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%.
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83 Comments
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 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.
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.
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.
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.
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
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.
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
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…
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!
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.
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.
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.
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.
Transformation or Collapse Nafeez Ahmed 19 October 2022
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.
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…
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’?
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.
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.
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).
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
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