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
Nothing to report today from any institution.
TERM DEPOSIT RATE CHANGES
Only Christian Savings had a change today, a rise to their TD rate card.
STILL TIGHT, BUT LESS SO (MAYBE)
Statistics New Zealand says the unemployment rate has risen to 3.4% from 3.3%; it was widely expected to fall. Private sector hourly wage growth has slowed to 8.1% from 8.6% when it was expected to rise. BNZ economists changed their OCR call, saying it will rise by 'only' +50 bps on February 22. Still, we need to point out that the not-seasonally adjusted data shows employment grew +28,500 in the December quarter to an all-time record high of 2.872 mln. The employment rate is also a new record at 69.7% of the working age population. And the participation rate rose to a new record high 72.1%. These are 'extreme' levels for any economy, not just New Zealand, and it is hard to see how jobs can be filled when things are this tight (except by opening the borders, of course). The seasonally-adjusted data may have suggested things are topping out (and they may well be), but the raw data has things as tight-as.
WORKERS NOT BEING LEFT BEHIND
The pay data in today's labour market releases does suggest a topping out in pay increases. These came in at +8.1% on averageacross the whole labour market. What is interesting is that it is clear most workers are keeping up with CPI inflation (7.2%), and making relative gains due to the applicant shortages for unfilled positions. Private sector average weekly earnings increased by +8.6%, to $1,432/week. Real wages are rising. When real wages are rising and the census of filled jobs is at its highest ever, the risk of wage-push inflation embedding is high. From a macro perspective, the level of payroll cash flowing through the economy is also at a record high and rising faster than CPI. Gross earnings of all employees were up +10.1% in Q4-2022 compared to Q4-2021, whereas paid hours only rose +2.5% over the same period.
'VENDORS UNREALISTIC'
Realestate.co.nz figures show stock levels up and asking prices down, warns many vendors still have unrealistic price expectations.
'TEMPORARY' TAX CUT EXTENDED
The Government has extended its earlier 25c/litre fuel tax cut for yet another three months, saying it wants to focus first on ‘bread and butter’ ‘cost of living’ issues. It is hard to see them reversing these cuts before October 14 (election day). More than just fuel and RUC extensions, half price public transport is to be made permanent to around one million Community Service Card holders, including tertiary students, from 1 July 2023. We are in full election campaign mode now.
NAME CHANGE
NZBA today announced it would be called the New Zealand Banking Association – Te Rangapū Pēke. It was previously known as the New Zealand Bankers’ Association. The te reo name, was given by Tāwhia, the Māori banking rōpū, "and we are very grateful for this generous gift".
NOT CONFIRMED
It is a fine margin, but the private Caixin PMI survey did not confirm the official Chinese factory PMI with a shift to an expansion. The Caixin survey still reports a small contraction, but new orders shrank for the sixth straight month.
SWAP RATES EASE
Wholesale swap rates likely retreated today with most of the fall at the short end. The real action comes near the close however. Our chart will record the final positions. The 90 day bank bill rate is down -2 bps at 4.89%. The Australian 10 year bond yield is now at 3.55% and little-changed. The China 10 year bond rate is back at 2.94%. The NZ Government 10 year bond rate is now at 4.19% and down just -1 bp, and that is still way above the earlier RBNZ fix at 4.10% which was down -8 bps. The UST 10 year is down -2 bps to 3.52%.
EQUITIES RISE
The S&P500 ended its Tuesday session on Wall Street up almost +1.5% with a late burst higher. Equity markets are more convinced the Fed will ease off their 'normalisation' pace tomorrow. The NZX50 is ending today up +0.8% near the close. The ASX200 is up +0.5% in early afternoon trade. Tokyo has opened up +0.6% today. Hong Kong is up +0.2% at its open. Shanghai has opened up +0.2% as well.
GOLD UNCHANGED
In early Asian trade, gold is unchanged from this time yesterday at US$1925/oz.
NZD SOFT
The Kiwi dollar is at 64.3 USc, and down -½c from this time yesterday. Against the Aussie we are down at 91.2 AUc, and that's down more than -½c. Against the euro we are down slightly less at 59.2 euro cents. The TWI is now at 71.2 and -30 bps lower in a day.
BITCOIN HOLDS
The bitcoin price has risen slightly, to US$23,073 and up +0.8% from this time yesterday.
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107 Comments
Three former student presidents walk into a bar. The round one says " We will borrow and give them cheap fuel. The suckers will vote for us". The ginga one says "But the grandchildren will have to pay, with interest". The other one says "Grandchildren? You are so last century"
If the grandchildren really are in Australia, climate change will be making their lives even more unpleasant than had they remained in NZ.
People banging on about Australia being this future paradise better wake up quickly to the fact that they are going to be severely inconvenienced by climate change: https://www.science.org.au/files/userfiles/support/reports-and-plans/20…
Plenty more Auckland like events on their way, on both sides of the Tasman.
Yeah Im now 60/40 on 50 points rise. 7.2% inflation (food is/will be higher), 8% wage growth, 3.4% unemployment, we are still heading for OCR at least 5.0%. I see the 5 and 10 year swaps ticking up on the news today. US cash rate will be interesting, prob 4.75 to 5.0% tomorrow?
They need to go 75bp, if they blink now the economy is cactus. Inflation is now pretty much entrenched, to dial back the OCR hikes will weaken Kiwi and just send a signal to pile back into property - (the prospect of a National victory is probably already supporting prices). Building supplies continue to rise in prices, groceries are like crypto. We need a short sharp shock, there is no easy way out.
How about all the businesses that will be whacked by the flooding in Auckland? Surely that becomes a consideration in limiting, or even halting, OCR hikes.
After all the OCR was cut, down to 0.25, on the basis of perceived and/or real impacts of covid lockdowns on business. That decision had nothing to do with inflation, nor with unemployment (other than a fear that unemployment would soar - which it didn’t).
Just being the ‘devil’s advocate’ here, not saying that halting OCR hikes would necessarily be desirable or the right thing to do.
What businesses? You mean the ones facing massive demand for new furniture, carpets, cars, household appliances, waste removal, cleaning, painting, fencing, landscaping .... $1B in flood claims means $1B being pumped into the domestic consumer economy for new goods and services
And we havent even touched on all the damaged fruit and vege crops that are going to send food prices higher
Yes, but how about all the warehouses, shops etc that have been extensively damaged? Not an insignificant number. And in a few locations beyond Auckland now.
There’s also the political economy aspect to this. Which is not an insignificant factor.
Is an OCR hike a ‘good look’ in light of this?
Don’t get me wrong, I still think the OCR will probably be hiked. I am just putting another scenario out there which I don’t think should be written off.
The disaster has today been called the worst non-earthquake disaster in NZ’s history, after all.
I'd considered the pause scenario, but this isn't as drastic a situation as covid for the RBNZ to take it's foot of the gas. You could well be right about a lesser hike though.
Overall it seems like they're shit scared of repeating a 70s/80s style muckup of easing up on inflation fighting.
yes they cant pile into property at the moment at 6.7 to 7.5% interest. But yes, they think National will make it tax free again and remove the bright line test and take immigration back to 70,000+ a year. If RBNZ have learned anything, they must have a DTI in place before (if) National get back in power, and/or it mortgage rates go below 5% again.
7 % inflation is the new norm. (I suspect it is higher from prices at the grocery store). Banks have no desire to stop lending (money creation), governments have no desire to stop spending (votes), and big business can pay down their debt faster through inflation. Our fiat currency is on it's last legs, the grandkids will not have to worry about 'our' debt, it will not be worth anything.
The idea is not to keep inflation stable at 7% but to return it to 2%. This will be harder than most think with 8% wage increases. So yeah, 0.5% increase is a distinct possibility but I wouldn’t rule out 0.75% yet. The harder they go now the sooner inflation and then interest rates will start to fall, so wishing for soft increases now really just wishes for higher rates for longer
From the RBNZ Website
Inflation
The current remit requires the MPC to keep inflation between 1% and 3% on average over the medium term, with a focus on keeping future average inflation near the 2% target midpoint.
With no definition of "medium term" or "future", and no apparent consequences for failing to meet these "targets", they would appear to have free reign to do whatever they want.
So the floods will halt inflation...?
I suspect the opposite will occur. Insurance funded repairs will drive another inflation driven boost to trades wages and materials. Inflation is still charging. OCR will keep rising - another .75 coming. RBNZ warned everyone from loading up on debt last year.
No they won’t halt inflation. As I said yesterday, it will worsen.
But my point is they have made decisions in the past that are effectively decoupled from their mandates. Lots of businesses will be hit by these floods, and the last thing many of them will need is increased borrowing costs.
And I for one don’t believe the RBNZ is truly independent.
Vendors being unrealistic? Vendors think its the buyers who are unrealistic: https://www.oneroof.co.nz/news/too-cheeky-when-a-low-offer-becomes-darn…
Oneroof bias aside, looks like quite a stand off. Vendors expectations of actually banking the paper gains is proving to be quite a challenge!
There is an absolute tear down 3 bed 1 bath near us wanting offers over $1.3 million. Maybe a year ago a developer would have paid that and pulled it down, but I highly doubt that now. What FHB is going to pay $1.3 mil for an absolute shitter that wouldn't be worth much more completely renovated. Nicer similar sized houses in nicer streets have gone for more, and you can get a really nice brand new house (on less land) for less. But they still want what they may have got 1 year ago...
Sorry for all the questions but it will depend on the slope.
If it’s only a moderate slope then might be able to get say 7-8 townhouses running down the site. In which case, that’s not a bad land value to dwelling cost. And Mt Roskill is a fairly central suburb, it’s not Manurewa.
If it’s moderate-steep then it’s a different story.
Development is dying but there will still be some sites and developments that stack up.
Offered 900k on a house (accepted) Sept of last year, vendors would barely move on that price when a couple of consent related issues arose and we reduced to $850k, so we pulled out. It sold in late Dec for $760k. Vendors are doing themselves no favours with their pricing expectations.
I thought it was sellers being cheeky asking these crazy high prices. Buyers are only offering to take the property off their hands for what the market price. It is funny to see the narrative being used during this market crash in some areas in NZ. 20% + falls are a market crash according to one oneroof writer. It is even worse than that when you take into account inflation.
The IMF has just published a new piece, called "Gold as International Reserves: A Barbarous Relic No More?"
No idea what they're up to. Hopefully not a rug pull.
https://www.imf.org/en/Publications/WP/Issues/2023/01/27/Gold-as-Intern…
Is there a way to assess how much the current and ongoing decline in some economic activity is offset by the upcong economic activity in the recovery?
Hospo, retail, petrol sales, tourism all must be getting crushed. Yes there will be a spike because of insurance and building costs but surely there is a big decline in multiple other areas?
I'm not buying that is is wholly inflationary in its impact.
Good points. Although presumably hospo carnage will be very temporary? Many people will be going out and about again in a day or two.
Regional tourism in the upper North Island will be hit. We were planning to go to Coromandel in a few weeks, regardless of road damage we will cancel now, the weather is just too volatile this summer.
Spending on hospitality won't go completely bust during an economic downturn. People not affected by income losses tend to reduce their eating out frequency, carry lunch to work more often, get cheap takeaway instead of premium dining and choose to meet mates at home over a 6-pack instead.
I was in Auckland, we were walking around the city on Saturday and didnt see any flooding, the central city was business as usual, took a ferry over to Devonport where we were told they had no flooding, restaurants were busy on Saturday night. Sunday we drove to Mount Maunganui - the roads were fine, the Mount was busy. I think the media might be making things out to be much worse than they really are.
Firstly, it’s an average. The actual extent of wage rises varies greatly.
Secondly, the salary starting point is critical is. 8% increase on 150k is obviously a lot more money than an 8% increase on 50k.
The increase on 150k will have a good chance of covering cost of living increases. The increase on 50k, much less so.
A 7.3% increase on 50k of expenses is less than an 8% increase on 50k of salary, so on average people are getting richer. And it appears the bottom end are doing the best at the moment as the minimum wage has increase much more than inflation since Labour were elected.
This is not reconciling well with the majority who claim they are worse off...
Because it's nonsense. Even if income were increasing greater than inflation, it would be short term only. And the CPI doesn't really indicate inflation.
Anyway, the real wage growth is centered in industries that are renowned for low wages and poor conditions for a long time. The FIRE industry is flat and the public sector actually negative.
As usual the majority are right.
I have been doing some rem analysis lately, and looking at most of the large salary surveys, insights, and forecasts. There is no 8% average in any of them. Most jobs showed a 3-4% move last year, with a forecast of 4-5% this year. Although I expect a lot of those forecasts will downgrade as we move into more troubling times.
Just depends on what ever angle Interest is running on the day. From the home affordability article last week:
Thrown into that mix was a slight (2.1%) increase in after-tax income for typical first home buyers, which would have given them an extra $37 a week.
So these prime working age people are only seeing a 2.1% after tax increase, but the average is 8.1% gross? I wouldn't think they are losing 75% of their pay rise to the taxman.
Over the 12 months from December 2021 to December 2022 ...
https://www.interest.co.nz/property/119373/decline-house-prices-has-bee…
This might be a better reason than ‘view maximisation’ to remove pohutukawa in St Mary’s Bay:
https://www.nzherald.co.nz/nz/auckland-floods-giant-pohutukawa-trees-ha…
Why?.... Because a homes.co.NZ or a oneroof.co.nz algorithm told you what your "basic house" price was based on 5 mansions that sold down the road, falsely calculated your house value!....wake up ...
Algorithms are falsely over inflating prices based on the average sale of hoses in your area that are up to a year out of date!
Just watch how often homes.co NZ changes its guestimating!
... the participation rate rose to a new record high 72.1%. These are 'extreme' levels for any economy, not just New Zealand
I thought the *average* participation rate for Europe was 75%, Germany is 80%, Switzerland is 83%. Do they define it differently? Data here.
The pay data in today's labour market releases does suggest a topping out in pay increases. These came in at +8.1% on average across the whole labour market.
You might want to check that David - I think you are quoting the increase for private sector hourly earnings? The figure for public and private was 7.2%. In real terms (CPI adjusted), private sector hourly earnings went up by 0.3% - with most of the increases taking place 6 - 9 months ago. Public Sector earnings are down 1% in real terms over the last 12 months.
Also worth noting that the increases were highly concentrated in food and accommodation (15% annual increase), recreation facilities and other places that are bouncing back with the return of tourists. They are definitely having to pay more to get staff to work unsociable hours in crap conditions. Good!
The herald has been the first to call Wayne Brown "Trump-Like" (think this got paywalled), I was wondering how long it would take them.
He was elected as a protest vote, starts with little idea about his full responsibilities and how do them, gets into open disagreements with council "executive", gets offside with the media and calls them names, then has some poor performance and interviews and the media start attacking him with misrepresentations. I think there's enough there for this comparison to stick.
What do you want.., a media savy, glossy, spin doctor, talk fest, throw money at minority dumb projects mayor or.
A mayor that calls out idiots, fixes the issues, focuses on infra structure/ costs and keeps your rates low?...
You've had plenty of the former glossy " ass hats".. which has got you where you are today!
So stop your whinging and stop believing the useless MSM
There's very few politicians who can put the media in their place and Brown has yet to show any capability to do this. I don't think he has the temperament to even try, he already characterised some/all of them as stupid. It is a weakness to refuse to engage with inane questions of the media but I can sympathise.
He is very clearly out of his depth (as Trump was at the beginning) at handling the flooding and could have done a better job with handling the good questions.
You want to judge him as a traditional politician I'm not sure everyone will use that standard for him.
You're part of the problem. JA ignored the press when she was being exposed by them but used it to promote her myopic spin!
Brown just doesn't do media spin bullshit.
All the pussy's that want him to do what the CD should have done, and tell them to do what they should know what to do is just a reflection of the Overindulged aucklanders attitude these days ..
FFS, It's going to flood! Get out early was a easy call for individuals to make!. But no ! The COVID compliant public were waiting for Cindy to tell them how to wipe their ass!
Individual responsibility is a rare thing these days ..it always somebody else's fault.
You're all muppets
Found a video about Fletchers business model
Anz drops mortgage rates
https://i.stuff.co.nz/business/money/300797444/biggest-bank-cuts-home-l…
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