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
Both ASB and BNZ joined Westpac with floating rate increases, all +50 bps. More here. That only leaves Kiwibank as the sole major yet to pass the OCR rise through.
SAVINGS & TERM DEPOSIT RATE CHANGES
Westpac and ASB raised a mix of savings accounts and term deposit rates. But BNZ didn't announce any changes when they raised floating rates. First Credit Union, Unity Money, and NZCU Auckland all raised term deposit rates today. The Cooperative Bank did too.
A DISASTROUS START
According to the September data from REINZ, the housing market has had a disastrous start to the Spring selling period with September sales at a 12 year low. House prices continued to slide with the REINZ's national House Price Index now down -12.6% from its peak, down -17.3% in Auckland, and down -19.8% in Wellington.
THE INFLUX RISES QUICKLY
The number of foreign workers arriving in the country is starting to gather pace and it is quite possible it will back to pre-pandemic levels by the end of the year.
LOOSER IMMIGRANT SETTING REDUX
The Immigration Minister has reopened the Skilled Migrant visa category ahead of full a review. He has also reopened the parent visa category and its quota has been more than doubled.
MORE PRESSURE
Tourist arrivals are recovering, but overseas travel by Kiwis is growing even faster. That will put even pressure on our current accou7nt deficit.
"TIME TO REBUILD FISCAL BUFFERS"?
The IMF released projections as part of their World Economic Outlook that indicated New Zealand's expansion would fall from +5.6% in 2021 to just +1.9% in 2023. It also forecast that our current account deficit would stick at -6.0% in 2023, the highest in the list of countries they reviewed in the Asia/Pacific region. Unemployment would rise to 3.9% in 2023 they said. Still, Finance Minister Robertson claimed that "New Zealand is in a strong position to handle the increasing global economic turbulence", and "now is the time to rebuild fiscal buffers". These comments come after the audited Crown Accounts to June 2022 showed that government spending rose by +12.9% from the prior year with payroll costs going up +9.5% (pg 46).
A BIG EIGHTH RISE
The Korean central bank raised its base rate by +50 bps to 3.0% today, matching market estimates. High inflation and a weakening currency are burdening their economy. This was the 8th increase in borrowing costs since the Bank of Korea lifted the base rate for the first time in August 2021.
KEEPING AN EYE ON ...
Just for the record, we should note that the US Fed's balance sheet has fallen by -US$209 bln in the past six months, reducing from US$8.965 tln to US$8.759 tln. It is now back to levels last seen at the end of 2021. We should also note that American junk bond yields are back near 9.5% pa.
SWAP RATES RISE AGAIN
Wholesale swap rates are firmer on global trends yet again although they may be lesser than recent rises. The key real action comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +1 bp at 3.92% and back at its highest since January 2009. The Australian 10 year bond yield is now at 4.00% and up +1 bp from yesterday. The China 10 year bond rate is unchanged at 2.76%. The NZ Government 10 year bond rate is now at 4.54%, and up another +10 bps and still above the earlier RBNZ fix for this bond at 4.51% which was up another +10 bps from this time yesterday. The UST 10 year is now at 3.95% and down -2 bps from this time yesterday.
EQUITIES LOWER
Wall Street ended lower today with the S&P500 down -0.7% at their Tuesday close. Tokyo is up +0.3% at their opening. Hong Kong started today down -0.9%. And Shanghai has started down -0.5%. The ASX200 is unchanged in early afternoon trade, but the NZX50 is down -0.7%, hurt mainly by the electricity companies and the banks.
GOLD SLIPS
In early Asian trade, gold is at US$1667/oz and down -US$6 from this time yesterday.
NZD FIRMER
The Kiwi dollar has firmed from this time yesterday to be just over 55.9 USc. Against the AUD we are marginally softer at 88.1 AUc. Against the euro we are now at 57.5 euro cents. That all means our TWI-5 is at 66.6 and up +40 bps.
BITCOIN HOLDS
Bitcoin is little-changed today, now at US$19,072 from US$19,058 this time yesterday. Volatility over the past 24 hours was modest at just under +/- 1.1%.
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41 Comments
Stuff says ASB economists expect house prices to fall by 24% !!! Except that they actually expect them to fall by 15% but added inflation to make it more, click bait. I can do one better, add the devaluation of the NZD then they can headline "Houses in NZ to fall by 44%" Now that's a headline!
Their forecasts are trash either way.
Of course Ginja, that's why they're called forecasts.
Haven’t house prices in Wellington already dropped by 20%?
Yes, and I am guessing that figure doesn't include inflation. We had a house price bubble and now it has popped.
I see Auckland is now down 17% from the nov 21 highs. Had a bit of a laugh today, the commercial radio stations now reporting 'year on year' Auckland down 3%. Amazing how they choose the statistic that suits...... Also noticed today the NZ 10 yr swap has breached 4.5%.
What's wrong with that if its a fact ? Sorry but you cannot just ignore the huge gains and just go straight into losses the second it suits you. Basically existing home owners are going to see 3% down, those that do not own a home are going to see 17% down.
Will be interesting to see what the 'year on year' is in Jan where they will be compared to the highs.
They will extend the chart out and talk about the last 2 years or 5 years.
The problem is there are no standards on how house prices are reported. So the narrative can be changed by fudging the numbers like that. It is made to look worse because inflation is so high. Anything over a 20% house price drop is considered a crash by one NZ leading house price expert, and they seem to think it was unlikely to happen last year.. But interest rates IMO are the leading cause of it, like they were when house rises rose. It is all about what mortgage amount people can afford to service.
Exactly interest rates are the main driver, what would house prices do if mortgage rates were 10% v mortgage rates of 0%. Its obvious, even though some commentators are adamant interest rates are not the main driver.
Well in real terms they are already down by nearly 20% nationally.
More farcical forecasts.
Did they mean by year’s end, or from peak to trough? Peak to trough likely to be more than 30%. In real terms.
the cost of building is still going up and will eventually lift existing house stock values
The cost of a new build puts a floor under the price drops of existing builds, that's just common sense. New houses get built based on cost + margin and if the house prices fall then new builds fall off a cliff and prices of existing houses rise, its a self regulating industry.
One year swap at 4.76%. How the fixed one year rates are at 5.45% just shows you the down market, competition and FLP is impacting the 1 year rate. With a 4% OCR on top of those swap rates and FLP ending 1 year fixed has to hit 6% - 6.25% by Christmas
yeah a pressure point building up for around december on the 1 yr fixed, looking like it will have to go at least 5.75
Unless the BoE extends the Friday's deadline, then today's low of £ 1.0927 is going to look high.
I guess we'll have to see if the Kiwi gets sucked down a similar drain-hole in sympathy.
"Contagion" might be the new buzz word coming soon. Could be more than the NZD that is impacted.
Sort there issues means close out positions..... some will not hoping BoE steps back in.... going to be bad, especially once markets realise the same leveraged positions are present in ALL gov bond markets due to runway length and boomers retirements ambitions.....
The IMF released projections as part of their World Economic Outlook that indicated New Zealand's expansion would fall from +5.6% in 2021 to just +1.9% in 2023.
Late last year IMF models thought '22 in US would see better than 5% real GDP. Now, less than 2% which would be a miracle. Link
Hong Kong Hang Seng below 17k for the first time in a decade. Down almost 50% since last February, this has more to do with "inflation" really the end of it than anything Jay Powell has ever thought, said, or done. Euro$ #5 is getting serious. Rapid tightening, not rate hikes. Link
People hate the word transitory, especially this context, but here you go. Even chips. Remember the chip shortage? It was everything the "inflation" was and more. Now, it's a bloodbath of inventory glut. Prices falling - because the economy is, too. Link
"...the housing market has had a disastrous start to the Spring selling period..."
No, it is just heading in the direction it needs to head
Still a long way to go though ...
I guess David is calling it disastrous from the point of view of its performance as a ‘market.’ From that point of you, it is bad or maybe even disastrous.
So... "now is the time to rebuild fiscal buffers"
What an absolute fool. Our key economic challenges are:
- our current account deficit, which effectively prevents us having independent monetary policy and means we pump billions of dollars of interest payments (on $50bn+ of bonds) to overseas bond holders
- a house building / construction sector that is totally ill-suited to the work we need to do over the next 10 - 20 years to build climate resilience and address our...
- poor energy security and reliance on $10bn a year of imported fossil fuels, which both expose us to wild swings in a cartel-controlled oil market, and add to our current account deficit
- gross inequalities meaning that we leave 10% of people either fully or partially underemployed despite having a shed load of work to do, and we import the skills we need because we have zero workforce strategy
These challenges require a Government that is willing to invest in the future of the country - not a Government that disinvests in the country (which is what generating a surplus actually entails - taking more out of the economy than you put in).
One of your gems Jfoe. Unfortunately, NZ does not have long-term strategically minded leaders. Robbo is a great illustration of the Gliding On nature of it all.
Well said
our current account deficit, which effectively prevents us having independent monetary policy and means we pump billions of dollars of interest payments (on $50bn+ of bonds) to overseas bond holders
The latest NZ government bond syndication statistics
Similar phenomenon to post-crash Japan
Chinese borrowers are in a hurry to clear their mortgages early in a bid to reduce leverage, and this comes against the backdrop of an economic slowdown and falling stock market investments
https://www.scmp.com/business/china-business/article/3195151/chinese-ho…
One has to remember that the Big Aussie banks are effectively our biggest housing hedge funds..... if you really believe housing will crash buy out of the money puts on the big 4
Current ‘accou7nt’
The prophet works in mysterious ways.
Wait till you start to see the same over leveraged positions start to appear in the other goverment bond markets around the world, thinking Italy, Germany and (say it quietly) USA and Japan..... proper https://www.youtube.com/watch?v=UwVHFDAdWL8 the fed dont normally extend FX swap lines like they are at the moment last time was the GFC ........ unless there is only one cockroach
What's Robertsons plan to reduce the current account deficit? Get to surplus ?
Can anyone think of a wore example of a Foreign Minister than Mahuta. Does she just not have a clue or does she deliberately want to burn every possible bridge?
https://www.rnz.co.nz/news/on-the-inside/476543/opinion-new-zealand-s-r…
Hard to say how much she is making up on the spot, or just emulating wider policy to India.
Not an area I've had a lot of exposure to, but at a glance the lion's share of our exports to India is bringing Indians to NZ either as students or tourists. Doesn't sound like something that'd yield a heap more by moving towards an FTA, or make Kiwi voters overly jazzed by.
If all you want is for us to be as US vassal in an increasingly smaller and less capable western world or you just don't about that kind of stuff then sure the PM and her foreign policy is fine.
We might care if the US, Japan and Europe go into recession (that latter being a given) and our other potential trade partners don't want to know us.
I guess the problem is there isn't a clear superior alternative to being a franchise nation of the global trade order.
The lower teir nations get to be Chinese vassals, that doesn't appear to be a prosperous move.
India's not a super great export market for many of our products, they don't comparatively eat much animal protein, don't drink much wine, etc, what are we selling them?
"Jaishankar was publicly critical of New Zealand's unwillingness to renew visas for Indian students..."
What message would this send to the sub continent and rest of the developing world. How is this not a reasonable request, it's an absolute disaster for those effected.
It's a big country and some do eat non-beef protein and do drink wine. No directly related but Anchor is a food brand in Sri Lanka. We used to sell lamb to Iran.
It's not like this is the first bridge she's burnt for no good reason.
.
Mahuta is godawful
Great qualifications there - I tried to understand how she was qualified to be the foreign minister:
Firstly she studied law at the University of Waikato, but failed four of her seven papers and had to drop out. She then studied social anthropology and Māori business development at the University of Auckland, graduating with an MA (Hons).[5][6] The title of her 1995 master's thesis was Te poukai o Waahi : an historical background to the Waahi poukai.[7] She also worked at the university as a researcher/archivist.[8]
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