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
BNZ raised some fixed rates today, taking them just under their main rivals. More here. We are now expecting a flurry of new fixed rate increases, maybe not until the shadow of the long weekend however.
TERM DEPOSIT RATE CHANGES
None to report here today so far.
ROUTE RECALCULATION
Inflation ran at a much higher level in Q3-2022 than nearly every analyst assumed - and that includes the RBNZ. It came in at 7.2% pa, +2.2% from Q2 alone. (And that is a recent annualised rate of nearly 9%). Lower petrol prices were expected to suppress the overall rate. But raging non-tradeable inflation is keeping the pressure on in unexpected ways. Financial markets, analysts, and politicians will all have their pencils out for route recalculations.
DOING A STARVE
The misfiring housing markets are tough on real estate commission earnings. They are down more than -30% year-on-year in Q3-2022. And the new level is the second lowest Q3 level ever (or since our records began in 2016).
TOUGH LESSON FROM ACROSS THE DITCH
Fast-rising house building in Auckland is keeping a lid on rents. That is a similar effect to what we saw in Christchurch after the earthquakes there and housebuilding ramped up; house prices stayed restrained for years while it raged elsewhere. Building houses at a faster rate than demand keeps shelter costs suppressed. We can watch what is happening is Australia right now when that impetus falters. They have an extreme rents crisis.
NEXT DAIRY AUCTION
There is another dairy auction tomorrow morning. Derivatives pricing suggests WMP prices could come in at US$3,625/tonne. That would be +1.5% higher than the last full event. However, remember there are WMP Pulse events in between and the last one of those a week ago came in at US$3,425/tonne - but that may have just been because it wildly missed 'over' in its previous event. Since, Fonterra has warned markets that NZ milk volumes are running softer than predicted, so supply is somewhat constrained. Derivatives pricing for SMP suggests US$3,355/tonne so a -4% fall for this product. Overall, we will be lucky with a no-change result in USD. In NZD, our currency has fallen -1.4% so the NZD prices should insulate us somewhat.
MORE FLP DRAWDOWNS
Another $700 mln was drawn down from the Funding for Lending program, taking the total owing on it to $15.9 bln. That costs the borrowing banks 3.5% pa or $46 mln per month ($557 mln in interest per year). The rate for all the borrowing rises with each OCR rise.
NEW DIRECTOR FOR ANZ NZ
ANZ NZ says Mark Tume has been appointed to its board, effective January 1 next year subject to the standard non-objection from the Reserve Bank. Tume is a director of Infratil, RetireAustralia Pty, Precinct Properties and chairs Te Atiawa Iwi Holdings. His professional experience is in banking and funds management, with corporate governance positions predominantly in the infrastructure sector.
GONE QUIET
We should note that China seems to have stopped releasing economic data; presumably they expect their people to be glued to the Party Congress proceedings. That means the expected September trade, GDP, FDI, and PBoC data are now unexpectedly not being released. No agency is saying why. Analysts are wondering if is an attempt to keep bad news away from the Party's week in the limelight.
SWAP RATES FIRMER AGAIN
Wholesale swap rates are firmer yet again especially after the release of the September CPI data. The key real action comes near the close. Our chart will record the final positions but they will be very much higher, perhaps by +15 bps. The 90 day bank bill rate is up another +3 bps at 4.04% 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 3.98% and down -8 bps. The China 10 year bond rate is little-changed at 2.72%. The NZ Government 10 year bond rate is now at 4.61%, and up +3 bps and now matching the earlier RBNZ fix for this bond at 4.61% which was up +8 bps from this time yesterday. The UST 10 year is now at 4.00% and up +1 bp from this time yesterday.
EQUITIES RISE
Wall Street rallied strongly today with the S&P500 up +2.7% in Monday trade. Tokyo is up +0.7% in early Tuesday trade. Hong Kong is up +1.2% in very early trade. But Shanghai is flat at their Tuesday open. The ASX200 is up +1.4% in early afternoon trade today. The NZX50 is up +0.8% in late trade.
GOLD HOLDS
In early Asian trade, gold is at US$1651/oz and up +US$3 from this time yesterday.
NZD FIRMISH
The Kiwi dollar has firmed +¾c from this time yesterday to be just on 56.6 USc. Against the AUD we are up +¼c at 89.9 AUc. Against the euro we are also firmish at 57.5 euro cents. That all means our TWI-5 is at 67.2 and up +50 bps from this time yesterday. But you have to say the currency market reaction to the high CPI and the implications that flow are modest.
BITCOIN FIRMS
Bitcoin is firmer today, now at US$19,546 and up +1.5% this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.1%.
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108 Comments
Central banks everywhere want destruction now. They asked nicely for the market to control itself but that's gone unheeded, so they're going to push things till they snap. This will ease labour inflation and curb demand inflation at the same time.
With so many dynamics changing now, manufacturing being onshored, energy dynamics, etc, actual price inflation may be here to stay for a while.
think of the FLP ending like the petrol subsidy coming off. Petrol companies will ramp up margins and find excuses as to why it happened to be more than 25c/l increase. Rates don't need any help rocketing up and neither will petrol prices when the time comes. Fixed rate mortgages 1-5 years are heading north (again)
29c/l gst incl increase
I am sure many will be watching come the time
https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resourc…
think of the FLP ending like the petrol subsidy coming off
The CEO of ASB Vittoria Shortt:
"FLP was never there to help banks. FLP was there to help investment for New Zealand."
This woman deserves a Nobel Prize.
https://www.interest.co.nz/banking/117126/ceo-vittoria-shortt-says-asb-….
FLP is a floating rate three year repurchase agreement for AAA rated RMBS between participating banks and the RBNZ. There are many banks and other cash rich wholesale entities that will be willing to finance this operation after the expiration date for a small increase in cost.
History - Sale of New Zealand Government Securities to New Zealand Debt Management Office
Transaction Settlement Bond SoldFace Value Total Sold to date
Date Date
15-Jul-2022 19-Jul-2022 15-May-2041 415,000,000 415,000,000
15-Aug-2022 17-Aug-2022 15-May-2041 415,000,000 830,000,000
15-Sep-2022 19-Sep-2022 15-May-2041 415,000,000 1,245,000,000
17-Oct-2022 19-Oct-2022 15-May-2041 415,000,000 1,660,000,000
Re: Auckland rents - I heard today from a reliable source that Auckland Council have over 3000 dwellings to have their code compliance certificates signed off in the next 6 weeks. Even if we assume only half of those are rental properties, that will be a big surge in rental supply before Xmas.
Labour's Christmas present to the 000s of people on the waiting list for emergency housing - are they saving up all the good news to help their campaign? What I would pay to be a fly on the wall at the meeting of Wayne Brown and Jacinda Ardern on Thursday. Will it be televised from the podium of pontification?
They have made some weird announcements recently that reek of desperation for ‘good news stories’.
I was bemused when they huffed and puffed yesterday about a 700 (private) home development in Queenstown getting fast tracked yesterday. It has been in the process for months! And it hasn’t even been approved. But the hype yesterday from the government was if it was a brand new initiative.
Looks like the Unitec development they announced in their first year is going nowhere:
"Over the next 10 to 15-plus years, a new urban village of at least 4,000 homes will be built as part of the Carrington residential development". https://www.hud.govt.nz/our-work/carrington-residential-development/
right on cue;
https://www.nzherald.co.nz/business/new-multi-billion-dollar-village-pl…
New multi-billion dollar village planned for Ōwairaka Mt Albert by Marutūāhu-Ockham
Plans have been launched for a new multi-billion-dollar Auckland "village within a city, an urban kāinga" of 40 new apartment buildings with more than 3000 units on land within the established suburb of Ōwairaka Mt Albert.
Paul Majurey, Marutūāhu chairman, has announced a scheme with Ockham Residential for the newly-created, newly-named suburb, Maungārongo beside Unitec and the old Carrington Hospital.
> They own the bloody land, why not start building something?
Do they own it? I thought some of the land was taken off iwi using the public works act, and so any change in use the Iwi have the first right to buy the land back. From what i have heard negotiations with iwi are taking their time.
Speak of the devil:https://www.nzherald.co.nz/business/new-multi-billion-dollar-village-pl…
They gave me the impression of being conflicted in will too. They didn't want house prices to go down - "people expect the value of their main asset to keep going up" - so as long as that was the case they could not take too meaningful or effective of action. So while they were nominally keen on KiwiBuild they seemed unwilling to go all-in.
Probably would've been far better off liberalising zoning (as they're trying to do now, over obstinate councils) and while increasing funding and resources to Kainga Ora's building arm. And perhaps, in a parallel universe, getting truly serious and ramping income tax down while ramping LVT on the unimproved value of land up...
The housing crisis is eminently fixable, were there the will in NZ's two major parties.
Hard to know what they were thinking with light rail, they had the chance to do it right the second time after Twyford was axed, and instead they came up with the same mega scheme that will almost certainly be cancelled if National win. They could have had spades in ground by now with the cheaper surface level option, twice even, instead National will push Auckland back a few decades.
The idea of a massive trench for rail almost seems purpose designed to prevent it ever being done. Must be ridiculously expensive.
We'll probably just wait till individual car travel becomes prohibitively expensive then whine about why the short-sighted muppets of previous years did nothing to prepare for the future.
The initial AT three-branch project is what we should be building instead, but we've ended up with this so WK can use it to lock in the requirement for car tunnels across the Harbour. So you also have to add in the cost of two Harbour tunnels at tens of billions to do what a bridge could probably do for $2.5b.
Just give us the in-corridor running we were promised and build something.
Saw a lot of praise from the interest dot co commeratari about Cameron Bagrie as an economist. Not sure I'm convinced as he talks about the fear of wage inflation. Data from across the Tassie suggests that wage inflation is benign and comparing now with the 1970s is plain wrong headed. Technology has done much to suppress wage growth and will continue to do so.
I am not convinced wage inflation will be sustained. Feels to me like this year was a big year of ‘catch up’, and also the product of an incredibly tight labour market. And as the labour market weakens as the economy slows, that will also reduce wage inflation forces.
Yes, but you never know. It all depends just how powerful the public sector unions are. I have been regaling my grown up kids with tales of yesteryear in the UK, when every day someone was on strike. I see that the Railway Workers have recovered the power to hold the country to ransom there. What happens when the nurses and teachers and electricity workers don't get their inflation plus pay rises here?
It seems many things we thought were behind us are in fact also ahead. You know, fascist dictats about masks, dodgy vaccines that cripple, curfews (ie lockdown), World War (if the yanks carry on as they have been doing, laying waste to country after country).
...the public sector unions...
Maybe people today have antiquated notions such as that housing costs should be reasonably related to wages, like the forebears received.
It seems completely unreasonable to expect to receive anything like their parents' generations did though, in terms of debt-free entry to the workforce, or reasonably-priced housing, or wages that enabled folk to build a life and family. Don't know why we can't just carry on having low-waged workers taxed to fund a universal pension and subsidies for aged care...These indentured labourers just don't appreciate how good they've got it! They need to put their heads down and pay their landlords' rents and pensions.
Chris (sorry Christopher) Luxon...closet Green party member...
https://www.blakenz.org/person/christopher-luxon/
BLAKE LEADER 2019
Business leader and sustainability champion.
Departing Air New Zealand CEO Christopher Luxon has established the airline as a leader in social, environmental and economic sustainability.
The Christchurch-born business leader has announced he will leave Air New Zealand on September 25, destination unknown. But throughout his seven-years at the helm, he has encouraged the airline’s 12,500 staff to see sustainability as “the way we do things around here.”
“Every time you chase down sustainability and try and put it into the bloodstream of your business, you are actually building a better quality business,” he says.
In 2015, Christopher established an innovative Sustainability Advisory Panel to help Air New Zealand towards its sustainability goals. It brought together six global experts in the fields of conservation, anthropology, climate change policy, sustainable tourism and sustainable development, led by sustainability thought leader Sir Jonathon Porritt.
The panel acts as a ‘critical friend’ to the airline, challenging the status quo and lifting ambition to solve big challenges such as carbon emissions, regional development and sustainable procurement.
In the past year, Christopher has also created an Executive Steering Group to oversee the airline’s sustainability agenda. The company publishes an annual sustainability report to transparently summarise the airline’s progress against its sustainability goals, and many senior roles in the business now feature sustainability-related performance objectives. Key partnerships, such as one with Antarctica New Zealand, have been established to support climate research.
This leadership from the top has seen a number of improvements and innovations that collectively led to Air New Zealand being awarded Eco-Airline of the Year by Air Transport World magazine.
Air New Zealand has relaunched customer carbon offsetting and encouraged business leaders to transition their company fleets to EVs.
An inflight waste reduction initiative Project Green has, since 2017, diverted waste equivalent in weight to three 777-300 aircraft from landfill. Plastic waste reduction has lifted to nearly 55 million items a year.
Even plugging stationary aircraft into ground power in Auckland and Christchurch, rather than burning fuel, has saved more than 12,000 tonnes of carbon and 3.8 million kilograms of fuel in the past two years.
Christopher says: “Sustainability for me is really about mission and purpose, and it hits me in a couple of ways. One is really about the role of the organisation and making a contribution to something bigger than itself. And so I feel very passionate that we sit here in New Zealand and we’re very fortunate to live here.
“And as a result, companies here should be part of actually strengthening the place, working alongside Government, working alongside community leaders to do that. So for me, sustainability is about: “how do we actually improve the place that we’re living in?” And that’s what we’ve been trying to do.
“This idea of actually signing up to a bigger mission and purpose than just the profit and loss of a company has been really important. It’s been really important to our people, because it’s actually given them a bigger mission, a bigger purpose to actually emotionally attach to and it’s been really exciting seeing the agenda build over the past five years.”
Christopher is an influential member of the Climate Leaders Coalition Chief Executive Leadership Group and his annual Sustainability Breakfasts have brought together several hundred business leaders to engage around sustainability ambitions for New Zealand.
His leadership has been influential across the wider business community and with government. This was recognised when he was approached by Prime Minister Jacinda Ardern to help establish, and then chair, her Business Advisory Council to build stronger relationships between business and government.
Christopher insists corporations need to adopt a definition of sustainability which extends beyond environmental considerations. He works just as hard on social and economic sustainability.
Air New Zealand is an enthusiastic supporter of the revival of Te Reo Māori. The airline collaborated with the Māori Language Commission to create the Waha Tohu; a pin initially developed as a means of identifying Te Reo speaking Air New Zealand employees, the Tohu Reo is now available to be worn by all fluent Te Reo speakers in New Zealand.
The airline has a Maori and Pacific Islands employee network and has recently signed on to support Te Matatini national kapa haka festival. Air New Zealand also boasts its own internal competition called Hakamania, where different teams across the business learn haka to perform for their workmates (the 2019 competition was won by the cargo roopu).
Christopher is recognised for empowering and enabling women in leadership roles. Under his leadership, the percentage of women on the airline’s 80-strong Senior Leadership Team has risen from 16 percent to 44 percent. The goal is 50 percent by 2020.
Throughout his tenure, Christopher has also presided over a significant drop in the gender pay gap at Air New Zealand. Male employees are now paid 0.41 percent more than females, compared to a New Zealand average of 9.2 percent.
Christopher’s personal drive to end modern slavery and human trafficking led to the establishment of a Supplier Code of Conduct. Prawns were eventually removed from cabin menus because the airline could not vouch for provenance and worker conditions.
Departing Air New Zealand chair Tony Carter says Christopher has put sustainable development at the heart of the organisation. He has worked closely with stakeholders on the East Coast and in Northland to support these regions to become more economically independent.
Christopher formalised the airline’s relationship with Ngāti Porou so the partners could work together to build economic and social growth in Tairāwhiti. Carter says this partnership could pave the way for the airline to support regional development and sustainable tourism elsewhere.
Carter says during Christopher’s tenure, the airline has consistently been identified as having the number one corporate reputation in NZ and Australia, shareholder returns have risen around 275 percent, customer satisfaction at seven times the industry rate has resulted in a slew of awards, and employee engagement is in the top quartile of global companies.
“It is clear Christopher’s influence extends well beyond Air New Zealand’s sphere.”
Interesting that Ashley Church turned up on my Linkedin feed:
Bio reads
Headline: Over 15 million post views on Linkedin (est,)
Talks about #faith, #Israel, #politics, and # prophecy
Last post: What if today was your last day? (linked to blog)
Latest comment: (Damning take down of Jacinda Ardern) "Easily the worst PM in the history of our nation and leave a legacy of economic carnage and social division in her wake."
Not sure how Keys partners the Chow brothers will go down at church...but then,maybe they will be welcomed;
https://www.theguardian.com/australia-news/2022/mar/24/disappointed-and…
https://www.theguardian.com/australia-news/2021/apr/26/scott-morrison-t…
It amazes me how the right wing conservatives who are looking to further enrich themselves and the wealthy tend to be Christian while the left wing who are trying to help society and the poor are atheists.
Maybe they think they can get heaven’s doorman in their back pocket too.
It's sad. Christians used to be fighting for better for those at the bottom of society. E.g. Lord Shaftesbury. These days too many seem to enjoy "giving alms" as part of a balanced spiritual diet for themselves, while looking away from injustice at scale. Which does not seem to align with what Jesus and the prophets taught.
Lower petrol prices were expected to suppress the overall rate. But raging non-tradeable inflation is keeping the pressure on...
Petrol price might rebound if OPEC keep trimming production.
As for non-tradable inflation well, the Reserve Bank just needs to get on with its job. They've let inflation run for far too long. Do it or stand aside to let someone else get on with it.
It's not petrol prices that are the problem, diesel prices (imported remember) are flowing through everything we do...farmer on the news tonight,tractor used to take $600 to fill,now $1200 for 10 hours running,then you have fertiliser costs,urea which is used in additives like 'ad-blue' in diesel trucks etc to clean their emissions...all of these imported cost rises will become domestic inflation with the flow through.
Seems to be a huge agenda at the moment so maybe easier in person. .... geopolitics is crazy scary.
Significantly the Saudis just decided to cut oil production (in the middle of an energy and inflation crisis and coming in to the northern hemisphere winter) and potentially share key US weapons tech with russia and china. Nice timing.
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