What happened Friday

Business / news

A review of things you need to know before you sign off on Friday; Many retail rate hikes, another bad trade deficit, credit card data shows early sign of stress, swaps little changed, NZD stable, & more

21st Oct 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
Kiwibank has raised fixed rates, similar to ANZ and Westpac. TSB has raised its fixed and floating rates. This increase means there are now no rates on offer below 5% from any bank. First Credit Union, China Construction Bank, Police Credit Union, Simplicity and Resimac all also raised rates

TERM DEPOSIT RATE CHANGES
Kiwibank raised TD rates, the most notable being their 4.50% one year rate matching TSB who have also raised term deposit rate offers. Of note is that they are the first bank to offer 5% (for 5 years) in the current rate change cycle. WBS (Wairarapa Building Society) also raised their rates.

A BUILDING WEAKNESS
In September, exports rose +37% year-on-year to just over $6.0 bln. Meanwhile imports rose +16.1% on the same basis to $7.6 bln. That resulted in a -$1.6 bln trade deficit for the month, and swelling the annual deficit to -$11.9 bln or -3.3% of GDP. This is the merchandise trade deficit, and excludes the services deficit. We are now running trade deficits with China, an unusual situation and our trade with Australia, the US and Japan are all on a track for much lower surpluses or greater deficits. A lot of this is because of the flood of EVs and hybrid cars we are importing. For that to be sustainable, we need exports to exceed imports, and run a trade surplus. We haven't had one in a full year since 2014 (2020 excepted for the pandemic twist).

READING THE CREDIT CARD TEA LEAVES
Spending on credit cards issued in New Zealand rose +27% above year-ago levels in September (a locked down month) but it is up +10% from pre-pandemic Septembers - and inflation would likely account for most of that. Credit card balances are up +4.9% from year ago levels, but down a massive -17.2% from pre-pandemic levels. The proportions incurring interest moved up slightly to 53%, so maybe an early sign that some credit stress is starting.

AUSSIE CPI EYED
Next week (Wednesday) Australia releases its September CPI data. It is expected to rise to 6.9% from 6.1% in August. But analysts like CBA reckon it will be 7%. At that level, the RBA may not be as sanguine about how they have handled the monetary policy so far.

JAPAN GETS SUSTAINED INFLATION
Japanese inflation came in at 3.0% in September, unchanged from August and holding near an 8 year high. Food prices were up +4.2%. Electricity costs were up 21%. Without food and energy costs, 'core' inflation there was only 1.8%.

SWAP RATES LITTLE-CHANGED
Wholesale swap rates are firmer again today with smaller rises today. The key real action comes near the close, and yesterday this fell away then. Our chart will record the final positions. The 90 day bank bill rate is down -2 bps at 4.13%. The Australian 10 year bond yield is now at 4.17% and up +8 bps. The China 10 year bond rate is little-changed at 2.74%. The NZ Government 10 year bond rate is now at 4.66%, and down -11 bps and now below the earlier RBNZ fix for this bond at 4.69% which was down -8 bps from this time yesterday. The UST 10 year is now at 4.23% and up another +8 bps from this time yesterday. Recall this rate was 3.94% this time last week, so a +29 bps rise since then which is substantial for this benchmark.

EQUITIES RETREAT
Wall Street fell today with the S&P500 down -0.8% at the close. But if it holds at this Thursday level tomorrow it will book a +2.2% rise for the week. Tokyo has opened down -0.3% and heading for a +0.5% weekly rise. Hong Kong has started today recovering +0.4% but without further change it will book a -0.9% weekly fall. Shanghai is up +0.3% in their early trade heading for a -0.5% weekly drop. The ASX200 is down -0.6% in early afternoon trade and heading for a -1.1% weekly fall. The NZX50 is flat in late Friday trade and heading for a -0.4% weekly dip.

GOLD STABLE
In early Asian trade, gold is at US$1627/oz and up +US$2 from this time yesterday.

NZD HOLDS
The Kiwi dollar is little-changed at just on 56.6 USc. Against the AUD we are still at 90.3 AUc. Against the euro we are still at 57.9 euro cents. That all means our TWI-5 is at 67.6 and up +30 bps from this time yesterday, mainly on firmness against the GBP and the JPY.

BITCOIN UNCHANGED
Bitcoin is firmer today, now at US$19,037 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.1%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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83 Comments

by bw | 21st Oct 22, 4:42pm 1666323758

A global house-price slump is coming..... in America prospective buyers have been watching, horrified, as the 30-year mortgage rate has hit 6.92%, over twice the level of a year ago. Someone who a year ago could afford to put $1,800 a month towards a 30-year mortgage, back then they could have borrowed $420,000. Today the payment is enough for a loan of $280,000: 33% less. From Stockholm to Sydney the buying power of borrowers is collapsing.

https://www.economist.com/leaders/2022/10/20/a-global-house-price-slump…

This is what higher rates does. It's not the penalty to existing borrowers that has the biggest impact, but to the capacity of aspiring borrowers, to borrow.

by bender | 21st Oct 22, 4:24pm 1666322669

Yet I was thrilled to refi at 8.25% there back in the day.

by Audaxes | 21st Oct 22, 4:40pm 1666323636

When to expect the housing market downturn to conclude, according to Wells Fargo

by Nzdan | 21st Oct 22, 4:45pm 1666323915

by Nzdan | 11th May 22, 6:04pm

Prices will decline as much as interest rates increase, where servicing is maintained at current levels. It's purely a numbers game, anything else is just trivia.

e.g. Calculated on 30 year mortgage:

$800k mortgage @ 3% = $778 per week.

$550k mortgage @ 6% = $760 per week.

30% drop in borrowing power. Maybe compensated slightly by wage inflation.

by Carinaz | 21st Oct 22, 4:49pm 1666324187

Had been to auction last week for a colleagues and good houses are still going at decent prices though it may be just one or two houses out of 10 or 12 houses that went on Auction but still are enough to boost the confidence.

Other houses are not selling but vendors are holding and not selling distress sell. Till than, can say only the froth has been cleared but the cup is still full.

by HW2 | 21st Oct 22, 5:12pm 1666325535

42 Ellis Ave Mt Roskill was a very frothy Harcourts auction. Did you see that one

by HouseMouse | 21st Oct 22, 5:28pm 1666326488

Right under power pylons….

by HW2 | 21st Oct 22, 6:01pm 1666328475

"Don't Look Up". There was 3 bidders and sold over 900k. I can't understand it.

Over the years we've had the opportunity of several properties next to pylons. Did not touch

by HouseMouse | 21st Oct 22, 6:14pm 1666329273

No go.

Will always be a stigma, although clearly the stigma didn’t deter someone today.

Good luck renting it out when so many rentals are coming available. If owner occupied, good luck taking the health risk.

by vman | 21st Oct 22, 6:40pm 1666330844

Wireless charging for the Tesla??

by Zen20 | 21st Oct 22, 6:52pm 1666331564

plenty of greater fools arriving shortly to take up the slack

by JimboJones | 21st Oct 22, 7:35pm 1666334157

Times have changed, people just have to take what they can get. You don’t get much for 900k that close to the city.

The value at this end of the market is terrible, for probably only $300k more you could get a 3 bed in a much nicer street in Mt Roskill without transmission lines.

by JimboJones | 21st Oct 22, 7:52pm 1666335132

This sold for $1.2mil, 3 bed 2 bath in a very nice street on 900m2. https://homes.co.nz/address/auckland/mount-roskill/46-boyce-avenue/2ZoJK

needs work but a much better investment than under transmission lines. But not everyone has $1.2mil.

by lucenera | 21st Oct 22, 10:47pm 1666345656

Pretty much nobody "has" 1.2 mil

That set will dry up soon, even with mumdad help

4 walls are not supposed to cost that much

That is the real pandemic, to think that basic needs are privileges

by Carlos67 | 22nd Oct 22, 5:56am 1666371394

"Only" $300k more was more than my entire mortgage back in 2005 for a 4 bed house on the North Shore let alone Mt Roskil. If you cannot afford another cent that thats the limit.

by J.C. | 21st Oct 22, 4:47pm 1666324052

This is what higher rates does. It's not the penalty to existing borrowers that has the biggest impact, but to the capacity of aspiring borrowers, to borrow.

Property crashes usually start with the behaviors of the marginal buyer.

by Uninterested | 21st Oct 22, 5:14pm 1666325695

Of which there are few at the moment. Understandably.

by meh | 21st Oct 22, 7:10pm 1666332635

This is what unfettered borrowing to create the illusion of wealth does. The market will have to meet the borrowing capacity of aspiring borrowers, will it not?

It's a nice spin on the problem "the buying power of borrowers is collapsing".

by Foxglove. | 21st Oct 22, 4:23pm 1666322609

Credit card tea leaves. Spending up from 12mths ago, then a lockdown period. But aside from that, and correct me if i’m wrong, don’t think p credit card interest rates, throughout the lockdown & record low OCR, were lowered one iota?

by Pa1nter | 21st Oct 22, 4:30pm 1666323030

A lot of this is because of the flood of EVs and hybrid cars we are importing. For that to be sustainable, we need exports to exceed imports, and run a trade surplus. We haven't had one in a full year since 2014 (2020 excepted for the pandemic twist).

So we are taxing emissions generating export goods, and subsidising increasingly expensive imported cars?

Ruh-roh

by Rex Pat | 21st Oct 22, 5:06pm 1666325195

Absolutely. A rough calculation is about $600,000,000 worth of Teslas in the last two years. $200,000,000 since July this year. Thanks JA

by HW2 | 21st Oct 22, 5:15pm 1666325702

80k average price?

Hows yours driving

by Rex Pat | 21st Oct 22, 5:40pm 1666327205

8,500 cars at $70,000.

Love mine. 1,000 km road trip this weekend. 600km at 3 cents per km. 400km at 11 cents per km.

by HW2 | 21st Oct 22, 5:53pm 1666328030

Andrew Dickens commented that he would not have an EV, they are worse than ICE, he said. I don't know

by Rex Pat | 21st Oct 22, 6:20pm 1666329623

Many wouldn’t. I have done 30,000km in mine. Best cars I have owned.

by Zen20 | 21st Oct 22, 6:58pm 1666331908

who cares what a Devonport scooter rider says anyway - it's inevitable that The Hosk will be given a high performance EV and the performance will blow his brain

by Eschaton | 22nd Oct 22, 7:45am 1666377939

Most people don't have $30k to spend on a car let alone 70k

by vman | 21st Oct 22, 5:46pm 1666327607

RP,don't forget to thank all the Ranger, Hi Lux & Mitsi Trton purchasers who are helping to subsidise EV's with the ute tax;

The surge in EV registrations was largely accounted for by Tesla, which has successfully avoided the worst of the effects of product shortages and managed to continue deliveries, which has seen the Model 3 take second place in sales for September with 1066 registrations, not quite managing to dislodge the dominant Ford Ranger in the top slot 1408 registrations. The Mitsubishi Outlander slotted into third place with 963 registrations.

by RickStrauss | 21st Oct 22, 6:07pm 1666328820

Fair enough, though, given we've let many of them off FBT with a nudge and wink.

by Rex Pat | 21st Oct 22, 6:11pm 1666329113

Model Y was the largest single seller in September with 1502 delivered. I can’t see why they are subsided but I’ll take the money. Thanks JA

by HW2 | 21st Oct 22, 6:27pm 1666330065

JA = Jack Ass

by vman | 21st Oct 22, 6:54pm 1666331674

Wow,aren't you clever...did your teacher give you a star for that one.

by vman | 21st Oct 22, 6:42pm 1666330925

Deep down I think you love JA...you are always thanking her. :-)

by Nzdan | 22nd Oct 22, 8:05am 1666379125

Imagine living your life, day by day, constantly griping about a young politician.

by Pa1nter | 22nd Oct 22, 8:13am 1666379608

You don't understand.

A young woman is telling old men what to do.

Just won't stand I tell you.

by Uninterested | 21st Oct 22, 5:16pm 1666325802

I like them because when I am riding my bike and one goes past, I do not have to hold my breath like I do when its a diesel.

by RickStrauss | 21st Oct 22, 5:17pm 1666325838

I thought we were supposed to be robbing Peter to pay Paul, so to speak - taxing higher emission vehicles to subsidise lower emission vehicles.

by Rex Pat | 21st Oct 22, 5:38pm 1666327080

Government put up an ante of $300,000,000. Last time I looked, it was down below $200,000,000. I very much doubt there is enough being paid on imports to pay out the EV imports so it’s a declining balance.

by Audaxes | 21st Oct 22, 4:36pm 1666323380

Japanese inflation came in at 3.0% in September, unchanged from August and holding near an 8 year high. Food prices were up +4.2%. Electricity costs were up 21%. Without food and energy costs, 'core' inflation there was only 1.8%.

The funny thing is there was a time when Japan never ran a trade deficit. Now they're so big the Japanese just can't keep up, and the country is literally paying the price for it. In dollars, of course. Link

by J.C. | 21st Oct 22, 6:25pm 1666329946

Transaction volume on the crypto mkts in Japan up over 113% from June 21-June 22. Obviously JPY value will likely have something to do with that.

https://blockchain.news/news/eastern-asia-crypto-market-growth-halts-ch…

by Justa comment | 21st Oct 22, 4:37pm 1666323446

I see TSB has the best TD rates at present. Anyone had dealings with TSB?

by HouseMouse | 21st Oct 22, 5:15pm 1666325746

Enjoying a tidy Spanish Tempranillo-Syrah, $12 from Pak n Save, remarkable value. Quality is as per a semi-decent NZ red at the $18-20 price point. Maravedi is the label.

Their white at the same price is tidy too, a Chardonnay-Airen.

Bargains still possible in these inflationary days.

cheers!

by HW2 | 21st Oct 22, 6:19pm 1666329592

Hahaha

When you keep asking me if I'm drunk thats ironic

by HouseMouse | 21st Oct 22, 6:29pm 1666330187

There’s a big difference between drinking in moderation and getting pissed and spouting garbage.

by HW2 | 21st Oct 22, 6:33pm 1666330425

Are you the latter 😉

by HouseMouse | 21st Oct 22, 6:37pm 1666330625

You always seem to get aggro and ad hominem around late afternoon / early evening for some reason, I wonder what it is… watch the drinking, and seek help. Seriously.

And when I start getting this garbage from you, that’s when I tune out. See ys

by HW2 | 22nd Oct 22, 6:32am 1666373549

Tune out then...good for you. Making very disparaging comments of others, and not just me, you deserve a bit of shit.

HM you need a bigger mirror.... one without blindspots.

by Fitzgerald | 22nd Oct 22, 7:31am 1666377098

Time to give it a rest HW2. Nobody else wants to see it anymore.

Seems that HouseMouse has become some sort of lightning rod for bullies lately on this page. And I suspect that most of the "likes" are coming from multiple accounts.

Bullying someone online is not going to make up for whatever financial losses people are making right now. It might make you feel better in the moment, but logging off and phoning a real estate agent will probably make you feel even better longterm.

by Harvey W | 22nd Oct 22, 8:26am 1666380384

Thanks House mouse, keep the wine tips coming🙂

by HW2 | 21st Oct 22, 5:27pm 1666326457

Prices will decline as much as interest rates increase,

Houses aren't dropping 30 percent so that's wrong

by agnostium | 21st Oct 22, 8:22pm 1666336957

OK boomer

by HW2 | 21st Oct 22, 8:27pm 1666337234

What you talking about Willis?

Not a boomer

by lucenera | 21st Oct 22, 10:55pm 1666346109

you seem to be

entitlment, a sense of "you are what you have"

I might be wrong

or you just represent yourself in a bad way

but that is what boomers are

by HW2 | 22nd Oct 22, 4:54am 1666367697

I dont think so

by Nzdan | 22nd Oct 22, 8:07am 1666379256

Agreed. He might not be a Boomer by age, but appears to carry Boomer-Like traits, therefore the label still sticks.

A bit like calling someone a Nazi. "But I wasn't alive in the 1940's".

by Audaxes | 21st Oct 22, 5:34pm 1666326863

We are now running trade deficits with China..

A vital link connecting the world

Key: I think the West has, not universally but largely, accepted democracy is the system for ruling the country and is the most successful way of making sure that the people control mechanism, if you like, on politicians and on government. Obviously it's not solely the case, but there's been largely the case.

I think every system has its frustrations. On the one hand, the fact that people can exercise the right to choose the government and to get rid of a government they don't like and to support policies that they think are right, has a huge number of benefits. And for the most part, I'm a great believer in democracy. On the other hand, I think when you have a country that's emerging, if you contrast China's rule by the CPC with India's democracy. You can see the challenges the democracy has in a very large populated country. It's been a lot easier for China to make some difficult decisions, but important ones, particularly around the building infrastructure and the planning of the growth of cities and those kinds of things. The systems worked really well for China.

The thing I would still say is that the impressive thing about the Chinese leadership is they are very responsible to the people. Particularly with Xi Jinping and Li Keqiang as president and premier, they have been very active, very visible, very focused on challenges. And if there've been disasters of any sort, they've been very responsible. I think that they've been very conscious of the fact they can only really govern by the support of the people.

by Snow | 21st Oct 22, 5:44pm 1666327460

The thing I would still say is that the impressive thing about the Chinese leadership is they are very responsible to the people. Particularly with Xi Jinping and Li Keqiang as president and premier, they have been very active, very visible, very focused on challenges. And if there've been disasters of any sort, they've been very responsible. I think that they've been very conscious of the fact they can only really govern by the support of the people.

You’re kidding right? A post like that would normally be taken as derisive towards the CCP but coming from our closet CCP sycophant I guess not.

by Audaxes | 21st Oct 22, 6:22pm 1666329758

Hyundai is investigating child labour violations in its U.S. supply chain and plans to "sever ties" with Hyundai suppliers in Alabama found to have relied on underage workers Child labour issues in US. When are sanctions to be imposed? Link

by Audaxes | 21st Oct 22, 6:27pm 1666330056

Amid French refinery strike, Macron to impose 2023 budget without parliamentary vote

by Snow | 21st Oct 22, 6:35pm 1666330540

No doubt Stephen, but when you’re constantly spouting whataboutism over the West whilst spruiking the virtues of the CCP, you’re demonstrating an incredible amount of cognitive dissonance.

by Audaxes | 21st Oct 22, 6:41pm 1666330869

"Whataboutism" is a term created to extract western warmongers from the difficult position of having done All The Bad Things they accuse others of doing. When someone uses it on you, it means you just killed their argument and exposed their moral bankruptcy. Link

by Fossil Lover | 22nd Oct 22, 7:30am 1666377041

The west has little democracy left. Governments are elected by corporate lobbyists, even little ole Invercargill. Lockdowns, forced vaccinations, arresting peaceful protesting, vaccination cards, traffic control, gun controls, health and safety, speed cameras, the list is endless. Look around your country there is no democracy left, it is all government control, you know the ones we elect to 'serve us', not serve their corporate interests.

by Wrong John | 21st Oct 22, 5:32pm 1666326752

Lots of things happening out there we don't read much about. Scrambling. If you think it's bad here, look at the nightmare taking shape in the UK. And Europe. Not to mention Russia. As for the poor folk in the Ukraine. Beep.

by Audaxes | 21st Oct 22, 5:37pm 1666327050

Britain’s Stark Choice Ahead

Transformation or Collapse Nafeez Ahmed 19 October 2022

by Audaxes | 21st Oct 22, 5:38pm 1666327102

Ukraine war is ‘Biden’s war’ now

by singautim | 21st Oct 22, 6:34pm 1666330459

Seems like a very biased interpretation. The war is clearly Russian and Ukrainian with the civilian deaths Ukrainian. There are some foreign boots involved - plenty of Chechens and even a handful of Kiwis. Financing is from USA as usual but this war has done the near impossible by uniting Europe. My guess is the USA worries more about Russia collapsing and China taking over places east of the Urals than they do about democracy in the Ukraine. Europe and the USA will be happy to see Putin and cronies go and then do their best to rebuild Russia into a strong neighbour against expansionist China.

Note those 'boots on the ground' would include Iranian drone technicians.

by Fossil Lover | 22nd Oct 22, 10:09am 1666386573

Putin will be happy to see the US go. No NATO, no war.

by HouseMouse | 21st Oct 22, 6:12pm 1666329124

John Bolton reckons mortgage rates are close to peaking. I don’t agree - I think fixed rates will go to at least 7%.

https://www.rnz.co.nz/news/national/477124/mortgage-hikes-peak-may-be-n…

by HW2 | 21st Oct 22, 6:21pm 1666329687

Man o man, a couple of months ago (maybe 6) you were predicting interest rates to retrace. Flip flop

by Audaxes | 21st Oct 22, 6:30pm 1666330232

Fixed income markets are expecting the sharpest drop in inflation ever since the 2008 Great Financial Crisis. Link

by HouseMouse | 21st Oct 22, 6:34pm 1666330465

So people aren’t allowed to change their minds?

I still think they will retrace, potentially quite aggressively, from late 2023 / early 2024.

So Presumably you are sticking to your view that prices won’t fall any more than about 10-15%? Good luck with that wishful thinking, if so.

Or have you ‘flip flopped’?

by J.C. | 21st Oct 22, 6:43pm 1666331029

Back to normal ya reckon HM? Already plenty of deflationary pressures in Chyna.

by JimboJones | 21st Oct 22, 8:02pm 1666335769

I remember the common theme in these comments only 12 months ago was that the RBNZ would never increase interest rates, house prices were sacrosanct and a sure bet, the governor owned rentals and only ever wanted prices to go up, they were corrupt, etc. But it as it turns out the RBNZ were just trying to keep inflation at about 2% as they were required to, once inflation picked up they put rates up. But I haven’t seen those people admit they were very wrong.

by J.C. | 21st Oct 22, 6:28pm 1666330080

Squirrel Bolton has skin in the game....in more ways than one.

by Snow | 21st Oct 22, 6:40pm 1666330827

Close to peaking IS at least 7%.

by ngakonui gold | 21st Oct 22, 7:21pm 1666333263

Just been reading an item regarding a ute ev in the states.He was towing 3500kg and had to recharge every 100 miles.

by Pa1nter | 21st Oct 22, 7:41pm 1666334492

Yeah the maths behind shifting significant weight using batteries has pretty diminishing returns.

There's a new Mercedes commercial van, the electric version weighs 600kg more, goes 400ks less per charge, and costs $30k more than the diesel version.

Batteries have to get cheaper or more dense, or both.

by bw | 21st Oct 22, 7:28pm 1666333692

If the Central Banks, including the RBNZ, wanted to get Inflation under control, they'd have ramped interest rate up the above the rate of Inflation. Done, quickly dusted. Inflation falls.

They haven't. So the equation might be : Why haven't they?

I can only see one of two reason. (1) they don't really want to control inflation, or (2) they don't know what to do.

I've always believed that the latter was the reason, but the longer this goes on the more likely it's to be option (1).

by Independent_Observer | 21st Oct 22, 10:10pm 1666343448

You miss the possibility that they can’t control this level of inflation because our debt levels are now too high to allow them to use interest rates to contain the inflation without creating a depression.

by Fossil Lover | 22nd Oct 22, 10:17am 1666387046

And a collapse in the fiat money system, that central banker's control

by lucenera | 21st Oct 22, 11:06pm 1666346805

Too many parameters, that's why

By doing it "slowly" they think they can assess the consequences.

That is not how things work, because the curve of consequences is not linear, but looks more like a multidimensional hyperbolic tangent function

So...

They know there is a point where everything go bananas

They just don't know where... and how big is the banana

by Fossil Lover | 22nd Oct 22, 10:13am 1666386810

Because inflation is a tax on the savers and wage earners, that central banks have little sympathy for, after all they are the productive members of society.

by Squishy | 21st Oct 22, 7:49pm 1666334943

In the battle between Liz Truss and the Lettuce there has been a clear, decisive winner.

Lettuce for next British Prime Minister!