be giving financial advice.
That is why it is hilarious that the democratic party and Fed etc are trying to say that the US isn't in a recession, yet the bond market is saying that it either is, or will be very soon - and to them it will be a surprise, but no to anyone who can read the bond market indicators.
Its interesting that the US 2/10 year has inverted so closely together - it means that all that massive monetary and fiscal stimulus did was kick the can down the road by 2-3 years from 2019 when it first inverted, to now being inverted again. Normaly it would be 7-10 years. So this could be signalling something even greater is at hand....time will tell.
You don’t state what shares you sold but using the Dow as a proxy it was 26,500 beginning on October 2019. It’s now 34,000 despite the immediate post covid crash and most recent correction. You’ve lost out on all those gains. The vast majority of people do worse in the long term trying to time the market rather than just staying put and dollar cost averaging.
You assume again that I'm still in the market...which again isn't true (and you know the saying about assumptions I'm sure!)
US yield curve has been flat (and in parts inverted) since earlier this year....again forecasting trouble. The 2/10 has also been inverted....
Assumptions are also a guaranteed way to lose money.
Our public policy is no longer focused on our international income.
We have become so fixated on trade deals and domestic budgets that we are ignoring the real things that matter. We send logs, cheese, meat, and milk powder overseas and we get fossil fuel products, fertiliser, cars and technology back. A simple economic strategy would see us increasing the value and sustainability of our exports, and reducing our reliance on fossil fuel imports that have increasing destabilising prices. Where is the strategy here?
I spoke to an Asian gentleman at the gym and asked him which part of the sub continent he was from. He quite happily replied, actually the northern part of Malaya and we then had a rather good discussion about that, because I used to go there a bit in the 70/80s. After that though after he had left, I was confronted by a caucasian middle aged lady I didn’t know, who obviously had eavesdropped and then said I was racist as I should have asked him where he was from, rather than pre-supposed it. Quite honestly, I think the world, our society is going bonkers.
What's the regular basis and what percentage of these migrants are committing the crime?
It's an under populated country of migrants, most of which have made positive contributions to the place.
Some days this website seems teetering on the edge of xenophobic populist paranoia.
Nobody noticed the elephant in the room. The unit price of the imported diesel increased 139% between July 2021 and July 2022 while the Brent Oil price only increased 43.4% at the same period. Spending the 25 cent/liter on keeping NZ refinery open would made a lot of sense!
I think it will collapse in a correlated fashion with the US stock indexes. Which if you follow the tech analysis, it is believed the current bear market rally is over. So we might (nothings certain..) see another leg down on the NZD coming up in the next month or so. As investors step away from risk, the appetite for NZD might fall. I guess we will soon see.
Interestingly our housing market appears to be highly correlated to the highly speculative US share market index/es also. So it could all come piling down upon itself in a nasty feedback loop. Especially if foreigners decide they want to sell up their nz property and get out of NZD.
The trade balance for merchandise goods was a deficit of $11.6 billion for the year ending July 2022 cf a deficit of 1.1 billion for the year ending July 2021.
These numbers align with my expectations. They demonstrate how we are in big trouble. The next set of data for the external current account (due 2 September) is going to be very interesting. I expect it will set another record, with a BOP deficit likely to be above $24 billion.
KeithW
Independent Observer,
In the long run, I would like to see the current account running positive - as Australia's is currently. That would mean we would not have to be importing capital - currently about $23 billion per annum . But we won't be in that desirable position of a positive external current account for many years if ever. In the meantime I would be relaxed if the current account deficit could be brought back to say $5 billion but that is a huge ask.
The three big contributors to the current account are merchandise goods, services, and repatriated interest payments to overseas destinations on historical loans.
The current merchandise deficit is $11-6 billion right now and this is a record. it is primarily due to very big increases in imports which have overwhelmed a more moderate increase in exports. The export increase has been due to higher prices as there is no increase in volumes. And those export prices have in the last couple of months been turning against us from record highs.
Services sometimes run at a surplus but currently these are in big deficit because of limited tourism and the decline in overseas students studying here. But this has been balanced somewhat by less NZers going overseas. Right now the uptick in Kiwis heading overseas seems to be exceeding the uptick in foreign tourists coming here. Queenstown is awash with Aussies but there are aren't many tourists elsewhere. I don't see services turning positive for quite some time.
Interest payments to foreigners are increasing.
The combined effect of all of these factors is that I see difficult times ahead. At some stage I see a further decline in the exchange rate as the mechanism to bring the current account into a better balance. Our current account deficit (merchandise, services and interest payments) is sitting at $23 billion per annum. Resetting will occur when the financial reef fish stop darting around and decide they need to move their money away from NZ. At that point the exchange rate will drop creating further inflationary pressures. I cannot predict exactly when those irrational financial reef fish creatures will see the light but at some stage it will occur.
The situation as outlined here, plus the widespread failure to even recognise this situation, is why I am less than optimistic about where we are heading to in Aotearoa NZ.
KeithW
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.