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 and the Police Credit Union raised fixed rates today.
TERM DEPOSIT RATE CHANGES
TSB and the Police Credit Union also raised term deposit rates, and they were joined by Unity Money.
MORE BETTER DATA
Like most (non-real estate) data we have been getting recently, today's Q3-2022 economic activity data was stronger than either analysts or the commentariat had expected. Not only is real GDP higher than year ago levels by an impressive +6.55%, the Q2-2022 data was revised up as well. Nominal economic activity (GDP) rose to $373.5 bln in the year to September and the July-September activity was more than $97 bln. Both were all-time records. But it is the inflation-adjusted 'real' results that are eye-catching. On a per-capita basis, the +2.0% 'real' improvement returns that expansion to pre-Covid levels. All of this paints a picture of a 2022 economy that has done better than many were expecting, economists included.
SALES INCH UP, WAGES JUMP
The latest Xero Small Business Index reveals weakening annual sales growth for New Zealand’s small business sector in November, ahead of the Christmas and summer break. They report that sales grew +2.3% year-on-year, down from +10.0% in October and the lowest since September 2021. While sales weakened, wages grew +6.6% in November 2022, the second consecutive month of acceleration as wage growth nears the previous record high of +6.7% in June 2022.
'NOT DELIBERATE OR DISHONEST'
The Real Estate Agents Disciplinary Tribunal has censured two agents for misconduct for inserting the signatures and initials of vendors taken from previous documents onto a new offer and failing to obtain the parties’ actual signatures on the contract. In its decision the Tribunal noted the conduct was “not a deliberate or dishonest act of forgery” but constituted seriously negligent or incompetent real estate agency work.
DELIBERATE AND DISHONEST
Two couples looking to get into property investing in Auckland used fake employment agreements to defraud banks out of $8.7 mln. Bryan Martin and Joshua Grant were found guilty on charges of obtaining by deception following a six-week Auckland District Court trial in August and September of this year. Grant’s wife, Sian Grant, and Martin’s former partner, Viki Cotter, have both previously pleaded guilty to their part in the scheme. Both couples sought to invest in the Auckland property market, however did not have the income needed to secure loans. They made document up.
PROPERTY SENTIMENT FALLS AMONG THE PROS
Property sentiment edged lower in the December quarterly ANZ-Property Council survey and is now back below pre-pandemic levels. Both residential and commercial property sentiment fell. Interest rates, access to finance and rising costs are weighing on sentiment, they note.
LOWER WELL-BEING, BUT AT LEAST THE COMMITMENT TO THE BANK ARE BEING MET
A Roy Morgan survey of 7000 people commissioned by ANZ has found that a majority of people are staying on top of day to day financial commitments and keeping up their KiwiSaver contributions, despite uncertainty about the economic outlook. From the responses they derive The ANZ Financial Wellbeing Indicator which shows some steady declines, and was 59.7 out of 100 in the three months to September 30. That compares to 59.9 in the June quarter and 62.3 in the September 2021 quarter. However, when it came to the ‘meeting commitments’ component the number has risen, sitting at 72.9 in the latest report, up from 71.9 in the June quarter.
'SYSTEMIC FAILINGS'
The FMA has formally warned Pencarrow Private Equity Management for breaching record-keeping requirements under AML/CFT requirements. But the warnings relate to activity in 2018.
AUSSIE LABOUR MARKET STRENGTH
A higher participation rates is powering the Aussie labour market, whose jobless rate stayed at 3.4% in November. Their jobless fell by -7,400 to 491,700. Total employment increased by +64,000 to a fresh record peak of 13.8 mln, beating market forecasts of a rise of +19,000, as full-time employment rose +34,200 to 9.6 mln while part-time employment gained +29,800 to 4.2 mln. Yes, 30% of jobs there are part-time roles. Surging inward migration is boosting this labour market. Willing workers are finding willing employers. Their participation rate edged up to 66.8%, returning to the record high hit in June.
CHINA RELEASES WEAK ECONOMIC DATA
There was a set of official data released in China today, much of it weak. Retail sales fell and by much more than anticipated, to be a massive -5.9% below year-ago levels in October. Given their pervasive lockdowns, analysts had though a massive -3.7% fall was coming. In fact it was almost twice that. Electricity production was unchanged in November from a year ago. But they claimed industrial production rose +2.2% on the same basis even though that was half the claimed October rise. It hardly makes sense when electricity use is unchanged. They also said house prices fell -1.6% in November from a year ago, a brave estimate when these markets are largely a shadow of themselves.
SWAP RATES LEAP
Wholesale swap rates were likely sharply higher today. Swap rates could be as much as +15 bps higher today. The real action comes near the close however. Our chart will record the final positions. The 90 day bank bill rate is up +1 bp at 4.53%. The Australian 10 year bond yield is now at 3.43% and up +7 bps from this time yesterday. The China 10 year bond rate is at 2.91% and down -3 bps. The NZ Government 10 year bond rate is now at 4.31%, and up +13 bps and still well above the earlier RBNZ fix for the NZGB 10 year which was up +6 bps to 4.20% with clearly some catching up to do. The UST 10 year is now at 3.50% and unchanged from this time yesterday, although it surged somewhat after the US Fed announcement before quickly reverting.
EQUITIES MOSTLY NEGATIVE, NZX THE EXCEPTION
Wall Street was roiled by the US Fed's hawkish position today, and ended down -0.6% in its Wednesday trade. Tokyo has opened down -0.2%. Hong Kong has opened down -1.9% in early trade. Shanghai is down -0.3%. The ASX200 is down -0.5% in Thursday afternoon trade. The NZX50 is on the positive side, up +0.1%, a small gain but it is unusual among the markets we follow.
GOLD UP
In early Asian trade, gold is just under US$1800/oz and up another +US$11 from this time yesterday.
NZD STAYS FIRM
The Kiwi dollar is little-changed from this time yesterday, now back at 64.6 USc after dipping sharpish on the US Fed rate change. Against the AUD we are softer at 94.1 AUc. Against the euro we are little-changed at 60.5 euro cents. That all means our TWI-5 is now down fractionally at 72.5.
BITCOIN UNCHANGED
The bitcoin prices is virtually unchanged US$17,794 despite some wild but short swings in between. Volatility over the past 24 hours has been moderate at +/- 2.0%.
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56 Comments
On Treasury forecasts the CPI in 2025 will have been 13.3 per cent higher than if the Reserve Bank had simply done its core job and delivered inflation on average at 2 per cent per annum (the Reserve Bank’s own projections are very similar). It is a staggering policy failure – especially when you recall that the Governor used to insist that public inflation expectations were securely anchored at around 2 per cent. It is an entirely arbitrary redistribution of wealth that no one voted one, few seem to comment on, and no one seems to be held to account for, even though avoiding such arbitrary redistributions (benefiting the indebted at the expense of depositors and bondholders) was a core element of the Reserve Bank’s job. We don’t – and probably shouldn’t – run price level targets, but let’s not lose sight of what policy failures of this order actually mean to individuals. Link
It’s quite simple, can you get your head around this:
-GDP boom mostly a result of borders and economy opening. Yes, a result of a government action but it’s merely an expected reversion to normality (or something approaching normality)
-inflation: multiple factors at play, but government has played a significant part by: changing RBNZ mandate, pumping the economy with money, and excessively limiting immigration.
"Who would have thought the “worst government ever” would have record low unemployment and massive GDP growth."
Let me put that through the reality machine:
The worst government ever, benefited from years of covid lockdown, resulting in mass migration to Australia, causing brain drain in NZ, low unemployment and minor GDP growth.
Latest stats from OZ to Jun 2022
running at net 4,910 NZ citizens
highest since 2014
https://www.abs.gov.au/statistics/people/population/overseas-migration/…
The year 21/22 NZ Citizen Visa subclass 444
Arrivals to OZ- 23,230
Departures from OZ - 15,790
It makes you wonder about people on legitimate salaries who applied for massive loans to buy multiple properties. How many got these loans to buy multiple properties and how are they faring now? There were often articles in the press about these people yet it's not easy to find cashflow positive properties straight off the bat.
I wonder how Jonathan Brownlee is doing. 51 properties by the age of 26. No amount of retained earnings can explain that, just pure equity leverage/debt stacking.
He now owes $11m to the banks but has $9m in equity - the theoretical amount he would earn if he sold all his properties tomorrow.
$11m in loans, $9m equity = 55% LVR. Wonder if those are homes.co numbers.
https://www.nzherald.co.nz/nz/aucklander-jonathan-brownlee-owns-51-prop…
Likely not looking so stable now.
Assuming maintenance and insurance of around $50-100pw per property (rough guess), this guy is negatively geared at just over 7% interest only…
Id assume a lot of apartments too, so body corp through the roof. Add to that a nominal loss in value, and he was looking to tick up more property, this could turn nasty very quickly.
Ooo look a property bubble! Best buy 50 for a fun ride back down!
It would be interesting to know more details. Reading the news I see they applied for 14 loan applications between August 2015 and October 2016. Interest rates weren't super low then and it would have been hard to find properties that were immediately cashflow positive after all expenses. The banks lent them 8.7 million which is quite a lot. Interest rates would have dropped after they got the loans. If they got away with it and sold up in October 2021 they would have made a killing.
Got to keep that cash-flow positive property market going!
The (NSW) state government has intervened to strip the local council in Byron Bay of its authority to limit the use of residential properties for Air BnB holiday accommodation. The proposal would only apply to houses and units where there was no host present, and came amid concerns about rising homelessness in the popular coastal community.
Suicide is not painless after all?
We made an appalling mistake, so the Bank of England needs a £188bn bailout. Since 2009, the Bank has been buying very large quantities of Government debt in an action christened at the time ‘Quantitative Easing’ (QE). At the time of writing (December 2022), the Bank owns £847bn of QE gilts valued at cost. It also owes a similar amount to the commercial banks (effectively on overdraft). This borrowing is subject to the Bank paying the bank rate to the commercial banks
https://www.telegraph.co.uk/business/2022/12/14/made-appalling-mistake-…
Wage price spiral plays out in the UK....
Postal workers and railway employees have walked out, holding up Christmas packages and disrupting the travel plans of millions two weeks before the holiday. On Thursday, they will be joined by as many as 100,000 nurses in a one-day work stoppage that could slow treatment in hospitals and clinics across England.
Driving-test examiners at motor-vehicle departments are going on strike, as well as baggage handlers, bus drivers, road crews and energy-company employees. The newspapers have taken to publishing colour-coded calendars to help readers keep track of which services will be interrupted on what date.
As opposed to the corrupt conglomerate? (Her rationale? "But everyone does this!")
Brussels accused of corruption....
https://www.telegraph.co.uk/business/2022/12/14/brussels-accused-corrup…
With more central banks meeting tonight,the higher cost of money will start to impact global spending.What is not widely advertised is the effect QT globally will have going forward.
The fed already has been reducing its balance sheet by around 95b a month (around 1 trillion a year) the ECB has signaled a trade off with lower rate increases balanced by reduction in the 5T euro ECB holdings.This will see enhanced competition for available funds by the demand for higher yields.
Higher energy demands in the northern hemisphere for heating and electricity will keep an elevated floor under core inflation,as the opening of China and increased colder weather forecasts see demand increase.
Higher interest rates are a renormalization of the real cost of money,and will be here for some time.
A friend back from 4 & a half months in the UK (he has a new lady in his life) saying he can't believe how bad things are there. He is a 70 year old business person so he's seen quite a bit. It's sad to hear that, as I have fond memories of my times there. The Brexit/covid one-two has been a tough gig. Here's hoping they can turn things round.
As for what we hear & read out of China? Well, they're cutting back on their monthly/quarterly data reporting substantially, which tells its own story really. The corruption will get them in the end.
China is about to look like Italy/London/New York did in 2020, Not enough vax to produce enven a limited amount of immunity. Sure Omnicron may be only 30% as deadly (try verifying this) but if 500 million get this in the next few months whats going to happen to the health system? Two weeks to flatten the curve?
Peter Zeihan just did a good YT on the outbreak in China. It's compounded by them having even worse health than Americans (eg. twice the diabetes), and minimal natural immunity because of the lockdowns. A bunch are already off work sick.
Possible death tolls in the low millions are floating about.
Good question. if Wikepedia is to be believed (Wet markets in China - Wikipedia), the answer is No, but the offending products have mostly been knocked on the head:
The Chinese government subsequently announced a temporary ban on the sale of wild animal products at wet markets on 26 January 2020,[23][24][9][10] and then a permanent ban in February 2020 with an exception for Traditional Chinese Medicine ingredients,[24][25] By 22 March 2020, at least 94% of the temporarily closed wet markets in China were reopened according to Chinese state-run media,[8][6] without wild animals or wild meat.[10]
Do not get me started, there is not a single piece of evidence that Covid came from an animal res in a wet market, unlike Sars and Mers where there was a well defined trail of virus sequences in animals... (remember we even did sequencing here in little old NZ ) not one, there never was a reservoir in the wild. It was Chinas easiest get out of jail card, but alas all they held was a lab full of jokers.
HouseMouse you seem a smart guy who can read through both sides of a long analysis, read this
https://thebulletin.org/2021/05/the-origin-of-covid-did-people-or-natur…
Very interesting IT Guy, good piece.
However, I tend to side with experts, and it is clear that the overwhelming view amongst virologists is that Covid did not have a lab origin. I am not convinced by the conspiracy theory suggesting virologists, as an international community, have conspired to suppress debate around the lab origin theory.
Having said that, there are some interesting circumstantial arguments presented in this argument for the lab origin theory.
Any progressing sequence evidence of covid-19 circulating in animals before it jumped to humans would instantly shut this debate down.... as would any subsequent ongoing mutations in said animals.
Where is it?
Interestingly we have plenty of evidence its jumped from humans to animals multiple times via sequencing the virus in animals,
Science
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