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
No changes to report today.
TERM DEPOSIT RATE CHANGES
Westpac has raised some term deposit rates for terms of 1 year and less.
"HOUSING CONFIDENCE ... CRUMBLING"
ASB says the public's confidence in the housing market has finally cracked. In their survey, housing market confidence is now at its lowest level in 13 years.
RECESSION RISK
Almost all economists were surprised by the fall in retail spending in the June quarter, which raises the possibility the country may have gone into a technical recession in the first half of the year.
SMEs SUFFERING
The Xero Small Business Index for July showed sales have slumped as the cost of living begins to impact small businesses. Sales fell -1.5% year-on-year in July, down from a +4.4% growth in June and now the lowest it has been since September 2021. The "shop local" and "support Kiwi business" impetus has faded or even evaporated.
PROGRESS IN THE FIGHT AGAINST CYBER FRAUD
Reported cyber security incents reported fell in the June quarter according to CERT. But despite the overall fall, there was a spike in scam calls where attackers were pretending to be from a bank to try and trick recipients into sharing financial information, giving access to their bank accounts or allowing remote access to their devices or PCs.
DIVERSIFYING AWAY FROM NEW ZEALAND
The proportion of KiwiSaver assets invested in New Zealand has fallen to its lowest level ever, just 43.5% as at the end of June 2022. It peaked at 61% in September 2008 and has been steadily falling since. Having said that, is is now at $38 bln, but this is -10% lower than a year ago and lower than its peak of $42 bln at the end of 2021. The New Zealand investments are more risk-averse than the international investments.
COMPARING THE BANKS' KEY METRICS
The RBNZ released its Dashboard data today which allows you to compare detailed bank financial statement data between each of them. We have now updated our Bank Key Metrics tool which uses that same data (and which we suspect many readers will find easier to use).
THE MINNOWS GROW MARGINS FASTER THAN THE MAJORS
Yesterday we noted the good rise in net interest margins (NIMs) in the June quarter by the local banking industry. Today we got the detail in the RBNZ Dashboard, and that shows the main banks all raised theirs modestly (+0.1%) to about 2.1% except Kiwibank which grew theirs by +0.2% to 2.3% and the highest of any main bank. The real movers were the challenger banks where MINs rose strongly. TSB recovered from 1.9% to 2.1%, SBS held at 2.6%, Cooperative Bank rose to 2.5% from 2.3%, and Heartland rose from 4.3% to 4.6%.
HUMM SHUTTING NZ BNPL SERVICES
Humm Group says it has made "the strategic decision" to close its buy now pay later (BNPL) services bundll and humm in New Zealand to focus investment on its card portfolio. The company says none of its NZ cards or commercial products are impacted and its Auckland office will remain open. In NZ humm's BNPL products won't be available after September 25. Bundll was launched in partnership with Westpac just 13 months ago.
NEW RABOBANK CHAIRMAN
Rabobank NZ says former Farmers Mutual Group CEO Chris Black will join its board and succeed Andy Borland as Chairman in November. Borland is Managing Director of Scales Group and will leave Rabobank's board after a six year stint.
ANOTHER RATE HIKE IN KOREA
The Bank of Korea raised its base rate by +25 bps to 2.5% during its August meeting, as widely expected, citing persistent inflationary pressures and high inflation expectations. Today's move came after they delivered an unprecedented +50 bps rate increase in July and as they try to prevent capital outflows amid more rate hikes in the US. The latest decision was also the 7th increase in borrowing costs since they lifted their base rate for the first time in August 2021. South Korea's inflation rate to hit 5.2% this year, the highest level since 1998.
CHINA SPLASHES MORE CASH
China has rushed out more economic stimulus with a further ¥1 tln set of policy measures to try and rebuild some growth, guard against the effects of their pandemic policies and try to fix the corrosion of their property market crisis. A 19-point policy package announced yesterday included another ¥300 bln that SOE banks can invest in infrastructure projects, on top of ¥300 bln already announced in June. Local governments will be allocated ¥500 bln of special bonds although this is not all strictly 'new'.
SWAP RATES FIRM
Wholesale swap rates are probably higher again today, still on those global influences we have been noting recently. The curve steepening still still there too. The 90 day bank bill rate is up +3 bps at 3.42%. The Australian 10 year bond yield is now at 3.72% and up another +7 bps since this time yesterday. The China 10 year bond rate is at 2.66% and little-changed and still near its lowest since May 2020. The NZ Government 10 year bond rate is now at 3.86% and up only +1 bp from this time yesterday, and now matching the earlier RBNZ fix for this bond which was down -1 bp to 3.86%. The UST 10 year is now at 3.10% and up +6 bps from this time yesterday.
EQUITIES FLAT
On Wall Street, the S&P500 rose +0.3% today as it ambles toward the end of their summer holiday period and awaits the Powell speech on Saturday. Tokyo is up +0.5% in Thursday trade so far and making back yesterday's fall. Hong Kong is shut on a typhoon alert although it may open later as the storm passes, and Shanghai is flat in early trade today. The ASX200 is up +0.8%, and the NZX50 is up +0.2% in late trade, led by Freightways, Vital Healthcare, and Heartland Group. It is being held back by Summerset, Ryman, SkyCity, and Contact Energy.
GOLD HOLDS
In early Asian trade, gold is unchanged from this time yesterday at US$1,746/oz.
NZD MARGINALLY FIRMER
The Kiwi dollar is a tad firmer from this time yesterday, still at 62.1 USc. Against the AUD we are softer at 89.4 AUc. Against the euro we are little-changed at 62.1 euro cents (and notice, it is at parity with the USD now which is a big comedown, and a 20 year event). That all means our TWI-5 is now at 71.1 and up very slightly.
BITCOIN ALSO MARGINALLY FIRMER
Bitcoin is in another quiet period, up +1.0% from this time yesterday at US$21,530. Volatility over the past 24 hours has been modest at just on +/- 1.7%.
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36 Comments
Student debt relief by the Biden wizard is fascinating. Ol' ratty and crypto in general possibly liked it but it might just be a coincidence.
Obviously. The lowest earners probably don't have an education and therefore don't have student debt that needs relief
You mean 'indoctrination'. Education makes you indoctrinated into the system. Student debt just creates a debt slave. So obviously the lowest earners have better street smarts and choose to not have student debt.
So their taxes can pay off these student loans.
I find this quite bizarre, will anyone bother paying for their education anymore or just keep the student loan debt, knowing one day the debt will just disappear.
If you were a Democrat supporter who'd slogged their guts out, to do the right thing, and had already paid off your student loan, who would you vote for at the midterms?
Democracy in the USA is totally broken. They are on a very slippery downward slope and its going to make no difference who they vote for. All indicators point towards a GFC 2.0 in the USA now so it doesn't matter who is running the show because they have all flown it into the deck. Seems to have happened all around the world, Politicians too busy squabbling and trying to discredit the other lot instead of actually running the country.
End of the day it's hard to overlook the huge competitive advantages the USA has. They can drive it into the ground and still be better off than most nations.
Two books I can recommend to understand what is happening around the world at present:
- The 4th Turning (Strauss/Howe) to understand the demographic changes/cycles.
- The Changing World Order by Dalio to understand the financial and geopolitical changes.
If you read these, then what is happening shouldn't be surprising. Based on these books, we are entering a period similar to the 1930's to 1940's. A new period of prosperity could start, but it likely won't look anything like the last 40 years. It would be more like the 1946-1980 period. And it may not start until later this decade after some large geopolitical and financial changes (with millennials being the demographic powerhouse of society - not boomers).
The 4th Turning is on my tablet. I think that's my weekend taken care of.
Good work!
It can be quite hard going. It was the type of book I had to read short sections on then reflect about for a few days then go back to. Sometimes I had to put it down for a few weeks before going back to. But if your able to get through it in the weekend then fantastic! It might be mental stimulation overload. You may also view you own and other generations differently (or perhaps not..) I had quite a few aha moments and then better understood why generations older and younger than me were behaving the way they were, or the way I perceived them based upon my own generations experience. Each generation essentially attempts to try and balance out the bad/darkside personality traits of their parents meaning we each have our good points and we each have our bad points.....but things get really interest when the roles we play in society shift at the end of a 20 year (approx) cycle...which we are nearing the end of one now (which started with the terrorist attacks and GFC and will end with the boomers out of the workforce and into retirement - with the possibility of global conflict and a new monetary agreement like a modern form of the Bretton Woods!).
I think perhaps the comparison to dates in history of things that will happen now is flawed because the world population, resources and the climate have clearly all changed. We cannot simply re-enter the earlier years, we are entering times that have never exited before.
I think reading Dalio's book might be useful there Carlos as one of the key themes he hits upon at the start is that he realised thing were happening in the world that hadn't happened in his lifetime before, but they had happened before.
Most people only learn lessons from their own experiences/lifetimes and will call that 'reality'. But to see the world from a high perspective, you can learn the lessons from the generations before you as well if you are willing to have an open mind. The alternative would be to say that 'it was impossible to see such and such coming' even though the signs were there if you had read the history of similar periods.
Excellent, looks like all the Dalio books are at my local library.
Democracy in the USA is totally broken.
Biden has thrown more lollies than Cindy
The USA yes, democracy in the form of its government is hardly thriving. But what about here. Today in the high court the ex speaker of the house had to have an apology issued that confirms his actions were a breach of the civil liberties that each and every New Zealander have as a right. Such actions described as and admitted to be unreasonable and irrational. The speaker is meant to be independent and both the convenor and enforcer of the principles of democracy in the house, But New Zealand’s prime minister then endorses and compliments said ex speakers appointment as an ambassador enthusing, with over thirty years parliamentary experience said ex speaker has a “huge depth of understanding about New Zealand priorities.” Don’t think so! Not on todays events he hasn’t. Hard to imagine a more self explanatory definition of contradiction. Are these two that far removed from reality?
I would guess they just had to get Mallard out of the country. Being as hated as he is here going out in public would always be risky.
Why do you reckon they hurried him out the door so quickly last week? They knew this was coming and had to move him on quick smart.
Peter Zeihan says it's a Global issue and the USA is going to get off the lightest, although they will probably complain the most.
not many Democrat supporters among those matching the description
"HOUSING CONFIDENCE ... CRUMBLING"
Mate, at this point you'd want to be pretending as if you had no confidence in most of the institutions we live under.
What will get the confidence back? Not more of the same, that's for sure.
Might be time to batten down the hatches.
With USD and Euro on parity, I've been thinking lately about any benefits of them merging into a super currency.
Never in a million years.
Keep thinking that one through..why would USA give up its hedgemoney?
So the EU will have 28 states again.
None. Fiat currency + Fiat currency = 2 (Fiat currencies).
Recession retail figures and SME suffering above.. would not come as a surprise except to our lovely economists and leaders blissfully unaware of recession in quarter to 30 June?
The performance of economists is just farcical. Surprised by the retail figures, really???
My mind is going wild with a Monty Python skit on this farce.
He'll want the right to have that baby, to do his bit for economic growth?
:)
The last figures were affected by covid so I guess they expected some of that to reverse out.
Covid, 'What is that'.
It’s for those that still need an excuse for everything. Drank too much milk sop in other words.
I see the 5 yr swap is back over 4% again, and the 10 yr still turning up again.
Time to raise the interest rates again.
The banks haven't passed on the full OCR rise to savers. It doesn't really appear the the rates have risen much as a result of the OCR rise and some rates seem to have dropped. Is there a reason for this? Or are banks holding out. For example Heartlands notice saver rates haven't gone up at all (yet over a week later), and Kiwibanks noticesaver rates are now far better despite Kiwibank having a better credit rating and being government owned
Overseas investments share of portfolio should be considered a positive, right?
Once acceptable hurdle rate investments in NZ are funded, the best allocation of capital is elsewhere and brings funds back in.
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