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
ASB, BNZ and HSBC all raised fixed rates today. More here. So did WBS (Wairarapa Building Society) and the Heretaunga Building Society.
TERM DEPOSIT RATE CHANGES
ASB and HSBC also raised term deposit rates. (ASB has joined Kiwibank in offering a 4.5% one year TD rate.) They were joined by the Cooperative Bank and Heretaunga Building Society in raising rates. BNZ has raised its savings account rates.
LOWER ACTIVITY & HIGHER COSTS
The latest ANZ Business Outlook Survey for October shows a drop in business confidence, and a drop in activity levels - but inflation expectations have risen again. 'Inflation pressures remain intense' they report.
FARM SALES SLUMP
The REINZ is reporting a sales slump for farm sales in September. There were 109 fewer farm sales (-39%) for the three months ended September 2022 than for the three months ended September 2021. The median price per hectare for all farms sold in the three months to September 2022 was $23,080 compared to $30,890 recorded for the three months ended September 2021. That is -25% lower.
LIFESTYLE BLOCK SALES RETREAT TOO
Lifestyle block sales are falling too. 130 fewer lifestyle property sales (-9%) for the three months ended September 2022 than for the three months ended August 2022. There was no early spring bounce in this market segment.
A SHARP IMPROVEMENT
There has been a significant uplift in the supply of new housing compared to demand. The supply of new housing has exceeded population-driven demand by almost 60,000 homes over the last two years.
HIGHER INTEREST RATES BITE
Mortgage interest costs rose 39% for Kiwi households in the past year, according to Statistics NZ. They say annual inflation for households was 7.7% in the year to September, fueled by housing and food costs.
FAR HIGHER FAR EARLIER THAN EXPECTED
The Australian CPI inflation rate climbed more than expected to 7.3% in Q3 from 6.1% in Q2, above market forecasts of 6.9%. This was the highest level since Q2 1990, boosted by higher prices for new housing construction, automotive fuel, and food. Prices for food rose the most since Q4 1983, up 9.0%. The RBA looks like it has called this completely wrong, even if they do now see Aussie inflation peaking at 7.75%. Their cred is on the ropes.
ROYAL COMMISSION FALLOUT CONTINUES
In Australia, their Federal Court has ordered ANZ to pay a AU$25 mln penalty for failing to provide certain benefits it had agreed to give customers with offset transaction accounts or under a ‘Breakfree’ package. And in another Federal Court win for ASIC, Australia’s largest stockbroker, Commonwealth Bank-owned CommSec, will pay a AU$20 mln fine after it was judged it had broken the law when it over-charged customers on more than 120,000 occasions to the tune of about $4.3 mln.
SWAP RATES FALL & FLATTEN
Wholesale swap rates may be flattening today with small falls at the short end and larger falls at the long end. The key real action comes near the close however. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 4.13%. The Australian 10 year bond yield is now at 3.97% and down -14 bps extending their retreat. The China 10 year bond rate is unchanged at 2.74%. The NZ Government 10 year bond rate is now at 4.56%, and down -4 bps and now marginally above the earlier RBNZ fix for this bond at 4.59% which was down -10 bps from this time Friday. The UST 10 year is now at 4.09% and down -12 bps from this time yesterday.
EQUITIES ALL RISE
Wall Street ended their Tuesday session with another positive tone with the S&P500 up another +1.6%. Tokyo has started today up +1.1% and building on yesterday's rise. Hong Kong has clawed back +1.3% of the Monday/Tuesday rout, in early trade today. Shanghai is doing the same, up +0.6% to grap back a small amount lost earlier. The ASX200 is up another +0.3%, handicapped by the China links of many of their listed companies. The NZX50 is far less exposed, and is up another +0.7% in late Wednesday trade.
GOLD STABLE
In early Asian trade, gold is at US$1654/oz and up +US$4 from this time yesterday.
NZD HOLDS
The Kiwi dollar is nearly +½c firmer from this time yesterday at just on 57.4 USc. Against the AUD we are only marginally softer at 90 AUc after dipping sharply on the Aussie CPI news. Against the euro we are little-changed at 57.7 euro cents. That all means our TWI-5 is at 67.7 and also little-changed.
BITCOIN JUMPS
Bitcoin is much firmer today, now at US$20,204 up +US$943 in a day representing a +4.9% rise from this time yesterday. Volatility over the past 24 hours has been high at just over +/- 3.0%.
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23 Comments
Interesting to see the banks cover themselves with steep lending curves 6.0 1 yr to 7.3% 5yr, but flat deposit curves (ASB now 4.5% 1 yr to 4.7% 5yr). Somewhere around dec to feb we could see a flat TD curve with all rates 1 to 5 years all 5.0%, or even inverted. The jan CPI will still be over 6%, april will be interesting.
AT September public transport patronage continuing it's recovery with 5.7m boardings. Down 29% vs pre-pandemic and back to levels typical in 2012. Not bad considering half the busses are cancelled and the train network is shutdown more often than it is open. Or you could say it's up 802% vs 12 months ago.
https://at.govt.nz/about-us/reports-publications/at-metro-patronage-rep…
The Australian CPI inflation rate climbed more than expected to 7.3% in Q3 from 6.1% in Q2, above market forecasts of 6.9%.
Video: the secret to high growth w/o inflation, is credit allocation to small banks, that lend money to the local businesses that are the real economy of goods and services. Inflation is caused by money creation for ownership rights and consumer spending. Link
Kiwis make Bloomie today after release of Household Living Costs Index (dominated by food, property costs, and debt servicing).
The wealthiest New Zealanders are facing the highest rates of inflation once mortgage interest payments are included, according to government data.
Prices faced by the highest spending households jumped 8.8% in the year through September, Statistics New Zealand said Wednesday in Wellington. By comparison, the lowest spending households experienced inflation of 6.5%.
https://www.bloomberg.com/news/articles/2022-10-25/wealthiest-kiwis-exp…
Savings was probably a misleading word to choose to be fair! Over the last couple of years, around $40 billion has gathered in household bank accounts because people have earned more than they have spent (thus increasing disposable income / savings). Interest rates are now being hiked in an attempt to reduce disposable income. Well targeted taxation would be a better option.
I wouldn't have thought that the most wealthy people would have mortgages, and are cashed up. SO are not affected by interest rate rises, apart from earning more on their savings in the bank. It is middle and low income people who have recently purchased into the housing market at these highly inflated prices that are going to be worst affected IMO. Especially if house prices drop 27% in real terms, as predicted by one bank today. Negative equity
I doubt there's many low-income paying mortgages [directly]. Price's have been out-of-reach for nearly everyone who didn't have access to Bank of Mum and Dad for the last decade, and longer in Auckland. Especially since RBNZ turned the bubble into a Ponzi by introducing LVR over DTI back in 2013.
After lingering in the low 400’s for the past month or two, townhouses for rent in Auckland have surged back up to 440 on TradeMe over the past few days. Quite a few new build townhouses for rent, I expect that supply will keep getting bolstered over coming months as this big wave of new builds get completed.
Flat / very low rental inflation likely in Auckland over the coming year.
The Australian CPI inflation rate climbed more than expected to 7.3% in Q3 from 6.1% in Q2, above market forecasts of 6.9%.
Another day, another Reserve Bank failing to manage inflation. Where is Volcker when you need him?
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