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
Heartland Bank reduced its 2 year fixed rate to 5.99%, and that is notable because all their home loan rates are now below 6% (including their floating rate).
TERM DEPOSIT RATE CHANGES
None today here either. But we are expecting at least one big bank to make changes tomorrow.
NO LET-UP AS INFLATION PLATEAUS HIGH
The big story today was the Q4-2022 consumer price inflation data, which basically came in unchanged from Q3, at 7.2%. Non-tradable inflation is running at 6.5%. Bank analysts saw signs that inflation may have peaked and all said so loudly, pushing the narrative that the RBNZ should ease off their indicated +75 bps February hike. Banks don't enjoy the adjustment of a slower economy that high interest rates are inducing especially in the housing market. But in fact this data reveals inflation way higher than the RBNZ policy target, and with little actual concrete evidence it will retreat to that level any time soon. Remember, food price inflation ran at 10.7% in the quarter. Having said all that, financial markets are betting rates will ease from here. (See below.)
CREDIT CARD USE WEAKER
Credit card spending in December was weak. In fact it came in fractionally below the December 2021 levels, so a 'real' fall. For all of 2022, this spending rose +7.2%. So the December levels are a fast falling away.
CREDIT CARD BALANCES UP
But credit card balances are rising and were up +3.1% from year ago levels. This is the third straight month they rose after a longish string of declines (in 34 or the past 36 months). Still, only 51.8% of all balances incur interest which is near its record all-time low. You do have to wonder how long that can last.
MORE FX FIREPOWER
The Reserve Bank and Finance Minister have agreed a new framework for managing foreign reserves, which will include the RBNZ holding more cash offshore - but it's not saying how much more.
SCAM ALERT
The FMA advises they are concerned that Magnitude Financial Group is operating a scam via their websites magnitudefinancialgroup.co.nz and magnitudefinancial-nz.co. They point out they are not a registered financial service provider in New Zealand and therefore not permitted to provide financial services to New Zealand residents. A check of their domain name registration points to an Eastern European owner.
NOT THE SHIFTS YOU MIGHT EXPECT
The latest Roy Morgan political poll for New Zealand has Labour at 27.5% (up +2% from the November poll), National at 35% (down -4%), the Greens at 11% (down -2%) and ACT at 14.5% (up +3.5%). 12% of those polled mentioned other parties (down from 12.5%). This polling was done before the Ardern resignation.
NO RELIEF IN AUSTRALIA
In Australia, their CPI rose +7.8% in the year to December. That was above market expectations and its highest since 1990. The most significant price rises were domestic travel and accommodation (+13.3%), electricity (+8.6%), international travel and accommodation (+7.6%). Food prices rose +9.2% there. The RBA next reviews its cash rate target on Tuesday, February 7, 2023. It is more likely to be a substantial rise now - and that in turn may affect the RBNZ thinking for its February 23, 2023 MPS review.
AUSSIE NEW HOME MARKET VERY WEAK
In Australia, their new home market is retreating faster. Sales of new homes fell by -4.6% in December leaving sales in the final quarter of 2022 a remarkable -42% lower than at the same time in 2021. Anecdotal data in New Zealand suggests a similar pattern is developing here in 2023.
SWAP RATES FALL LESS THAN EXPECTED
Wholesale swap rates likely slipped today after the CPI data but probably not be anything significant. Early indicators suggested a chunky fall, but later ones not so much. The real action comes near the close however. Our chart will record the final positions. The 90 day bank bill rate is up +2 bps at 4.90%. The Australian 10 year bond yield is now at 3.45% and down -3 bps from this time yesterday. The China 10 year bond rate is at 2.96% and unchanged of course. The NZ Government 10 year bond rate is now at 4.11% and down -3 bps, and still above the earlier RBNZ fix for the NZGB 10 year which is down -5 bps at 4.04%. The UST 10 year is down -6 bps to 3.45%.
EQUITIES UNREMARKABLE
The NZX50 is heading for a +0.3% gain today, and most of that came after the CPI data was released. The ASX200 is down -0.2%, undermined by their high CPI news. Tokyo has opened little-changed. Hong Kong and Shanghai are closed still of course. The S&P500 ended on Wall Street earlier essentially unchanged too.
GOLD FIRM
In early Asian trade, gold is firm, now at US$1938/oz and up +US$5 from this time yesterday.
NZD HOLDS
The Kiwi dollar has slipped marginally to 64.8 USc from a day ago, moving remarkably little after the CPI data release. Against the Aussie we are now down more than -¾c to 91.6 AUc. Against the euro we are little-changed at 59.5 euro cents. That all means our TWI-5 is still at 71.6 and just marginally lower.
BITCOIN SLIPS
The bitcoin price is down marginally from this time yesterday, now at US$22,535 and -1.9% lower with most of that fall coming since 11am NZT. Volatility over the past 24 hours has been modest at +/- 1.5%.
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80 Comments
Government resignations called for in the UK ?
Pressure grows on Jeremy Hunt to salvage Britain's economy after budget watchdog 'warns medium-term prospects for economic growth are bleak' after it got its forecast wrong - as national debt hits eyewatering £2.5trillion Link
Read those pasta ingredient labels carefully chaps.
"Commission Implementing Regulation (EU) 2023/5 of 3 January 2023 authorising the placing on the market of Acheta domesticus (house cricket) partially defatted powder as a novel food."
https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32023R0005
Latest Roy Morgan poll is interesting. Generally used to think their polling as being a bit, let’s say, maverick. But these numbers, for that date, look pretty credible to the point that it predicted an election outcome that you could be pretty confident about. PM Ardern’s departure has obviously apple carted all that. All the forthcoming polls are going to be of renewed and even greater interest obviously.
It can happen because it has happened. When Lange abruptly quit and Palmer took his place, overnight he polled at over 20% as preferred PM even though up until then he had scarcely featured. That just goes to show how ignorance favours the incumbent and at the moment of course Hipkins himself is dominating the headlines and airwaves. Given that it is quite likely he will jump up and take the party up a bit too. You know, the person that if polled just blurts out the first name that happens to be in their head.
And , as Prof Robert McCullouch wrote in " Down to Earth Kiwi " , Chippy's first speeches have been dominated by the nation's economy , something Ardern seldom mentioned in 5 whole years ...
... she was off on a moral crusade to lead & save the world , puffed up with ideological wonderland dreams ... forgetting that the rest of us are struggling to pay the bills & to negotiate life's daily pot holes ...
Favourite recipe of many it seemed, flim flam with a fairy dust topping. I would put 90% of her reign in the category of circuitous utterances of nothingness, empty rhetoric verging on propaganda. But the other 10% was very good, the pathos, the celebrity and the representation of New Zealand internationally.
... she was fricking brilliant as our unofficial ambassador to the world ... they loved her overseas ... lapped up her vacuous puff pieces as a new moral compass ... the looking glass forward into Jacinda's Worldwide Wonderland ...
Completely & utterly useless at actually leading her nation ... the poor saps who mistakingly voted for her ... ... far & away the worst PM for the day to day business of running Zealandia ...
According to the bottom line of figures it would be ACT 19 National 46 = 65. But you are correct in that no previous formal coalition party on the junior side has been as well represented, as much as that. That in itself, would be a novel challenge in order to balance the scales so to speak.
See today's press conference from Chippy - very evasive on what co-governance might look like (I get he's only been PM for about six hours, but he has been knees deep in all this for nearly two electoral terms so he cannot claim ignorance).
Not much transparency at all, just "we'll need to figure out what it means" but it's "nothing to be afraid of" (per his Ratana comments).
If it's nothing to be afraid of, then why not come out and tell us what the end state looks like?
Willie Jackson uttered those nothing to be afraid of words right at the the beginning of it all didn’t he. At the time, I took that to be one of the most unctuous and unconvincing statements I had ever heard any politician make and right then I concluded, there was everything to be afraid of and that prediction has now come to pass.
Once again, if it's nothing to be afraid of then Labour has nothing to hide - be clear with what you intend to happen if it isn't the slightest bit frightening.
I don't think I trust any politician, but Willie Jackson I trust less than most. Imagine having the arrogance to declare singlehandedly that 'democracy has changed'.
This is what happens when a centre-left government fails to deliver on its centre-left policy promises. A big swing to the right. It’s happened many times in history and will happen many times more.
It’s a fundamental failure of the left, and the left just don’t seem to get it. More often they seem more beholden to business interests than working people.
Just bizarre.
... back up the bus there Jimbo ... it was the Gnats who originally set it up , to gain an overview of the nation's 3 waters infrastructure ... with a view to helping out where necessary ...
Labour perverted it into a nasty asset grab and a power shift to Tainui ... then added geothermal & foreshore , surreptitiously... and made an underhand attempt at entrenchment...
To go back a bit, was it not recorded that Mike Moore advised his incoming government colleagues about big business “don’t piss em off.” And the next time round when De Cullen addressed a meeting of the same up north somewhere, he had a road to Damascus moment that delivered the same message. Well this Labour government has been heedless of those lessons while at the same time, as you point out, failed to satisfy much of anything on their left either. So what exactly have they achieved then?
WOKEFLATION
Wokeflation: Used to described the correlation (not necessary causation) of the activeness/proliferation of woke activism and policy making [extreme baizuo] when compared to national inflation statistics over time.
- Wokeflation is claimed to be observable whether inflation is trending up or down. If wokeflation theory holds true, inflation and wokeness will peak at similar times,
- No research has been conducted into lag times, or wokeflation itself. Wokeflation is a cultioeconomic theory and should be taken with a generous helping of salt.
LOL, just needed to make myself laugh, and no, wokeflation isn't a word as far as I know.
Konstantin Kisin speaking at the Oxford Union for the motion "This house believes that Woke culture has gone too far" - 9 minutes.
The Union voted 89-60 in favour of the motion.
Extreme baizuo
Love this word. Deserves a Wiki moment as many won't know it:
A Chinese neologism used to refer to Western leftist ideologies primarily espoused by white people.....a reference to those whose political opinions are perceived as being overly driven by emotion. According to Chinese political scientist Chenchen Zhang, the word "Baizuo" refers to those who "only care about topics such as immigration, minorities, LGBT rights and the environment", but lack a concept of "real problems in the real world". It is also used to describe those "hypocritical humanitarians who advocate political correctness just to satisfy their own sense of moral superiority".Some used this word to indicate those "ignorant and arrogant westerners" who "pity the rest of the world and think they are saviors".
I disagree, I deal with a lot of "poor ". Sadly, they lack the most basic understanding about money, they have no foresight whatsoever and all that matters is instant gratification. I know, I pay some of them to do basic work and the money is spent immediately, I mean within minutes of receiving it, onto alcohol and cigarettes. I have said before, basic money management needs to be taught at school level.
Bloody heck. You are a hard one to work out sometimes Jimbo, as a vocal supporter of the Labour Party.
plenty of gross generalisations being thrown around by you two. Obviously some truth to the generalisations but….
You totally gloss over those people - and there’s a lot of them - genuinely going backwards in this economy. Working hard, on low-middle incomes.
Or those young couples who saved bloody hard for a deposit, bought a house 2-3 years ago on low interest rates, and are now refinancing at current interest rates. Some of them might have had children in the interim. And so on.
In principle of course I agree. But I don’t think life is that simple or neat and tidy, especially for people on low-middle incomes in this environment with very high and rapidly increasing cost of living.
of course some people are able to rely on the bank of mum and dad to bail them out.
Interesting call today with a client I haven't caught up with since about Q3 last year (occasional work for me).
This client develops a particular software solution that they sell to businesses who effectively resell it to their clients ... think how Xero typically works but for a different vertical.
The typical 'end user' clients are hospitality outlets, small retailers, trades businesses etc. Basically smaller outfits.
The software provider (my client) has data on the number of cancellations through their reseller partners, and collates information on the reasons given for cancellation.
They noted that since the start of the year they have seen a big uptick in the number of end users cancelling their platform subscriptions (via the resellers). In the post-cancellation survey results, the feedback on the platform is overwhelmingly positive - the issue is simply that business is no longer viable for these small operators and they are looking to shut up shop.
Reasons given are:
- Can't find staff - primarily for hospo
- Costs rising too fast
- Leads/sales have dropped off all of a sudden, and with the business can't stay afloat - this is the most commonly given reason
These are typically very small businesses; one-man-with-a-van electricians, mum and dad cafes, 'hobbyist' retail but still an interesting development.
This business was started prior to the GFC, and the director says the drop off this time is more pronounced and sudden than in 2008/9.
Grantham on housing and stock market, c/o Macrobusiness
https://www.macrobusiness.com.au/2023/01/grantham-and-now-for-the-globa…
...this data reveals inflation way higher than the RBNZ policy target, and with little actual concrete evidence it will retreat to that level any time soon. Remember, food price inflation ran at 10.7% in the quarter.
I will believe that RBNZ have a handle on inflation when we get back to back quarters of declining CPI. Then they should start thinking about sticking the landing.
Is it just me or is the Hubris around JA's departure nuts? she has just squandered the biggest political majority in a single term, from no requirement for a coalition partner to the opposition benches.... and they are still fawning over Aunty Cindy? I just do not understand that disconnect. She is a failed leader.
100% agree. Bizarre!!!!
Note - I don’t think she was a bad PM. But she wasn’t really a very good one either. She was burdened by a very poor team, and there’s only so much an OK captain or coach can do with a limited talent pool. To use a sporting analogy.
Even Pep Guardiola would struggle to get Everton achieving above modest levels.
Ardern chose to politicise Covid19 , and to stand up on the Podium of Truth daily at 1 pm ... it's her fault for over exposing herself ... and the cover pages of Womans Weekly : she played the celebrity card to the full ... until the fall ...
... she'll probably surface on Dancing With Stars soon ...
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