What happened Friday

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A review of things you need to know before you sign off on Friday; home loan affordability not improving much; lift in consumer sentiment; Fonterra trims payout, Orr says he is on the right path, swaps and NZD stable, & more

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

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
Effective Monday, Heartland Bank will raise its 18 month term deposit rate to 4.00%. It already offers 12 months at 4.20% however. In addition, it is raising its call accounts by +20 bps, and its Notice Saver accounts by +40 bps (32 day Notice Saver) and +50 bps (90 Day Notice Saver) to 3.45%.

HOME LOAN AFFORDABILITY NOT REALLY IMPROVING YET
Rising interest rates are eating up many of the benefits of falling house prices for first home buyers, but mortgage interest rates have taken a breather from recent rises while prices at the bottom of the market continue to fall. In only four of the 28 urban areas we monitor allowed first home buyers to purchase where mortgage payments were less than 40% of take-home pay.

A SMALL LIFT, SURPRISING SOME
The August ANZ-Roy Morgan consumer confidence survey results were released today. ANZ says consumer confidence lifted +3½ points in August to 85.4. The proportion of people who believe it is a good time to buy a major household item, the best indicator for retail spending, lifted +8 points to 17, its highest read since January (although still very low). A gap is emerging in this indicator between those with mortgages and those without. Surprisingly, those with mortgages are currently less pessimistic about the change in their personal financial situations versus a year ago. Inflation expectations were little changed at 5.0%, versus 4.9% last month.

THE FIRST 2022/23 CHANGE IS A CUT
Fonterra says inflation is affecting their customer's purchasing behaviour and global demand is softening. They have cut their 2022/23 milk payout forecast by -25c/kgMS. Perspective on the overall dairy company market is here.

CONSUMPTION BEGINNING TO COOL, & THAT'S GOOD, SAYS ORR
In a Bloomberg TV interview while at Jackson Hole, WY, RBNZ Governor Adrian Orr said their recent rate hikes won't drive the NZ economy into recession, but they are determined to show demand to tame inflation and that rates will continue to rise to 4%, even 4.25% from the current 3% to do that. He said he is satisfied they are on the right path to get the inflation genie back in the bottle. The NZD fell -20 bps on the interview, but has risen back some of that since.

ANOTHER $½ BIL
Another $500 mln was drawn in the RBNZ Funding for Lending program yesterday, taking the total to $13.9 bln. Mots banks have said their will use the facility to take their maximum allowance. FLP funding comes with an interest rate of the OCR, so this is 3% money (until October 5 when the OCR is reviewed next and will probably rise to 3.5%).

A RISE IN ACIDITY
Statistics NZ reported that their updated ocean acidification indicator shows there has been a decrease in the pH of New Zealand's subantarctic surface waters as they have become more acidic. Between 1998 and 2020, ocean acidity in these subantarctic surface waters increased 8.6% corresponding to a pH decrease from 8.092 to 8.057. (Because the pH scale is logarithmic, small changes in pH represent large changes in acidity.) Changes in pH in the open ocean are primarily influenced by absorption of atmospheric carbon dioxide by seawater.

DEATH RATE UP
The ABS today reported that the Australian death rate is rising, due to the pandemic and is running +17% higher than pre-pandemic. This will confound pandemic sceptics.

SWAP RATES HOLD
Wholesale swap rates are probably unchanged today as global markets await potential signals from Jerome Powell. The 90 day bank bill rate is up +2 bps at 3.44%. That is its highest since July 2016. The Australian 10 year bond yield is now at 3.62% and down -10 bps since this time yesterday. The China 10 year bond rate is at 2.67% and little-changed. The NZ Government 10 year bond rate is now at 3.87% and up only +1 bp from this time yesterday, and now marginally above the earlier RBNZ fix for this bond which was unchanged at 3.86%. The UST 10 year is now at 3.05% and down -5 bps from this time yesterday.

EQUITIES MIXED & ANTSY
On Wall Street, the S&P500 rose +1.4% in their Thursday trade with a late surge as it awaits the Powell speech on Saturday (NZT). But that still left it down -0.7% for the week so far. Tokyo is up +0.9% in Friday trade so far and heading for a +0.3% weekly rise. Hong Kong is up +0.7% inm early trade and heading for a +2.7% weekly jump. Shanghai is up +0.4% in early trade today and if that holds that will be the weekly gain. The ASX200 is up +1.0% and if that holds it will end the week unchanged. The NZX50 is up +0.2% in late trade, but heading for a -0.3% weekly retreat.

GOLD RISES
In early Asian trade, gold is up +US$9 from this time yesterday to US$1,755/oz.

NZD LITTLE-CHANGED DESPITE SOME NOTABLE MOVES
The Kiwi dollar gave up all its overnight gains on the Orr TV interview, now back to 62.1 USc. Against the AUD we are softer at 89.1 AUc and a new 5-year low. Against the euro we are firmish at 62.3 euro cents (and notice its extended slide against the USD). That all means our TWI-5 is now at 71.1 and little-changed.

BITCOIN BECALMED
Bitcoin is in another quiet period, up +0.3% from this time yesterday at US$21,588. Volatility over the past 24 hours has been low at under +/- 0.9%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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Source: NZFMA

This soil moisture chart is animated here.

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56 Comments

by Hummy | 26th Aug 22, 4:10pm 1661487014

Death rate up. No wonder fun police is just taking last bit of fun away.

by chebbo | 26th Aug 22, 5:46pm 1661492790

If you read the linked report, it lists the causes of death responsible for the increase in overall death rate.

Unfortunately people don't bother actually reading these things. They just assume it must have been COVID-19 and publish accordingly.

by mfd | 26th Aug 22, 6:55pm 1661496906

Looks like Covid is a big part of the puzzle:

"In 2022, there were ... 10,757 deaths (16.6%) more than the baseline average."

"Between January and May 2022 there have been 4,465 deaths due to COVID-19 that were certified by a doctor"

But yes, also big contributions of ~1k excess deaths from cancer and dementia. Quite likely some lockdown collateral damage and it'll be interesting seeing the retrospective analysis of lockdown impacts.

From my point of view close to the front line, time-critical cancer treatment was never impacted by lockdowns, but I expect some diagnoses were delayed or missed for various reasons.

by kpnuts | 26th Aug 22, 7:29pm 1661498960

1000's of diagnoses were delayed or completely missed and many of those are now turning into avoidable deaths -- particularly where cancer is concerned -- in addition tens of thousands of people have had essential surgery delayed, postponed and have severely compromised health and wellbeing as a result

I need a hop replacement -- but it was 9 months to get the first appointment -- 6 for a follow up -- and even though my priority score is higher than was required last year at 55 --- the goalposts have moved to over 70 due to the increases in waiting lists due to this --- got told i will be lucky to get the op within 18 months -- so choices are 35K private -- or simply give up work and wait in chronic pain for 18 months -- As a very senior manager running a health company -- mental health and traumatic brain injury -- my services are massively in demand -- and there are simply not enough people out there to fill the role --

Many of these deaths are also older adults dying from flu -- that would have died in the previous two years from flu - or similar illnesses that were eradicated in lockdown --

by Zachary Smith | 26th Aug 22, 8:53pm 1661503982

Have you thought about a radical change of diet?

That said it doesn't seem worth saving 35k by enduring chronic pain and giving up your livelihood. Why don't you just go private? I recently paid 11k to get a double inguinal hernia operation done. Caused by an inherited weakness that no amount of meat eating could cure unfortunately. It was a very good experience and outcome and I highly recommend it. Getting these sorts of things done under the public health system is so last century. It was a good feeling to just pay for it with a credit card and not go on a waiting list.

by Foxglove. | 26th Aug 22, 7:57pm 1661500658

There it is. Or in French. Voilà. It is so damn tragic that those that are affected, those that are actually involved in the real caring needs of our health system are drowned out by both politicians and faceless bureaucrats, who really are only involved primarily, in their own careers.

by mfd | 26th Aug 22, 8:06pm 1661501172

I'm sorry to hear that, that's a tough decision you shouldn't have to make.

As well as the direct impacts of stopping elective work during lockdown leading to backlogs, patients avoiding appointments they would have made etc. there are a couple of other reasons that come to mind. In my profession we have lost quite a few staff who have moved overseas, partly due to the pay freeze and the associated year of strike action making other places more attractive.

We have also been running with about 10% of us off sick at all times since Omicron took hold - mostly due to genuine illness and some due to the mandatory 1-week stand down (I felt fine for the last few days of my isolation).

Anecdotally, other staff groups lost quite a few people to vaccine mandates too. I'm in two minds on whether this was justified, just observing it as a reality.

I think the appropriate phrase rhymes with 'cluster duck'.

by Foxglove. | 26th Aug 22, 8:21pm 1661502104

kpn & mfd I have said it before and I will say it again.Throughout this pandemic saga, from each of your series of posts, I have recognised the trials presented & experienced in each of your respective fields. And I have learnt a lot. Thanks.

by imhenry | 29th Aug 22, 6:47am 1661712478

Yes the list of delayed elective surgery grows longer and broader every day

by tim52 | 26th Aug 22, 8:20pm 1661502058

Pandemic skeptics might be at a loss here but lock down and vaccine skeptics have plenty of potential explanations. This is a global phenomenon:

In 2021, ill-defined and unknown causes of death snagged the first spot with 3,362, up from 1,464 in 2020 and 522 the year before that, according to statistics from the Government of Alberta.

...

Chronic ischemic heart disease was the fourth leading cause of death in the province in 2021 at 1,939[baseline number for leading cause]. It was ranked in the top spot from 2001 to 2015. Link

by RickStrauss | 26th Aug 22, 4:12pm 1661487134

The ABS today reported that the Australian death rate is rising, due to the pandemic and is running +17% higher than pre-pandemic. This will confound pandemic sceptics.

Rather kind, using the term "sceptics" there, but on the whole I worry you overestimate deniers' willingness or ability to be confounded by real data.

by Foxglove. | 26th Aug 22, 4:24pm 1661487846

Trouble is, and as much so here too, hard to get a fix on the data. Breakdown by age and number of vaccine shots administered for each identity for a start. Underlying conditions, obesity etc and of course the old bogey was covid the sole contributor, an exacerbator, or just a silent partner.

by JimboJones | 26th Aug 22, 4:31pm 1661488269

+17% isn't it? Excess mortality is all you need to know right?

by RandomKiwi | 26th Aug 22, 4:50pm 1661489403

If you died from Covid what is it that actually kills you? I thought it would have been pneumonia?

I wonder whether they should be looking at the corelation between excess deaths and lockdowns. This is also is the report:

Deaths due to dementia including Alzheimer's disease were 16.4% above the baseline average in May, and 20.5% above the baseline average for the year to May. The age standardised death rate for May was 3.9 per 100,000 people, compared to a baseline average rate of 3.6.
Deaths due to cancer were 5.5% above the baseline average in May, to be 6.0% above the baseline average for the year to May. The age standardised rate for May (12.6 per 100,000 people) was below the baseline average rate of 13.0.
Deaths due to diabetes were 18.7% above average in May, and were 20.0% higher than the baseline average for the year to May.
There have been 44 registered deaths due to influenza that occurred during May. The historical average number of deaths occurring due to influenza in May is 29.
Deaths due to pneumonia were 20.1% below the baseline average in May 2022, and are 12.0% lower than the baseline average for the year to May.

by JimboJones | 26th Aug 22, 6:37pm 1661495831

But if the total number dying now goes up 17% compared to pre-covid, that almost has to be due to covid. Sure it could be suicide or lack of treatment of other diseases due to covid, but I doubt either would be anything like 17%. TBH I think 17% is fairly low, not worth all the hype.

by iliketobike | 26th Aug 22, 5:00pm 1661490003

No, we need to know what's causing them.

https://youtu.be/7f45S6vmQgA

by WellingtonInvestor | 26th Aug 22, 4:54pm 1661489697

Aren't the skeptic blaming the vaccine for causing all the additional death? They will always try to find and exploit an angle.

by RickStrauss | 26th Aug 22, 4:56pm 1661489789

Actual skeptics, probably not.

by theglc | 26th Aug 22, 8:56pm 1661504184

Well there is definitely enough evidence to suggest that someone should be studying vaccine injury and deaths, so we understand the impact.

Maybe they already know but its classified, you know... for the greater good

by fortunr | 26th Aug 22, 4:22pm 1661487723

And now Orr is talking about an OCR peak that could go up to 4.25%. While another small step in acknowledging reality, he knows very well that the peak will have to be at at least 4.5%, if not higher. I now think that a peak of 4.75% is becoming the most likely scenario.

by J.C. | 26th Aug 22, 4:36pm 1661488586

It's just my theory but I believe that price inflation will be sticky (on the upside) in NZ compared to other countries mainly because of the tyranny of distance and the relatively small population that wants to live beyond its means.

by Te Kooti | 26th Aug 22, 5:09pm 1661490576

A$/NZ$ is breaking to the top side and I see this move having legs. I can see no good reason why we do not underperfrom Australia both near and long term. We will over-tighten vs RBA (bad for growth) and longer term the self-harm to our primary exports is going to destroy our trade balance.

I have been getting assets out of NZ for 9 months,

by powerdownkiwi | 26th Aug 22, 8:44pm 1661503497

Is that a traditional cultural norm?

Sounds like individual colonialism to me - just sayin'.

by paashaas | 26th Aug 22, 9:15pm 1661505332

Much as I disagree with TK on many things to do with with racial policies in this country he as entitled as anybody to navigate the markets the way he thinks is best for him. Your sniping is just racist.

by Pa1nter | 26th Aug 22, 5:47pm 1661492841

There's a theory that economies with longer supply chains tend to be more resilient in times of global downturn than countries who have many close trading partners.

End of the day we are in a global system and the biggest factor to costs in NZ is a low dollar and the price of freight. The latter is heading downwards, and the former is anyone's guess.

by Te Kooti | 26th Aug 22, 5:58pm 1661493502

If we drag our primary sector into emissions trading, that is going to hit our economy very hard. We just aren't diversified enough to weather this well.

by Pa1nter | 26th Aug 22, 6:12pm 1661494365

Really hard to tell. So far it appears to impact land that's worth bugger all, because it's really low yielding.

Let me know when agricultural land worth hundreds of thousands per hectare is more viable as pine trees.

by imhenry | 29th Aug 22, 6:57am 1661713062

Try telling that to the Green party. They give us the problem and expect us to solve it with a smile

by J.C. | 26th Aug 22, 4:21pm 1661487664

Controversial pharmaceutical scientist and philanthropist Sir Ray Avery is leaving New Zealand for Australia.

He said institutional racism in New Zealand's healthcare and education systems was also a factor as well as the rising cost of living.

“Housing is unaffordable to so many and the cost of living is causing the poorest of the poor to beg outside supermarkets. Food banks are the new norm and gang violence is on the increase.”

Avery said the hospital system was “broken” as people were waiting more than a year for elective surgery.

https://www.stuff.co.nz/national/300671648/sir-ray-avery-moving-to-aust…

by Foxglove. | 26th Aug 22, 4:28pm 1661488114

Yep he can leave and he can explain his reasons, just as well as he usually does, for doing so and he can too, get himself heard. Regrettably the vast majority cannot do most of those things which is more the pity, especially the last point.

by J.C. | 26th Aug 22, 4:38pm 1661488725

I hear you Foxy. But he's using the platform he has. Article is partly a hit job on Ray himself.

by Foxglove. | 26th Aug 22, 4:42pm 1661488937

Didn’t mean to sound critical of the man himself. In fact quite the opposite, I admire him and his achievements. Have to admit then, that he is much more astute at getting the message across, than I am.

by kiwichas | 26th Aug 22, 4:58pm 1661489938

He does love the sound of his own voice,and a tipple, but no denying his drive and achievements...

by Carlos67 | 26th Aug 22, 4:32pm 1661488356

Blame it on Labour mate, they have now been in too long to simply blame it on the last lot. 1ZB e-mail in my inbox, something like 128 ram raids so far this year alone in NZ and rising.

by RickStrauss | 26th Aug 22, 5:00pm 1661490032

The main problem being they were too much like the last lot, sadly. Both having some innate belief that house prices should only be allowed to go up. They've taken us further along that road and now we are seeing the consequences of decades of greed-driven policy that focuses on feeling wealthy by passing costs and debts onto younger and coming generations.

As has been noted by Avery and by social services organisations, housing is the current main driver of poverty.

At least they've made some changes in recent times - but the damage from earlier continuation of the status quo is done.

by JimboJones | 26th Aug 22, 6:26pm 1661495189

So if we elect National the ram raids will go away? Have they said how that will happen?

by kpnuts | 26th Aug 22, 7:47pm 1661500078

yes - they will go back to locking up the 15 or so people that are doign 80% plus of the raids --- direct corrlation between prison numbers and recorded crimes --- everytime prison numbers go down crime goes up ---- and i am all for rehabilitaiton and reintegration projects -- i actully run these programs -- but there is a hard core of people committing the vast majority of crime -- and at this stage -- all you have to take them out of circulation -- makes a massive difference

by Officebound | 27th Aug 22, 12:44am 1661517852

So increasing imprisonment reduces crime.

Please explain how the US has such high levels of imprisonment and crime?

by Nzdan | 27th Aug 22, 9:34am 1661549677

The 15 or so people under the age of 16?

by bw | 26th Aug 22, 4:21pm 1661487691

"global markets await potential signals from Jerome Powell."

Indeed. And this speech has all the drama of early September 2008, when the faltering GSE's were rescued; the market went wild, convinced that 'they' would never let Lehmann go now, and yet they did. And so it all spectacularly reversed.

Different times and different reasons, but today, the nervousness and anticipation is definitely out there.

by King of the whiners | 26th Aug 22, 4:29pm 1661488147

Re: Funding for Lending program - as well as enriching the big banks one effect of the continuance of this totally illogical policy is surely to suppress the term deposit offers banks are making to savers (as they literally don't need those poor saps cash) - I very much suspect that come its end in December we will see significant TD rate increases as the banks are no longer able to trough out on the largesse of the RBNZ and are forced to offer savers respectable rates. One can't help thinking that the RBNZ is quite happy to see savers continually disincentivized in the meantime................

by Carlos67 | 26th Aug 22, 4:36pm 1661488569

I hope so, went long on a 12 month TD and now getting spanked by a low rate but its out in Feb to what will be double.

by Smudge02 | 26th Aug 22, 5:45pm 1661492720

come its end in December we will see significant TD rate increases

Encouragement and reward for saving and financial sensibility as opposed to gorging on dirt cheap speculative debt, we live in hope!

by streetwise | 26th Aug 22, 4:34pm 1661488476

Shouldn't the RBNZ be taking a temporary equity stake in the NZ big banks' Australian parent banks as security for the Funding for Lending program loans much as banks require home owners to register mortgages on their titles as security until such time as the loans are repaid.

by Uninterested | 26th Aug 22, 5:36pm 1661492205

The RBNZ could do all sorts of stuff like shut it down early.

But there is one factor which is in depositors favour and that is, with this incredibly cheap money source, the NZ/Oz banks are very unlikely to go bust in the short term. So this proposal to insure a set figure in term deposits is currently not necessary. Not at all.

However, personally I still favour Kiwibank and Kiwibonds with the lions share of my loot.

by NZGecko | 26th Aug 22, 9:35pm 1661506532

Yes.......Kiwibank. Never thought of opening an account there until just recently. Done it.

Why? Q. Who will the Australian govt bail out first and fully, in a Au/Nz banking crisis? A. Not NZ depositors.

Why?: 1/4 of Chinese banks now listed as somewhat distressed to faaaarking distressed and not allowing withdrawals.

Why?: 20 million American households now in arrears to energy suppliers.......no kindly, kindly NZ approaches to this growing distress......its shutoff time to the recalcitrant US households.

Why? Great deposit rates. REALLY good for on-call cash too!

Why? Implied Govt backing.

by Hardly | 26th Aug 22, 5:33pm 1661491993

I believe it’s true that there is a wide variance in ocean PH levels and that the current level still qualifies as alkaline rather than being acidic.

by Squishy | 26th Aug 22, 8:38pm 1661503137

Generally anything under 7 is acidic and over 7 is basic in aqueous environments...right?

by theglc | 26th Aug 22, 9:13pm 1661505190

7 neutral, above = alkaline

the oceans will never go acidic!

also the oceans expel CO2 as they warm, and capture CO2 as they cool

by Audaxes | 26th Aug 22, 6:27pm 1661495245

Another $500 mln was drawn in the RBNZ Funding for Lending program yesterday, taking the total to $13.9 bln. Mots banks have said their will use the facility to take their maximum allowance. FLP funding comes with an interest rate of the OCR, so this is 3% money (until October 5 when the OCR is reviewed next and will probably rise to 3.5%).

And $750m the day before.

by Squishy | 26th Aug 22, 8:32pm 1661502736

Mots banks...

Damned interns starting the Friday beers too early again?

by Peter M | 26th Aug 22, 8:43pm 1661503406

Regarding the lowered pay out of Fonterra, a couple of observations from last 2 weeks.

Compared with the 1st 7 months of last year, Fonterra exported 193000 ton of WMP (whole Milk Power) less this year. WMP is the highest export product by value and this reduction is about 1.2 billion $. (Stats NZ website)

Our log export, our biggest export product by volume, suffered a reduction of 2.15 Million m3 in those same 7 months compared with 2021. Value about 300 million $. China is not buying!

On top of that Zespri reported last week they have to regrade kiwifruit due to a quality issue and will drop about 500 million $ in revenue compared with last year.

In total 2 billion $ less and there are still economists telling us primary industries exports will get us through and we will avoid a recession. That is getting less likely with every month!

by Tee | 27th Aug 22, 3:45am 1661528747

Bitcoin plunged nearly a thousand points, now $20,800. Some have to sell.

by Tee | 27th Aug 22, 3:58am 1661529510

Fed

"Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy. Committee participants' most recent individual projections from the June SEP showed the median federal funds rate running slightly below 4 percent through the end of 2023"

by Tee | 27th Aug 22, 4:50am 1661532651

President Biden blasts Trump and MAGA "Semi Fascism"

by Tee | 27th Aug 22, 5:13am 1661534018

Search and Seize Affidavit of Mar A Lago

Redacted version released. Damning for D J Trump, and his legal team. And supporters and right wing media.

Ron DeSantis and Marco Rubio elections are on my watch list. Fox falls flat after attacks on FBI.