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
TSB raised its floating rate by +50 bps to 7.25%. They also raised fixed rates, as did China Construction Bank.
SAVINGS & TERM DEPOSIT RATE CHANGES
BNZ raised their term deposit rates today, but none are to market leading levels.
EASING BACK
BusinessNZ and BNZ are reporting that the Performance of Manufacturing Index (PMI) continues to be choppy month-to-month. After a decent push higher in August, up to 54.8, the PMI eased back to a slower pace of 52.0 in September. Any reading over 50 is an expansion, under 50 is a contraction. After a strong rise in August, new orders fell heavily in September, and a significant weakness. Employment is barely positive.
FINAL BIG ALLOCATION
The Christchurch Earthquake Appeal Trust established in 2011 distributed $6.8 mln in grants today, mainly to Christchurch City Council for 'community projects". This seems to be the final significant distribution of the $15 mln raised by the Trust.
SAVING - WITH APPLE
Apple users will soon have access to an Apple Savings account. “Apple Card users will be able to open the new high-yield savings account and have their daily cash automatically deposited into it -- with no fees, no minimum deposits and no minimum balance requirements”. "High yield" is apparently 3%. "Daily cash" refers to the rewards that card users generate through their purchases via the Apple Card. It's a partnership with Goldman Sachs.
DO THEY ACTUALLY CARE?
With homelessness soaring here, and at unprecedented levels (almost three times the levels above it was when this Government took office eight years ago), they are offering to allocate $6.8 mln to community organisations at the cliff-face. There are more than 4000 people living "without shelter", more than 2000 in "temporary accommodation", and more than 50,000 in shared accommodation in severely crowded situations. Another 60,000 people are in "uninhabitable housing" (lacking access to one of six basic amenities). Given those levels, I think the response is an insult to humanity. (And yes, this is 2018 data. Let me know the link to 2022 data if you know.) There are 1,943,000 households in New Zealand, and 689,000 are in rented or 'free' accommodation. That puts the scale of this problem into perspective. It's huge.
"BUT TOGETHER WE CAN DO AMAZING THINGS"
If you have 3 minutes, this will lift your spirits.
LESS MILK PRODUCED
After reducing their milk collection forecast in early September, Fonterra has reduced it again today. Their revised forecast for its 2022/23 New Zealand milk collections is down to 1,480 million kilograms of milk solids (kgMS), down from its previous September forecast of 1,495 million kgMS, itself a reduction from the initial 1,510 million kgMS. Getting the blame is "variable weather conditions which caused a slow start on farm have continued".
RECESSIONS TAME INFLATION
Earlier today we got the American CPI data for September. It was more stubborn than expected and embedded at 8.2% pa and a 40 year high. Now we have the Chinese equivalent. This is as expected at 2.8% and a small rise. The Chinese also reported that producer prices rose at only +0.9% in September from a year ago, a very low rate and mirroring the struggles the Chinese economy currently faces.
A FATHER'S PRICE
The father of a mainland Chinese woman who splashed ink on a Xi Jinping poster in 2018 has died in prison, according to human rights activists and media reports. His body was said to be covered in bruises and wounds. Dong Yaoqiong earned the nickname “ink girl” after she live-streamed herself splashing ink on a billboard featuring the Chinese leader in Shanghai in 2018, saying she “opposed Xi Jinping’s dictatorship and tyranny.” She was later sent to psychiatric facility. Her father, Dong Jianbiao, fought for her release but was eventually arrested and sentenced to three years in prison.
SWAP RATES FIRMER AGAIN
Wholesale swap rates are firmer on both local and global trends yet again although they may be up 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 another +3 bps at 3.98% and back at its highest since January 2009 when it was on its way down from 8.89%. Prior to that is was never as low as 4%. The Australian 10 year bond yield is now at 4.01% and little-changed from yesterday. The China 10 year bond rate is down -2 bps at 2.74%. The NZ Government 10 year bond rate is now at 4.54%, and up +2 bps (up +30 bps in a week) and now about the same as the earlier RBNZ fix for this bond at 4.55% which was up +6 bps from this time yesterday. The UST 10 year is now at 3.94% and up +2 bps from this time yesterday. From this time last week it is up +11 bps.
EQUITIES ALL OVER THE PLACE
Wall Street ended stronger today with the S&P500 up +2.6% at their Thursday close inj a rising trend. This index is up +0.8% for the week so far with one trading day to go. Tokyo is also up strongly, up +2.8% today at their opening. Hong Kong started today up +1.7%. But Shanghai has started down another -0.3%. The ASX200 is up +1.7% in early afternoon trade, and the NZX50 is up +0.7% in late trade. Both these local indexes are heading for a weekly dip of -0.2% however.
GOLD LOWER
In early Asian trade, gold is at US$1661/oz and down -US$9 from this time yesterday. From this time last week, it is down -US$50/oz.
NZD FIRMISH
The Kiwi dollar has firmed +½c from this time yesterday to be just over 56.6 USc. A week ago it was at about the same level. Against the AUD we are about a +¼c firmer at 89.6 AUc. Against the euro we are firmish at 57.9 euro cents. That all means our TWI-5 is at 67.2 and up +30 bps. A week ago our TWI-5 was at 67.1, so little changed.
BITCOIN FIRM
Bitcoin is firmer today, now at US$19,423 and up +1.6% this time yesterday. From this time last week this is -2.9% lower. Volatility over the past 24 hours has been high at just over +/- 3.5%.
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 ».
107 Comments
“Do they actually care.” What comes after that caption is horrendous. Certainly this problem was swelling when this government took office, but this government did not need to make lavish electioneering promises about fixing it, and which these figures indicate they have done nothing about, except to make it worse. And exactly the same scenario in the matter of housing applies. Bill English called fairy dust politics, I think. Bull dust more like it, and Tinkerbell nowhere in sight. To misquote Neil Young - words they add up to nothing son. And so too does fairy dust.
I think there's a compromise but it'd involve a lower tier level of new property with different insurance obligations and less flexibility and different ownership rights.
Cheap 100 year lease properties, 120m2 for 150 grand or something. Limited ability to modify outside of life cycle upgrades to anything inside the perimeter walls. Easy ability to pass on to descendents with existing use rights.
Hold a national design completion for say, 12 exterior options and 12 interior layouts. Limited colour pallet.
Houses constructed offsite in government subsidized factories to be installed on new Greenfields subdivisions that have plenty of common park spaces, shared facilities, some sort of onsite electricity generation, water capture and waste treatment, etc etc, i.e less reliance on existing infrastructure grids and the ongoing legacy maintenance issues.
Knowing what I know about construction and land use, that's the only way.
Do you know what? They spend far too much time ‘planning’ new redevelopment areas, like Mt Roskill, which don’t even increase the net amount of social housing. And don’t get me started about their excessive design review processes and requirements.
what they should have been doing, years ago, is using surplus crown land (there’s plenty of it) that wasn’t already developed, and building prefabricated villages of emergency housing ‘at pace and scale’ (to use one of Ardern’s great cliches)
And before I get lambasted - prefabrication is much more sophisticated than it used to be.
the problem is the surplus crown land is generally rubbish... all the easy to develop land was already developed the rest is marginal which makes it extra costly to develop. i believe there are whole teams working to do exactly this but they struggle as the land is rubbish so the numbers don't stack up. though maybe it would suffice for a temporary occupation of tent villages
That’s definitely a fair point, but from what I know also an exaggerated one.
Well, another option is compulsorily acquiring land (perhaps land that someone is land banking). This power exists under the Urban Development Act 2020. I am sure the government wants to be cautious in its use of these powers, however they do exist.
If you want a reason to not do something about an issue that is a crisis, then you can always find a reason.
The bar needed for compulsory acquisition is pretty high. Eke Panuku has done it in Northcote which is great as it allows them to come up with a proper masterplan and redesign all the infrastructure and amenity holistically, you know like actual town centre regeneration. Of course mayor Brown doesn't approve of this sort of thing and wants Eke Panuku to revert back to the old council development arm where they just flog any spare parcels to the highest bidder.
They are good.
They're also about 50% more per square metre to build than say, a GJ Gardner.
So they only make sense as a financial alternative for NZ if the actual property sizes are smaller (which they are).
It is funny seeing builders well dressed and disciplined though.
Not to worry. Labour signed their death warrant, yesterday with their opening of the borders, Who has 6 parents?
Siblings would also be able to co-sponsor applications, and joint applications would be able to apply for up to six parents
Maybe Christmas will be the time of retirement after all. Andrew Little redux, we reckon?
https://www.nbr.co.nz/on-the-record/arderns-star-has-fallen/
If I had to bet my house on it, I would pick Jacinda Ardern to announce that she is stepping down before Christmas. She won’t lead the Labour Party into the next election. She can’t. The announcement must surely be coming.
... and she was the shadow minister of agriculture FFS ! ...
Toad Muller filling in that role now ...
... why .... why such underwhelming candidates to take such a crucial role ...shadow minister of our biggest industry ... agriculture deserves a topnotch person as minister , surely ...
Because of the poor pay compared to the private sector and because of all the personal abuse you get from people who have no idea, but are happy to blame anyone but themselves.
You know the type, the ones that vote for people like Wayne Brown whose main platform seems to be based on "everything and everyone in government is shit, don't you agree?"
Must be a ‘perplexing dichotomy’ for Jacinda. Leave and secure her future internationally by cashing in on her popularity? Or stay in the leadership role? Does Chris Hipkins have enough mana to lead Labour? Perhaps. Probably too gentle. The vitriol toward her must give her pause. There are some things I cannot forgive her for in terms of her attitude to CGT and the Labour party’s approach to the neo liberal playbook and the wealthy status quo. We need real change. Transformational change. Te Pati Maori are disappointing in their ambition. The closest to any change is the Greens. From my point of view their progressive tax policies and their ‘Land Back’ policies resonate with me. The competency of their representatives area a problem for me. But I have decided that they are worth a shot. Even is they can talk Labour into a CGT at the least. We need a Robin Hood party that transfers wealth from the rich to the poor. As a Maori man I support the Greens over the TOP Party.
... my simmering anger against her began way way back when without warning she banned new permits for offshore gas & oil drilling ...
An ideologically driven action to show the world that we're leading the way on climate change ...
... but .... at the cost of high paid jobs , export earnings , energy independence , and ignoring the fact that nat gas is a transition fossil fuel & has half the carbon footprint of coal ...
If I had to bet my house on it, I would pick Jacinda Ardern to announce that she is stepping down before Christmas
Good for her to cut her ties before the housing crash starts to really kick in (assuming that it does) so she remove hersef as a target for public anger.
How to fix it? TOP would;
- Establish a $3 billion development fund for Community Housing Associations with the goal of clearing the public housing waiting list within its first 3 years of operation
- Remove the current Bright Line Test and allow tax deductibility of interest for landlords, which is replaced by the land value tax.
- Require a deposit of 100% of the value of an existing home when purchased for investment purposes.
- Return the GST on new residential builds back to the local councils to fund further infrastructure development.
- Introduce an income tax-free threshold of $15,000 p.a.
- Replace the current income tax thresholds with three simple tax rates - 20% (for income between $15,000 and $80,000), 35% (for income between $80,000 and $180,000) and 39% (for income above $180,000).
- Remove unfair and unreasonable sanctions on benefits, such as your relationship status determining benefit allowances.
- Increase income support for people with disabilities ($400 million).
- Make it easier for those with disabilities to access the support they need by streamlining processes and improving their accessibility.
- Wipe all Ministry of Social Development debt ($2 billion) to ease the financial burden on low-income communities.
- Extend the In-Work Tax Credit (IWTC) to all children of low-income families ($500 million).
https://www.top.org.nz/higher-incomes-policy
As a centrist I really like the TOP policies but is there any real backing for the Party? Looking at the donations register most of the money is heading to National and Act. The issue for TOP is that they are not about self-interest and therefore they won't attract the money from self- interested groups.
TOP will probably get my vote though, Labour have failed, I care too much about wider society and the environment to vote for National or Act, I care too much about the economy to vote Green.
I'll probably be voting TOP, but they've already been after the youth vote. Did you not see the last campaign and rebranding with bright neon colours? Even using swear words couldn't get the youth to vote.
Next year will be different though. People of all ages are starting to understand that career politicians don't - and can't possibly - have their best interests at heart.
Luxon is uninspiring, Ardern has jumped the shark. The Greens have sold out, time for change.
Land tax sounds good , but a lot of people won't be able to afford it . Pretty much everyone who owns land , that is on an average income or below , will be paying more tax. In some cases (retired people who own a house ) a lot more. do the maths on your own property.
Not totally opposed to it , but it needs a lot more thinking through .
That is the policy that I have found hardest to get my head around. For me most of the land tax would be off set by the reduction in income taxes, however this wouldn't be the case for retirees. I would like to understand this policy better as it doesn't seem entirely fair. I think preventing tax avoidance by the wealthy and a capital gains tax would be preferable.
Yeah, that's an interesting one. So to buy a rental property, you have to have the full price of the new property already 'saved' as unrealised capital gain in another property - is how I interpret that. And the more I think about it - the more I think it a good policy for society at large. The level of high gearing we've got to presently is not good.
Banks become safer lenders for investment properties. Investors become less frequent and (virtually) unconstrained competitors to individuals buying houses to live in themselves. I can't think of unintended (i.e., bad) consequences, but interested to hear others thoughts.
A 100% deposit requirement would have likely made the following numbers look a little more palatable.
RBNZ C31 Total Lending $ & QTY per month
- 2014 - 2017
- FHB Average $656m across 1800 borrowers
- Investor Average $1.6b across 4700 borrowers
- 2017 - 2022
- FHB Average $1.05b across 2276 borrowers
- Investor Average $1.24b across 3156 borrowers
I take it the "land tax" would apply to all land, including farm land? Apart from the transfer of wealth from income poor living in their own government policy inflated asset, to highly paid individuals, it would be interesting to examine the impacts of taxing non residential land? Farming already faces multiple pressures and realistically farm land price rarely bare any resemblance to a ROI. I remember when we bought our property the bank did figures on ROI and came up with 2.5%. So if a TOP government is going to grab most of that 2.5%,what are the consequences? Intensifying production? How does this sit with government policies to deintensify? A drop in the value of farm property? That would be great for overseas uber wealthy, looking for a trophy property for their doomsday bunker. I imagine it would be the end of livestock farming in NZ which vegans may cheer but wonder why they can't afford a second hand Nissan leaf thereafter. As for the abandoned working farms themselves?
Somewhere in a land tax proposal (not sure if it was TOPs) rural land was not included. Considering most food production relies on farmers being prepared to work for low rates of return, probably sensible. It would also be a nightmare for Maori, as is the methane tax proposal.
I spent a couple of very challenging hours reading the ‘Rongowhakaata Claims Settlement Act 2012’ today. From 1865 we went from relative prosperity to poverty within 4 years. Due to my ancestors ability to manage our own territories for the benefit of the community in the Turanganui (Gisborne) area under the ‘community ownership” of land and resources model from 1840 to 1865 led to imprisonment without trial, starvation, cession of our land (confiscation by any other name) and murder of our people. We lost 43% of our male population over this period by following Te Kooti and losses at Waeranga a Hika trying to protect our families against Crown aggression. What could have been>
" And exactly the same scenario in the matter of housing applies. Bill English called fairy dust politics, "
BE big mistake that there was no crisis. Crisis is too strong a word. He could have said its a serious problem and this is the way we are going to fix it. I'm not aware if he or the Nats had any real solution. They may have been frittering around the edges with their developer mates.
Apple card ""High yield" is apparently 3%."
Yes, but an indication of where we are heading. Shouldn't be any surprise Apple is moving into financial services.
Been a big week:
-- Google partnering with Coinbase to allow payment for cloud services with ol' ratty and other digital assets
-- BNY Mellon announcing it will start offering custodial services for investment firms for digital assets
https://www.wsj.com/articles/americas-oldest-bank-bny-mellon-will-hold-…
I recently visited Wellington and was shocked by the poverty around Cuba Street. I don't know how the occupants of the Beehive can walk past it every day. Perhaps they have just got used to it.
They allocated $10m to a bungy operation
https://www.odt.co.nz/regions/queenstown/staff-speechless-over-bungy-bail-out
but only $6M to help the homeless?
We have been breeding this problem for nigh on 50 years now & we wonder why it's a surprise that so many people have nowhere good to live. This is the down side to welfare folks, & it gets really ugly in places. History will look back on this period & judge us with hindsight. Welfare is good, but is only a short term solution. Long term welfare is not good. Why? Because it just breeds more long term welfarees.
What a lot of rubbish Wrong John (apt username).
NZ's had a social welfare system since the 1930's, and we used to be the envy of the world.
When I went to the UK in the 1980's, I'd never seen a homeless person (and that was living in Auckland). People were employed and housed. A single blue-collar wage was enough to raise a family.
What's caused the harm is neoliberalism and housing becoming a speculative asset class.
The data from MSD suggests an increase. Even before COVID hit it had been increasing
https://www.msd.govt.nz/documents/about-msd-and-our-work/publications-r…
Indeed, this is the downside to turning investment property into NZs most generous welfare scheme rather than allowing price discovery in hard times. The whole economy has suffered the I'll effects.
Moreover, over 50% of our welfare benefit budget goes to old folks regardless of need, and billions more to property speculators.
'almost three times the levels above it was when this Government took office eight years ago'
Wow who would have thought the period from October 2017 to now is 8 years? How time flies.........
Perhaps you were just adding on the previous 3 years of National inaction for good measure?
Orr will be (should be?) terrified looking at what swap rates are doing. I thought they had peaked at 4% but the one year now looks like it could be above 5% in the coming weeks if the current trend continues.
The pressure will be on now for a big lift in the OCR at the next RBNZ meeting. They may need to front load it to cover their bases through until the new year. Otherwise they may come back in the new year with the one year swap at 7% and the OCR at 4%! (part sarcasm, part not).
It also looks like interest rates are breaking out of a 40 year trend. If you view government bond yields over that period, they are now breaking well above a channel they haven't done so for the past 4 decades.
What does this mean?
'Things' in the financial system could start breaking and if you are basing asset pricing on the past 40 years of experience, that experience/knowledge could be an anomaly, not a norm/rule.
CME Fed Watch Tool is pricing in a 100% chance of a .75% increase in November.
A 57% Chance of a .75% increase in December.
Our next OCR review is going to need to be impressive before the 3 months holiday.
This is getting crazy, the market is now pricing in an 18% chance of a full 1.0% rate rise by the Fed in November.
https://pbs.twimg.com/media/Fe84T_sVsAEyOD_?format=jpg&name=small
Interesting times indeed.
"BUT TOGETHER WE CAN DO AMAZING THINGS"
If you have 3 minutes, this will lift your spirits.
Personally I find this all generic. It feels like the same stories and formats for the past 30 years. Sweeping vistas, sound of the putatara, idyliic nature framing (which could be achieved in any country), and faux references to some kind of spiritual relationship with the land.
Someone asked me earlier this week: "Do you have any idea what NZTE actually is?" To be honest, I couldn't really answer definitively.
The biggest contributor to the CPI is last year's real estate debacle. And it will continue adding to the headline for quite some time even though housing prices are already falling, maybe sharply. It's a ridiculous reason for rate hikes, but that's the Fed for you. Link
Did not long to get here. And people believing expert's is a joke. Tony Alexander said 3 months ago rates could go 1% higher but that would be definitely it. One person who was right from the start is Max Keiser. He likes Bitcoin and might be right on that one soon too.
The problem is even after all the money printing, the United States still has more value backing it's dollar than a crypto unless you weighted it to something.
Apparently that was supposed to be stable coins and that lasted well, aye.
Rates are going up till there's blood in the streets. They pretended to ask nice but we were always going here.
And now the transport companies want truck driving to be listed as a skilled category so they can import cheap labour hand over fist.
FFS.
Because the last thing a truck driver should be able to do is afford to build a life for his/her family in NZ without WFF wage subsidies. No, what's most important is cheap labour supported by taxpayers so companies can enjoy higher profits.
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.